It’s easy to be pessimistic over the future prospects
of liberty when major industrialized nations around the world are becoming
increasingly rife with market intervention, police aggression, and fallacious
economic reasoning. The laissez faire ideal of a society where people
should be allowed to flourish without the coercive impositions of the state is
all but missing from mainstream debate. In editorial pages and televised
roundtable discussions, a government policy of “hands off” is now an unspeakable
option. It is presumed that lawmakers must step up to “do something” for
the good of the people. Thankfully, this deliberate false choice will
slowly but surely bring the death of itself. Illogical theories can
only go on for so long before the push-back becomes too much to handle.
For those who desire liberty, it’s a joy that the statist economic policies of
the Keynesians become even more irrational as the Great Recession drags on. The
two following examples will illustrate this point.
Former
Labor Secretary, public policy professor at University of California, Berkley,
and political commentator Robert Reich recently offered President Obama and Mitt Romney a proposal
he thinks will help American workers. In lieu of almost 40% of workers in
the U.S. not receiving paid vacation for holidays and sick days, Reich proposes
that the federal government mandate every worker receive three weeks of paid
time off. Reich calls the country’s lack of a national leave policy
“absurd.” Further, he claims that imposing an increase in mandatory paid
vacation would be beneficial not just for employees but employers as
well. According to the union cheerleader, paying employees for taking
time off is great for productivity because they come back with batteries
recharged and higher morale. This boost in output would more than pay for
the leave and for the hiring of additional labor to offset the absence.
What
Reich is arguing is that by increasing the cost of labor, somehow the
unemployment rate will drop. Or that by paying employees to take time
off, the extra productivity that would take place would both pay for the hiring
of more workers and make up for the loss of time devoted to labor. And
finally, Reich is assuming that employers have never taken such a policy into
account and are blind to the low-hanging fruit of easy profits.
To
even the most unlearned observer, Reich’s proposal comes off as pure nonsense
in the sense that it would not just be damaging to an economy already strangled
by regulatory mandates but it would actually be beneficial on the whole.
Government intervention into the free choices of people always amounts to the
picking and choosing of winners. Left to itself, the unhampered social
system of production that is a free market economy is the best state of affairs
for participants to maximize their well-being. Under interventionism,
voluntary choices are replaced by dictation from the political elite.
Reich’s proposal for mandatory three weeks of paid vacation assumes that all
workers, at all times, would have no issue with the requirement. He
presumes that the policy would have immediate effect so that the up-front cost
of labor would automatically be offset by increased production which in reality
takes time to occur and isn’t guaranteed. Reich’s policy rests on the
notion that economies can be finely tuned. His view is that the human
energy expended on production is not an extension of the individual sovereignty
of men but something to control and guide. This is general mindset of a
central planner; especially one who has a high-profile academic position at a
major university.
Reich
is far from alone in this regard. He is a respected commentator featured
in the mainstream press. His colleagues offer the same suggestions for
policymakers in the government to follow. In another example, recently on
the Washington Post’s Wonkblog,
editor Ezra Klein offered up a compelling case for how Federal Reserve Chairman
Ben Bernanke could get the housing market out of its slump. Cleverly
titled “Uncle Ben’s Crazy
Housing Sale,” Klein suggests that Bernanke go before the American
people and announce that the Fed will begin buying mortgage-backed securities
in an effort to bring 30 year mortgage rates down to 2.5% “for one year, and
one year only.” The goal is simple according to Klein:
“If
you have any intention of ever buying a house, the next 12 months is the time
to do it. This is Uncle Ben’s Crazy Housing Sale, and you’d be crazy to miss
it.”
But
as Rothbardian economist Bob Murphy aptly points out, Klein’s proposal amounts to
nothing more than the deliberate creation of another bubble. By taking
potential demand that could conceivably be spread out over the next decade or
so and concentrating it within the confines of one year, the intertemporal
allocation of goods within the structure of production (housing in this case)
becomes distorted and leads to unsustainable investment. So once Uncle Ben’s
crazy housing sale comes to an end, the demand for housing would in all
likelihood plummet and the industry would be no better off. Also of
importance is Klein presupposing that 2.5% is the most desirable rate for 30
year mortgage rates by not giving an explanation as to why. Further, he
mentions that the housing market is appearing to have bottomed out and is on
its way to genuine recovery. Yet his policy proposal rejects allowing for
a natural recovery and boils down to the exact same monetary policy of low
interest rates that created the housing bubble of the 2000s which laid the
foundation for the financial crisis. It is the equivalent of injecting
heroin into a junkie who is trying to go cold turkey.
Though
these are just a few examples of flawed policy recommendation, they are largely
representative of the establishment’s views. Like Princeton economist Paul Krugman, former Treasury Secretary Lawrence Summers, and even the New York Times
editorial staff, Klein and Reich believe in the sanctity of
government intervention over the market process.
