What Crisis is Being Solved?

According to calculations by Robert Barro, Harvard University economist, the stimulus package harmed the economy. Mr. Barro, concluded in the WSJ:

… viewed over five years, the fiscal stimulus package is a way to get an extra $600 billion of public spending at the cost of $900 billion in private expenditure. This is a bad deal.

The fiscal stimulus package of 2009 was a mistake. It follows that an additional stimulus package in 2010 would be another mistake.

When in a hole, government, like everyone else, should stop digging. Apparently stopping is not a viable option.

Since the 1960s, government has claimed the ability to manage the economy. Some economists were bold enough to state that the business cycle had been tamed. Keynesian economics was the key that opened the door to full employment, low inflation and general economic bliss. With these tools, we were told, prosperity was assured.

It is unclear whether our leaders believed their own propaganda. The media did, or at least became willing accomplices. Newspapers report in a manner that supports the myth of government controlling the economy. Statements along the following lines are not uncommon: Clinton “gave” us a good economy, Bush “gave” us a bad one and Obama inherited Bush’s mess.

The reality is that government cannot give us anything without first taking it. They can make things worse with bad policies, but they cannot create wealth or growth. These come from the hard work and production of the private sector. Period.

After many years of claiming responsibility for the good times, government is faced with both an economic and a political crisis. If they were responsible for the good, then certainly they must be responsible for the bad. The false myth, helpful in the good times, has become a liability now. One can imagine a conversation at the highest levels of government going along the following lines:

Politician: “We have to do something to remedy this economic downturn.”

Economist: “Actually, sir, there is nothing that we can do. Attempts to intervene will make matters worse. The best solution is benign neglect. Any attempt to stimulate a recovery will be counterproductive.”

Politician: “I know that! You convinced me last week. But we have to do something!”

Economist: “Doing ‘something’ will make the economy worse.”

Politician: “We convinced the rabble that we control the economy. They believe we can solve the problem, so design a stimulus for me. The bigger it is, the better.”

Economist: “But it will harm the recovery.”

Politician: “They don’t know that. Better to give them what they want, harmful or not. It will help me. I will look compassionate and involved. They will never know.”

As  pointed out long ago by H. L. Mencken, the American people will get what they want, “good and hard.” There is no better example of his wisdom than what is happening now.

Monty Pelerin originally posted this on American Thinker

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7 Comments

  1. It may be true that the government can only redistribute wealth, but, surprisingly, this does not mean that the government cannot also create wealth (or the conditions for greater wealth creation) via redistribution.

    Here’s how that works:

    As an example, slavery is simply not a very productive economic system. Paying laborers is actually far more efficient and more productive. If a government were to go into a slave economy and simply “take” the “property” of the slave owners (slaves) and free them, they would also be creating a more efficient and productive market economic system, where workers (former slaves) have greater incentive to produce because they can keep the benefits of their labor.

    Let’s look at another example. If a few large landholders own all of the land in a feudal economy and charge rents on everyone else to use it, this is not economically productive. If a government were to go into a feudal economy, “steal” the land from the nobility and redistribute the land titles, small farmers would have more incentive to improve their newly owned land, and would be more productive without the burden of land rents. The government would only be taking from one group and giving to another, but it would at the same time be creating a more vibrant, efficient and productive economic system, where incentives to produce effectively are maximized.

    Do you follow me so far?

    Ok, now lets imagine that there’s an economy where a small group of people owns most of the capital and make most of the decisions, but do none of the actual labor (we’ll call them ‘capitalists.’) By simply seizing their assets and redistributing them to the people already using the capital to create wealth (we’ll call them workers), a situation is created whereby maximum incentive for rational production is achieved.

    Of course, the difficulty in all three situations is making sure that the government doesn’t simply keep the “assets” for itself. However, we seem to have abolished the monarchs and freed the slaves here in America without the government becoming a monarchy or a slave owner. I have full faith that we will free the wage slaves from their corporate masters as well (although not with our present anachronistic and fully corrupted political system).

    Down with the Forbes 400!

    We shall overcome some day!

  2. The problem is not simply economic.

    The problem is, science, whether economics, physics, medicine, sociology, political, psychology or phrenology, —> all science is barbaric empirical gobbledygook.

    Science is as fraudulent as the witchcraft that gave it its birth.

    Science provides no truth whatsoever.

    David Hume’s “pragmatism” is a fancy word for nothing more than “Go ahead, stupid, -throw the switch and hope for the best.”

    Aristotle’s logical syllogisms are but incantations meant to be more convincing.

    Induction and deduction are both silly concepts that are self-conflicting and based entirely on faith in the fallacious religion of science.

    We do not know Socrates. We do not know that all men are mortal. We do not know that Socrates was a man. We cannot know if Socrates is mortal -or not- because we don’t even know what mortal means -in any definite sense.

    The real truths of all the sciences are the unintended consequences and the dangerous byproducts of science-applied.

    Our entire modern system of beliefs -has been built on outright lies and mistaken beliefs.

    Science is dead.

    Get ready for Categorical Knowledge, that knowledge that is true in every instance, -without exception.

    And if you get the chance, -wreck something.

    That will fix the problems quicker than any economic approach.

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