After American’s tide of financial crisis, we have now the European’s version. All these can be traced back to a few factors that are basically roots of all these ill causes.
The supremacy era western powers have enjoyed over the past centuries have lead to a lifestyle of complacency, low competitiveness and false optimism. To maintain their dream, spending next and earning later is never questioned and in fact, encouraged to. Although this do have an effect of growing the economy, the bubble is inflating as well. Soon or later when everyone are succumbed under the pressure of unsustainable debt, the dream shall burst.
Well, already so.
Unions, pensions and the social benefit systems are corroding the competitiveness of their people with a number of reasons.
Employees empowered by the unions, are not flinching or backing down from their sometimes unreasonable demands. Strikes and threats are common. Do understand that if you are servicing a mortgage for a beautifully made home, loans maybe for 2 cars and a bunch of credit cards, you won’t be negotiating much with your employer anyway.
They are keeping up with their standard of living with their spending habits. Its their dream you are talking about here.
“Well, why not spend? We do have a pension to back us up anyway. Saving up? Erm… Never thought of..”
In those dream, people find work easy to come by. Thinking that they will have a better job every time.
But what happen when you can’t?
That’s when the problem comes. First, you won’t be likely to get your retirement plan. Probably a severance pay instead. Second, debts to be honored. Lastly and hopefully you won’t be into this; declare bankrupt.
Downgrading your living standard.
Selling away your home. (If you are lucky to find a sincere buyer.) In the U.S., there are millions of unsold, foreclosed homes still on the market. Renting is a much easier, cheaper option and you won’t be worried over another liability. Not wise to buy another place, although its likely to find one easily at a reasonable deal but home prices on average, are on a falling trend still and doesn’t seem to hit bottom yet.
Let’s say you have that solved at the moment. Whats next?
You still have bills to pay and mouth to feed. You need a job. But job doesn’t come by easy these days. In Spain, over 20% of the youths are jobless. With unemployment rate in U.S. at a high of 9% and who knows how much higher somewhere, you are left with not many options. You are left with either taking a huge pay cut or/and doing something you won’t like or remain jobless.
More and more jobless people have given up on looking for employment and turning to their government for unemployment compensation. The burden is passed on to the government’s responsibility. With fewer taxpayers, a shrinking economy and more people on social benefits, you see today what happen to these western powers. They are facing huge debts and are looking for more.
Their living standards shall fall, to an extend when they start spending within their means, have savings, living prudently and accepting a much lower pay.
Not forgetting, accepting a much lower remuneration is also a key factor on staying competitive with countries such as China and India. If they can find 100 people doing the same thing at 10% of your pay, don’t question why your job get outsourced, question what can you do to deserve that pay and what you can do but they can’t.
