|A Bridge Too Far||After Obama: Forgiveness|
by Christopher Chantrill
June 30, 2010 at 11:42 am
EVERY BAD idea seems to have its Wordsworthian moment:
Bliss was it in that dawn to be alive
But to be young was very heaven.
The early enthusiasm for Keynesian economics certainly qualifies. The dawn of Keynes was very heaven, if you were young back then. But now we are at the moment when a new generation asks: What was all the fuss about?
Last weekends G-20 summit in Toronto issued a veiled rebuke to the Obama administrations continuing appetite for Keynesian stimulus. In a veiled report in the New York Times, Sewell Chan and Jackie Calmes wrote that G-20 leaders called for
a timetable for cutting their deficits and halting the growth of their public debt, despite the Obama administrations concern that reducing spending too quickly might set back the fragile global recovery.
In an un-veiled editorial the Wall Street Journal exulted over the dead end of Keynesian economics. Finally the Journal can report that idea of spending our way to prosperity is going out of style. The blissful dawn is ending in humiliation and failure.
What could ever be so exciting and new about giving governments an excuse to spend and print money? When have governments ever needed an excuse to spend and inflate? If you want excitement, go and get all tingly about limited government, the radical idea of limiting the power of government to spend and inflate.
But, you young uns will ask, how did this crazy Keynesian cult take over the minds of our parents and grandparents?
The answer is that it wasnt easy. Even after decades of progressive and socialist propaganda it took a major government failure in the Great Depression of the 1930s.
In the depths of the Great Depression, capitalism had failed, everyone agreed. It was what we would now call a consensus.
Had capitalism really failed? Hardly. After World War I communism and fascism and social legislation were in the saddle, and government was bulking up all over.
When the Great Crash struck in 1929, progressives and socialists had managed to drive a stake through the heart of capitalism, but the heart was still beating. In the US there was a split between Progressive interventionists like President Hoover and sound money believers in the liquidation of malinvestments. In the middle of it all the clueless Federal Reserve Board split the difference and failed in its primary job to act as a lender of last resort. It rescued the banks that were too big to fail but not the banks that failed to be big.
Then along came Keynes and his book, The General Theory of Employment, Interest and Money, and made inflationism and deficit spending no longer the last resort of a failed royal dynasty, but the first resort of a sophisticated cosmopolitan. No wonder everyone thought it was bliss to be alive.
The pièce de resistance of Keynes theory was the Multiplier. The more money the government spent the more it multiplied and would stimulate the economy. When economists actually got around to doing research on the Keynesian Multiplier, they found it didnt work. See Barro and Redlick, Stimulus Spending Doesnt Work.
Keynesian economics was a failure right of the the gate in the 1930s. Thats why the Great Depression lingered on as FDR and his Brains Trust tried one bold persistent experimentation after another.
It took six years of bold persistent failure, but the American people finally decided, in the off-year elections of 1938, they had had enough and sent 79 new Republicans to Congress. You can read all about it in Amity Shlaes The Forgotten Man and also at usstuckonstupid.com.
Thirty years later in the 1960s, liberals tried again and ended up sending a grade B Hollywood actor to the White House in 1980 in an inflationary recession.
Now its thirty years later, again, and the Keynesians are making one last college try. Its not working any better than it did in the Great Depression and the 1970s. But theres a difference. Back in the early 1930s the US government debt was a mere 25 percent of GDP. Now, in 2010, it is budgeted at about 95 percent of GDP. Its one thing to throw borrowed money at uneconomic projects when the national debt is down at 25 percent. When the debt is at 95 percent of GDP the money power starts to murmur about the risk of sovereign default.
As we enter the end game of Keynesianism, the words of Pope John Paul II in the end game of a bad idea should inspire us once again. Be not afraid. Just as the Poles werent going to get rid of Communism without a struggle, we were never going to get rid of Keynesian economics on the cheap.
We wont bury Keynesian economics until after Keynesian economics buries the liberals. Fortunately, as Marx might have said, history during the Obama administration is repeating itself as farce.
Buy his Road to the Middle Class.
[W]hen I asked a liberal longtime editor I know with a mainstream [publishing] house for a candid, shorthand version of the assumptions she and her colleagues make about conservatives, she didn't hesitate. Racist, sexist, homophobic, anti-choice fascists, she offered, smiling but meaning it.
Harry Stein, I Can't Believe I'm Sitting Next to a Republican
Families helped each other putting up homes and barns. Together, they built churches, schools, and common civic buildings. They collaborated to build roads and bridges. They took pride in being free persons, independent, and self-reliant; but the texture of their lives was cooperative and fraternal.
Michael Novak, The Spirit of Democratic Capitalism
[To make] of each individual member of the army a soldier who, in character, capability, and knowledge, is self-reliant, self-confident, dedicated, and joyful in taking responsibility [verantwortungsfreudig] as a man and a soldier. — Gen. Hans von Seeckt
MacGregor Knox, Williamson Murray, ed., The dynamics of military revolution, 1300-2050
For [the left] there is only the state and the individual, nothing in between. No family to rely on, no friend to depend on, no community to call on. No neighbourhood to grow in, no faith to share in, no charities to work in. No-one but the Minister, nowhere but Whitehall, no such thing as society - just them, and their laws, and their rules, and their arrogance.
David Cameron, Conference Speech 2008
Imagining that all order is the result of design, socialists
conclude that order must be improvable by better design of some superior mind.
F.A. Hayek, The Fatal Conceit
[Every] sacrifice is an act of impurity that pays for a prior act of greater impurity... without its participants having to suffer the full consequences incurred by its predecessor. The punishment is commuted in a process that strangely combines and finesses the deep contradiction between justice and mercy.
Frederick Turner, Beauty: The Value of Values
[The Axial Age] highlights the conception of a responsible self... [that] promise[s] man for the first time that he can understand the fundamental structure of reality and through salvation participate actively in it.
Robert N Bellah, "Religious Evolution", American Sociological Review, Vol. 29, No. 3.
But the only religions that have survived are those which support property and the family.
Thus the outlook for communism, which is both anti-property and anti-family, (and also anti-religion), is not promising.
F.A. Hayek, The Fatal Conceit
[T]he way to achieve a system of determining admission to the public schools on a nonracial basis,
Brown II, 349 U. S., at 300–301, is to stop assigning students on a racial basis. The way to stop
discrimination on the basis of race is to stop discriminating on the basis of race.
Roberts, C.J., Parents Involved in Community Schools vs. Seattle School District
A writer who says that there are no truths, or that all truth is merely relative, is asking you not to believe him. So dont.
Roger Scruton, Modern Philosophy
Paul Dirac: When I was talking with Lemaître about [the expanding universe] and feeling stimulated
by the grandeur of the picture that he has given us, I told him that
I thought cosmology was the branch of science that lies closest to religion.
However [Georges] Lemaître [Catholic priest, physicist, and
inventor of the Big Bang Theory] did not agree with me. After thinking it over he
suggested psychology as lying closest to religion.
John Farrell, The Creation Myth
Within Pentecostalism the injurious hierarchies of the wider world are abrogated and replaced by a single hierarchy of faith, grace, and the empowerments of the spirit... where groups gather on rafts to take them through the turbulence of the great journey from extensive rural networks to the mega-city and the nuclear family...
David Martin, On Secularization