What
passes for informed economic analysis is becoming more unhinged from reality by
the day. The very same solutions are being offered that had a hand in
causing the crisis to begin with. That is: interest rates suppressed
beyond market levels, increased government spending, economic micro-management,
housing market stimulus, and more accommodating monetary policy. Getting
out of the way and allowing the economy to reach sound footing is too radical
of an option for the busybodies of the state. Still, Keynesianism
continues to fall short. Intellectuals of the school keep failing to
recognize the harm their theories cause. Their policy recommendations are
a rehashing of the same fundamentally pro-state theory: government needs to
spend more and more money needs to be printed into circulation.
Meanwhile
the average private sector or low-wage worker sees a system stacked against
him. Public sector workers receive better pay and benefits. Politically connected
banks and large financial companies are bailed out for poor business
decisions. Industries totally under government supervision such as health
care and education have become terribly inefficient. Countless lives are
lost or ruined from wars based on lies. The prices for
necessities at the supermarket are always inching upward. Privacy is
trampled upon by overzealous law enforcement. Wallets are treated like a
grab bag by tax collectors. And the solution put forth is always bigger,
more intrusive government. The false dichotomy of liberal versus
conservative is played out in the West as if there is an actual difference
between the two. In short, it’s only a matter of time before the ideas
ignored by the establishment are given more serious consideration by the
greater public.
As
the Austrian school of economics emphasizes, the bust which follows an
inflationary boom is a needed cure for the built-up malinvestment.
Likewise, recessions should serve as a guide on the unintended consequences of
public policy. They challenge orthodox teachings to justify themselves as
the damage of prolonged unemployment takes it toll. Out of hardship can
emerge new ideas for men to adopt and integrate. Thought then becomes a
weapon against the existing order which sees its position of authority under
attack. As Ludwig von Mises once wrote
Thoughts
and ideas are not phantoms. They are real things. Although intangible and
immaterial, they are factors in bringing about changes in the realm of tangible
and material things.
In
the course of human history ideas have been the catalyst for profound
change. The American Revolution was being fought on an intellectual
battlefield before the first bullet was shot at Lexington and Concord. Cato’s Letters, along with the writings of
Thomas Paine and Adam Smith, gave the revolting colonists a vision of the
natural rights of man and the prosperity free enterprise brings. Radical
pamphleteering was always a bigger threat to the British monarchy than any
musket.
Today,
the liberty-minded versed in sound economics face an uphill battle. The
corporatist establishment won’t let go of their government privilege
easily. Academics are too infatuated with their prestige to question the
blatantly criminal syndicate that is the state. Against such forces, the
battle may be tough but it is winnable in the end. Western governments
are beyond bankrupt when it comes to unfunded liabilities. Their
existence is dependent on the unsustainable and fraudulent practice of fractional reserve
banking. Default is inevitable at this point. The
broken promises of politicians will discredit government as a virtuous
institution. The productive class, meaning those forced to fund the state
and its beneficiaries, will stop sitting passively by.
To
win the fight against statism and the poverty it inevitably brings, the right
to one’s very humanity must be reasserted. From the beginning, mankind
has been plagued with the conflict of power versus liberty. As
libertarian author Rose Wilder Lane summarizes in her book The Discovery of Freedom:
They
replace the priest by a king, the king by an oligarchy, the oligarchy by a
despot, the despot by an aristocracy, the aristocrats by a majority, the
majority by a tyrant, the tyrant by oligarchs, the oligarchs by aristocrats,
the aristocrats by a king, the king by a parliament, the parliament by a
dictator, the dictator by a king…six thousands years of it in every language.
Lane
asks the most pertinent and direct questions that are never alluded to in
contemporary political discourse: “What is the nature of man? The
only political question is: What is the nature of the institution named
“Government”? To Lane, government, or the state, is an abstract concept
which does not exist. What exists “is a man, or a few men, in power over
many men.” By the same token, the prosperity brought forth through
government-financed initiatives and inflation does not exist either. The
printing of money creates no new wealth; just lowered purchasing power.
All government spending comes from resources siphoned away from the private
sector. For every dollar spent by lawmakers or bureaucrats means one less
dollar devoted toward productive efforts. In short, free lunch economics
is a fairytale.
These
principles, while plainly evident, cannot be stressed enough. State
officials can’t live outside the laws of economics or the laws of decent
behavior. The sham is coming to a close before our eyes. The
collapse of the Soviet Union proved that socialist regimes are incapable of
rational economic calculation. The fiat money system that brought the
world the slowly splintering Eurozone will eventually run its course.
Establishment economists have resorted to outright
lies to maintain the superiority of
government paper money over the market’s preference for gold.
They
are getting desperate because their stock answer is no longer being looked to
as right by the public. In their quest for power, the political elites are
looking more like the tyrants they really are. It’s only a matter of time
before enough people are fed up and declare their right to life, liberty, and property
once again. The battle will be won in the long run no matter how perilous
it appears in the short.
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