Blaming freedom for economic woes, again

It happened, of course, with the Great Depression. Instead of seeing it as a result of government intervention and mismanagement, that calamity was supposed to have occurred because of the free market. Free adult men and women in America and in time elsewhere supposedly produced a colossal downturn in various economies--massive unemployment, bank failures, fall in productivity, you name it. All the fault of freedom, none that of government meddling.

We are back to this once again. Peter S. Goodman wrote, on Sunday, April 13, in that great journal of economic history, The New York Times, that our current “downward spiral of the economy is challenging a notion that has underpinned American economic policy for a quarter-century — the idea that prosperity springs from markets left free of government interference.” So it is freedom, people working for other people who want them to work for them, earning incomes they can then use to buy goods and services as they judge fit, that’s responsible for the downward spiral. This is then what makes Hillary Rodham Clinton’s call for an economic tsar — “a commander-in-chief of the economy” — so attractive and even necessary. Yes, it is freedom that must be stopped, at all cost, and in its place what is needed is more government, with all of those wise and virtuous politicians and bureaucrats who of course know so much better and will force — or as two academics at the University of Chicago would have it, "nudge"— us all to do better.

But it is all a ruse. Sadly, however, neither Democrats and Republicans will straighten out this story.

Democrats love government meddling — they tend all to believe that once they are in power, they will whip us into shape in no time. Their ideal, going back to the economic philosophy of the New Deal and its hero John Maynard Keynes, is the command economy. (Keynes himself said, in his preface to the German edition of his famous book, “The General Theory of Employment, Interest and Money,” that the Third Reich was best positioned to put his ideas into play!)

Republicans like top-down economic management no less than Democrats, only they tend to favor business more than their political opponents, but not with policies of freedom but protectionism, subsidies, bailouts, and other approaches that are anything but what the late Milton Friedman — the ostensible subject of Mr. Goodman’s essay — and other libertarian political economists advocated. So do not hold your breath waiting for a letter to The Times from John McCain denouncing the smear of the free market by Mr. Goodman!

With the silence of the Republicans and the distortions in the attacks of the Democrats, the victim in all this is human liberty! The myth that we have had a free market system in place over the last 25 years is being spread indefatigably by the likes of Goodman and, especially, Paul Krugman who promotes it in his regular column for The Times.

As Allan H. Meltzer, the free market economist at Carnegie Mellon University (quoted in Mr. Goodman’s piece) put the point, “Now we’ve come into a crisis that has dampened enthusiasm for those (free market) policies, and we’re headed back into a period of more regulations that will do the same bad things as in the past.” The only mistake in this remarks is its implicit acceptance of the idea that Professor Friedman’s free market philosophy did in fact guide the American government’s economic policy for the last quarter century. Greenberg claims, for example, that when “Ronald Reagan entered the White House” he commenced “elevating Mr. Friedman’s laissez-faire ideals into a veritable set of commandments.” Not so. Reagan didn’t really implement too many free market policies and he barely managed to cut back some government economic regulations. Moreover, with the massive borrowing he perpetrated in order to help end the Cold War, Reagan didn’t achieve turning American economic policy toward freedom. (Of course, he was working with a Democratic Congress much of his time in office, so he alone cannot be blamed for that.)

But none of this will be pointed out in The Times since that newspaper is eagerly supporting returning to Keynesian economic top-down management, never mind that this ideas has been discredited far more than have Friedman’s free market views. The faith of the editors of The Times and Mr. Goodman in handing people’s economic lives over to a bunch of politicians and bureaucrats is blind. And it seems to induce them toward rewriting economic history as well.

ABOUT THE WRITER
Tibor Machan holds the R.C. Hoiles Chair in Business Ethics & Free Enterprise at Chapman University's Argyros School of B&E and is a research fellow at the Pacific Research Institute and Hoover Institution (Stanford). He advises Freedom Communications, parent company of this newspaper. His most recent book is “ Libertarianism Defended,”  (Ashgate, 2006). E-mail him at TMachan@link.freedom.com.