Must We Live in Long-Term Recession?
Or is there a sure way out?
The current downturn, even if the recession “officially” is over, is beginning to look like a reply of the 1930s. In fact, the “Progressive” Atlantic recently ran a most depressing story about what happens as joblessness becomes institutionalized:
The worst effects of pervasive joblessness—on family, politics, society—take time to incubate, and they show themselves only slowly. But ultimately, they leave deep marks that endure long after boom times have returned. Some of these marks are just now becoming visible, and even if the economy magically and fully recovers tomorrow, new ones will continue to appear. The longer our economic slump lasts, the deeper they’ll be.
If it persists much longer, this era of high joblessness will likely change the life course and character of a generation of young adults—and quite possibly those of the children behind them as well. It will leave an indelible imprint on many blue-collar white men—and on white culture. It could change the nature of modern marriage, and also cripple marriage as an institution in many communities. It may already be plunging many inner cities into a kind of despair and dysfunction not seen for decades. Ultimately, it is likely to warp our politics, our culture, and the character of our society for years.
The powers that be say government must “stimulate” the economy through new spending or the system will be moribund for the foreseeable future. That means activist government, government that forces up wages (to give us “purchasing power”), government that taxes the “rich” and “gives to the poor.” Indeed, the editorial pages of the mainstream New York Times and the Washington Post provide a cornucopia of such utterings.
However, there is an alternative, one that will lead to economic recovery, more wealth, and higher living standards. To put it another way, we don’t have to live the way we are living right now.
This is a bold statement, I realize. Some even may think it arrogant. I prefer to call it the truth. We don’t need to live with the current economic regime because Ludwig von Mises, Murray N. Rothbard, and F.A. Hayek prepared a roadmap out of the doldrums that is guaranteed to be effective.
The key to understanding the current downturn is to know why it happened. Yes, everyone knows about the housing meltdown and the financial collapse of Wall Street, but the central issue is that government policies drove the economy to throw vast amounts of money into what in hindsight are understood to have been massive malinvestments. Our economy has not faltered because of a sudden lack of “aggregate demand,” but rather because the government tried to block the liquidation of those malinvested assets in order to “save jobs.”
Wasting Resources
Here is the issue in a nutshell. By keeping derelict firms like General Motors afloat, not to mention spending billions on worthless “stimulus” projects and “green jobs,” the government also is drawing resources away from the very sectors of the economy that have real strength. Thus the government weakens the profitable firms in order to prop up politically connected companies that have almost no chance to be truly productive and profitable again.
For all his faults, President Ronald Reagan did not try to “reflate” the economy during the recession of 1982, and after the unprofitable malinvestments were liquidated, what emerged was an economy based on solid foundations of advanced technologies and telecommunications. Unfortunately, the present administration seems hell bent on following the advice of Paul Krugman, who recommends we embrace the chimera of inflation.
This means, I’m afraid, that the gloom and doom in The Atlantic is becoming outright prophecy. It does not have to be this way, but those in charge of the government have decided that they will pursue the Keynesian mirage no matter where it leads, and it is leading us to disaster.
Comment by OLdDog on 24 February 2010:
When will free men wake up to the fact that it matters not which enconomic policy is best, but what kind of government will allow the people to decide that for themselves. So what if Ludwig von Mises, Murray N. Rothbard, and F.A. Hayek prepared a roadmap out of the doldrums that is guaranteed to be effective, if control of our economic policy is in government hands? (MAKE THAT BANKERS HANDS!)
Until we have a true, and accountable, Republican government, all of this talk is P#$$%&g in the wind.
OldDog………wethepeople@anationbeguiled.com
Comment by Don MacLennan on 24 February 2010:
Good article. The way of the free market sparked by the billions to trillions of individual interactions best explained by Hayak and anticapitated by Mises and others is difficult to explain. Easy to understand is a few people “doing something” (even though that doesn’t work). The good news that more and more individuals do understand and that in time, not next year, civilization will take another path.
