A few days back, the polish newspaper Rzeczpospolita reported that the Polish government is in full nationalization mode against… textbooks? That's right! It would seem that elementary (and secondary) textbooks are nothing but a tool of capitalist imperialist dogs… err… no, that's not it… err… they are "too" expensive for parents to buy since they are already spending about 100 million PLN -zloty- (or about 36 million USD) per year.
OK, now let's take a look at that number. There are about 13 million families in Poland, and each family has an average of 1.3 children (let' round it up to 2 just to be on the safe side). That means that each family would have to spend 2.75 USD per year in textbooks. Fair enough, but is this number low or high; is it affordable?
Well, the average net disposable income for a Polish family is in the order of about 15.000 USD/year (this is the amount of money left after all living expenses have been paid). But, there is a wide distribution of income, with the highest 20% earners making as much as 5 times more than the lowest ones. OK, let's then take the worst case scenario and take the lowest 20%. And so assuming this distribution we find out that families in the poorest 20% bracket have a yearly disposable income of about 6000 USD/year. This number is not that great, but according to the 2012 Mercer Cost of Living survey, Warsaw (the priciest city in Poland) ranks 153rd of 214 cities in the world. This means that even the most expensive city in Poland is comparatively cheap to most cities. A very generous monthly expense for a family covering all needs is about 1000 USD. And so 6000 USD/year of disposable income for the 20% poorest families is equivalent to 6 months' worth of living expenses. In other words, 6000 USD/year/family (in the poorest bracket) is still quite OK.
Clearly, 2.75 USD/year for textbooks is not exactly a burden with 6000 USD/year of freely disposable income.
Obviously, these numbers are not telling the whole story. Why would the government go this route? This makes no sense, therefore we need to dig deeper.
Let's take a look at Polish finances (by the way, all the following numbers were provided by the International Monetary Fund).
This graph shows Polish GDP, which is growing at an accelerated rate. As a matter of fact, Poland is one of the largest and fastest growing economy in EU. This cannot be it since wealth is clearly accelerating.
Note: Incidentally, take a look at Polish GDP once communism ended in it. See the difference? This is precisely why we are against communism; it is not an ideological thing, it simply does not work!
Is perhaps inflation a problem? Let's take a look.
Well, inflation is on the rise, but all considering prices "only" doubled in the last 30 or so years, which is not that bad. Current Polish inflation is in the order of 2% and has been for a few years no. So no. Inflation is not an issue.
Note: incidentally please note the low levels of inflation during communism. This is correct. Since pricing in communist systems is all political, inflation is not an issue. What is an issue is getting the goods and services one needs, which are not available. There is no free lunch, even in communist systems. The laws of economics are immutable.
Could it be unemployment?
Well, unemployment went up between 1999 and 2005 but since it has stopped at around 10%. Now, this number is relatively high, but it is not horrendous. This cannot be it. Then why? Would it perhaps be Polish government spending?
Well, well, well. We may be up to something. The Polish government is spending like a drunken sailor. But is this rise in expenditure significant? Let's take a look at this very graph as a percentage of GDP.
Hummm… the Polish government has been spending in the order of 43% of the entire GDP for over a decade. This looks very suspicious indeed. In order to get things into perspective, do this approximate calculation. Take your gross salary or monthly earnings and add 43%. Then, subtract your taxes and cost of living. See how much more is left (you will notice that this is a lot). That's precisely what the Polish government has been doing for over a decade to everybody in Poland. This is bad indeed, because this money that the Polish government is extracting would otherwise have ended as productive capital which, through the market, creates wealth. But let's go a step further. Is the Polish government really extracting 43% of the GDP?
Well, no. Apparently is extracting a lot, but we don't know exactly how much. To make up for the missing budget, the Polish government is borrowing like a drunken sailor at a mob-run casino. The debt in Poland has been growing steadily; obviously the lifestyle that the Polish government is trying to sustain is un-sustainable since about 1998. But after 2008, the debt accelerated enormously. It accelerated so much that in 2013 the government of Poland grabbed the biggest source of private funds available to them: the private pension funds (see Poland nationalized private pension funds). This tells us that the Polish government is desperate.
