Learn from history

Economy
by Alex Tokarev
Posted on Tuesday, January 27, 2009, at 3:36 pm

A new Keynesian orthodoxy is emerging-in economic theory, in political rhetoric, and in government action. If a "free market guy" like Bush could advocate throwing a trillion dollars at the financial crisis, then for the Obama-Clinton team the sky is the limit. The Republican Party lost the last election not because of protracted wars and home foreclosures but because of a tactical fiasco. It has more to do with the concessions of GOP leaders that expansionary fiscal policy is a humane alternative to the pain of letting the market heal on its own. Most Americans refuse to accept the philosophy of spreading the wealth by a central planner. Trapped in a two-party system, however, they were denied an opportunity to vote for a clear ideological alternative.

In the next four years we are likely to discover the hard way that the running-deficit-as-solution theorists and practitioners have it all wrong. Being one of the most brilliant economists of all times, Keynes himself was aware that living standards are ultimately determined by one single factor: productivity growth. It is true that through government coercion we can coordinate strategic investment in infrastructure to facilitate production and exchange. But such collectivist efforts have never played more than an auxiliary role in making the nation richer in the long run. The main driving force of human progress has always been what Adam Smith labeled "enlightened self-interest." No bureaucracy has ever been able to guide successfully that force.

Let's stop fooling ourselves. There is no such thing as government altruism! For the government to give to Paul, it must first take from Peter. What often helps to sell the scheme is that Peter has not been born yet. If you believe that government-appointed bureaucrats can spend your money more efficiently and responsibly than you, then Keynesian policies will make perfect sense. Or you can choose to learn from history, as did Thoreau, that "government never furthered any enterprise but by the alacrity with which it got out of its way."

Alex Tokarev

Alex is a former WORLD contributor.

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