Comment by mds on 24 February 2010:
When Ron Paul wins at CPAC with a large youth contingent, there’s hope. With thinkers and writers such as Anderson carrying on in the classical liberal tradition, there’s hope. As long as the Internet remains open and free, these messages are reaching ever more people such as myself who are changed. We haven’t yet reached critical numbers. Unfortunately I doubt we will even by 2012. It’s looking more and more like it’s going to take even more pain to wake many up, or to make them accept what they already know, i.e. that our welfare-warfare system could never work.
Comment by Jeff Smith on 24 February 2010:
As long as economic education is almost non-existent in this country, it is difficult to see how the snake-oil salesmen won’t prevail.
We may get lucky, however. Even the economically challenged are beginning to see how far over the top this administration and Congress are currently. November may bring a blood-bath down on the Dems.
Will the Repubs. be up to the challenge? Only time will tell – but this could be their last chance.
Comment by Peri Worrell on 24 February 2010:
I’m not hopeful about the Rs. It was not long ago the Rs (under W) were jacking up the deficit with alacrity. Now they are trying to whip up their “base” with anti-immigrant propaganda. Shame on them! And what a sad day for us and our children. Our great-grandchildren might experience freedom and prosperity after the current international regime implodes from the weight of its debts.
Comment by Bachsman on 24 February 2010:
I’m right on the verge of giving up altogether on the R’s. Rush Limbaugh, Sean Hannity and Mark Levin are crying loudly that the R’s are our only last, best hope to stop the Progressive slide. Well we’ve been in that slide ever since FDR—WITH THE R’S HELPING PUSH US DOWN THAT SLIDE!! There are NO REAL conservative Republicans anymore (MAYBE Ron Paul.) Let me say that again for Rush, Sean and Mark: THERE ARE NO REAL CONSERVATIVE REPUBLICANS anymore. Scott Brown is a prime example. Glenn Beck said it best when he said, “Democrats tax-and-spend while Republicans just SPEND!” All I see is each side wanting to SPEND in their own way.
We don’t need 2 sides battling over which side has the “more righteous” way to spend our wealth. We need a MAJORITY that repeats the mantra, “IT ISN’T THE GOVERNMENT’S TO SPEND—ON ANYTHING!!!”
I don’t want Representatives who are going to pride themselves on slowing down growth or even stopping a few programs. I want Representatives who will go there with the goal to begin DISMANTLING ALL CURRENT GOVERNMENT PROGRAMS!! We need to get rid of Social Security, Medicare, Medicaid, ALL Unions (NEA, AFL-CIO, UAW, ALL OF THEM), the MINIMUM WAGE, ALL cabinet positions other than Secretary of State, and on and on. We need to go back to the absolute bare minimum government allowed by the Constitution and start over.
We need to go back to a hard currency monetary standard like gold again so no one—not even the Fed—can “bless” the dollar with a value. It IS WHAT IT IS; LIVE WITHIN IT!!!
We need to get rid of any and all taxes on wealth generation like Income and corporate and investment and capital gains and … Instead we should be taxing [if anything at all] wealth consumption. That would spur savings, investment and EARNING wealth while curbing wasteful spending, laziness, inactivity or creating babies just for revenue. That would also do away with the entire IRS monstrosity.
The problem is, as soon as you allow government to bless, favor, give special consideration, etc. to ANY industry, group of people, corporation, organization, whatever, you have just planted economic “cancer cells” and they WILL GROW (as they have for 50 years.) And that’s where I part with Republicans. They want to dismantle Democrat/Progressive programs but just suggest they get rid of their own and see how “conservative” they really are.
We keep hearing , “Don’t split the party or the Democrats will win again!” Well to that I say I am one centimeter away from voting for the most liberal candidates I can find for at least the foreseeable future anyway. And here’s my reasoning.