But was there a reasonable reason to spend so much for so long? We have seen that the economy is doing more or less OK and so the only other possible rational reason left to spend that much is a population explosion. Could this be it?
Well, no. Which leads us to the only possible conclusion. The Polish government is still catering to a large majority of Polish voters who, having left communism, still believe in socialism and all the goods and services that a government "must" provide. Hence, the government obliges whether they have the funds or not.
And what is the consequence of all this? An impoverish lifestyle. It so happens that life in Poland is relatively cheap, but, you get what you pay for. There is no free lunch. As a consequence, it is entirely possible that 2.75 USD per year per family is truly "too expensive" for the lowest earners in the lowest 20% bracket. But then again, who is to blame? The Polish government for spending to buy votes instead of not spending and improve the lives of all Poles.
And what does the Polish government do? It unfairly competes with the private market. They publish government-made materials for schools, which were paid for with taxes, including taxes from publishers. It forces publishers not to bundle texts, bans the inclusion of exercises in books (so that books may be re-used) and forces the publishers to deal exclusively with the Ministry of Education which has suddenly become the only purchaser of textbooks in Poland.
In other words, the government of Poland uses other people's money to compete against them, limits the features of their products and forces prices down by implementing a forced monopoly.
Now, from a strictly socialistic point of view this makes sense. All these measures, although not cheap (1.25 billion USD over ten years), will save considerable amount of money to parents. However, what will the cost be in real life?
The Polish debt will keep increasing which means that there will be less capital to increase wealth through the free market. At the same time, taxes will have to be increased to pay for the ever increasing interests of the Polish debt. These taxes will take the form or direct taxation or indirect taxation including inflation. There is no free lunch. Polish people will pay one way and the other. Government operation is not a zero-sum game. Governments are expensive to operate; they always consume money.
In the big scheme of things, 1.26 billion USD over ten years is nothing. That is not the point. The point is that this socialistic mentality is all-pervasive. As the former US senator Everett Dirksen said "A billion here, a billion there, pretty soon, you're talking real money". The problem is that everything is "a billion here, a billion there" and when you add up all the costs it reaches into trillions and then into default. This is the true socialistic mentality that is all-pervasive and all-encompassing.
But there is something worse. It is the concept that schools must be under state control. It is the notion that children must only be taught what the state deems appropriate. It is the notion that the state is the sole source of all educational wisdom and neither regular people, nor parents nor children must be allowed to have any saying into it, even considering that everything is paid for with their present or future taxes and wealth!
Education is a "right", this much is correct; in the sense that as free people we have the right to choose if and what to educate ourselves and those who depend on us. But it is most definitively not a right as understood by states, in the sense that they must provide education for everybody; this is nothing but the elimination of such right because it is a dictatorial mandate from which there is no escape (for example see Education The Absolute Austro-Libertarian Way).
This concept is indeed perverse because politicians hijack a concept and re-define it to their advantage. We must always remember that governments have no rights, just privileges which we grant them. As such, they can never trump our rights, yet, this is exactly what they do all the time and with everything.
The government, any government has no right (literally speaking) to impose education on anybody; much less to impose it and define its contents. This is the basic lesson from our little article. It is the lesson that government actions in finances have repercussions but at the same time they restrict our rights. It is all tied-in. Politicians love to separate issues but there is no separation because there is no free lunch. A poorer economy makes for government dependency. The poorer the people the more they will expect from governments which ties them to a political system and with it to politicians in a downwards spiraling path to financial debacle. Politicians are like drug pushers; they addict people to government money and once addicted they keep giving them this drug… for a price… which is always too high.
We must always remember that many countries are wealthy despite the actions of governments, not because of them. Governments produce nothing; all wealth comes from private people. Actions have consequences and government actions always carry the worst possible consequences for us all.
This is today's article. A tad long but we believe worthwhile. Now it is your turn to think about it at make up your mind. It is your choice, probably the only true one that you still have left.
Note: please see the Glossary if you are unfamiliar with certain words.