I learned one way to train a dog to stop chewing up things is to shove the item in their face and yell at them loudly so it hurts their hears. Do that often enough and loud enough and they will learn to avoid that item at all costs. They will run away from that item. I saw the same thing with a friend teaching his 2-year-old not to touch an electrical outlet. The kid (typically) touched it anyway and got zapped. The parent, watching carefully so the kid wouldn’t really be hurt, then suggested the kid touch it again. He even picked the kid up and leaned toward the outlet. The kid, having finally learned how much it hurt, wanted NOTHING to do with anymore outlets.
Now, as I see it, the American public, including almost ALL Republicans, have no idea how much pain they are causing. (Hey, it’s only a few billion here and there and the “rich” can afford it anyway, right?) It needs to be made real to them so they learn to avoid it as if their lives depended on it. So if we all vote Liberal for the next couple elections and CRAM IT DOWN THEIR THROATS, then maybe the Republicans will go back to being REAL conservatives again and the Liberals won’t be quite so “Progressive”. Who cares if we get into another [or WORSE] depression. The snotty-nosed, spoiled little brat-children in this country need to experience EXACTLY what they are asking for. Let’s give them the Krugman/Keynesian “dream” until Krugman admits he’s a MORON and finally admits, Keynes was a SOCIALIST IDIOT!!
So I say SPLIT the party. Vote for a Liberal. Until the Republicans PROVE they’re ready to fight the tide and go the other direction, they DESERVE to lose—AGAIN!! Scott Brown and John McCain are living proof they haven’t learned yet. So lets teach ‘em.
Comment by Davidus Romanus on 24 February 2010:
It’s not the R’s or the D’s. It’s the fact that our money is controlled by the Federal Reserve. If we could use anything we wanted as a medium of exchange, do you think anyone would choose (worthless) Federal Reserve Notes? Of course not. Only unconstitutional legal tender laws force us to use them. If gold, silver, or whatever people wanted to use (oil,rice,whatever) could be used as money, the gov’t could not inflate away the value of our money. This is the root of the problem.
Comment by donald dietrich on 25 February 2010:
republican,democrat,it doesnt matter.two wings of the same bird.devide and concor is the motto.nomatter who you vote for,government still gets in.we are brainwashed in this country and it makes me sick.how about using our brains,and instead of backing a party,how bout backing the constitution and the bill of rights!?our government is a joke,and the whole world is laughing.presidents,parties,and policies,that we hold so dear are only temperary at best.why bother getting all emotional about politics at all?the republicans will try to erase what the dems do and vice versa.as the present is ever changing, so will the future ever change.we will never be able to relax in a system that works because when we do,there will be no need for government.government is like an untrustworthy mechanic.breaking something that works fine,just so he can charge(you)to to fix it and make everything all right.unfortunately theres only two mechanics in town and there both as bad as each other.i could rant on and on,but its making me angry.my advice to everyone…pay off all your debts,get off the grid if you can,and never ever watch the propaganda machine we call news.at best its opinion with no solutions.war on drugs,war on terror,and the war on us and every democraticly elected government in the world that has natural resourses are our targets.dont let anyone you know join the military either. thanks for your time.
Comment by Benjamin Virnston on 25 February 2010:
There are so many on the verge of discovering the beauty of anarchism (voluntaryism, market anarchism, anarcho-capitalism, or whatever you wish to call it). You’ve gone so far and realized that government is the cause of, and not the solution to, all of our problems. Why can’t you take that last little step and realize that all government is inherently evil, no matter how small it is? If it steals to fund itself (which all governments must do, or they would not be governments), or it tells any peaceful individual what they can or cannot do, than it is evil and must be abolished completely. A voluntary society of individuals who respect the self-ownership and property rights of all other individuals will flourish and prosper unlike any society in history. Let go of your attachment to authority and institutionalized force. There is a better way. It’s not that hard to imagine. It’s worth the effort. Free your minds!
Comment by Kent Lalley on 26 February 2010:
“State interference in economic life, which calls itself economic policy, has done nothing but destroy economic life. Prohibitions and regulations have by their general obstructive tendency fostered the growth of the spirit of wastefulness.” – Ludwig von Mises, Greatest Economist of the Twentieth Century
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