Tuesday, March 03, 2009


...and that seems to go especially for neo-Keynesian spending frenzy going on in Washington right now. Vin Suprynowicz asks the pertinent question: Why is failed Keynesianism back in vogue? First, he discusses Hazlitt's demolition of Keynesian theory after more than a decade of its failure--increasing unemployment instead of decreasing and leading to economic worsening instead of recovery. In short, the twin Keynesian answers to unemployment and economic downturns of massive government deficit spending and "cheap money" -- the artificial driving down of interest rates to "free up more credit"-- DOES NOT WORK.
But why are Keynes' thoroughly debunked notions still in vogue? Why was the usually brilliant Murray Rothbard so wrong when he predicted this 1959 book would mark the death knell of the economic nonsense preached by John Maynard Keynes?

This question appears at first a lot harder to answer. Henry Hazlitt, after all, was not some obscure gadfly. He was arguably the nation's best-known and best respected financial writer and commentator.

I believe there are two answers. First, a dumbed-down American populace, trained to believe that economic theory is deadly dull and of no practical use, tends to cover their ears when such stuff is discussed.

But the second reason is far more obvious. Imagine any of our egotistical and money- and power-hungry members of Congress or chief executives (of either party) today announcing, "Gee, this economic downturn sure is a misery. Too bad there's nothing the central government can do but to slash spending till our budget is in surplus so Washington is no longer crowding out private borrowers, meantime putting us back on the silver standard and shutting down the Federal Reserve. So all you lobbyists here to plead for special favors just might as well go home. Store's closed."

What? Give up the greatest excuse since Hitler and Tojo for enacting every pork barrel spending spree they can imagine? Are you crazy?!

Crazy doesn't begin to describe it. Not only is Keynesianism back in vogue, but so is socialism! And, as the article makes clear, those who are using the "scareword" socialism are fighting against a "rhetorical ogre" and must be mocked:
Of course, there is nothing remotely new about “socialism,” or the willingness of conservatives to hit the opposition over the head with the term, just as the name callers among the liberals have bludgeoned conservatives as “fascists,” “fundamentalists” and “plutocrats” and whatnot for decades.

But the socialist bogey-mantra has made a full-scale return after a long stretch of relative dormancy.

The contemporary era of socialist demonizing dates to the general election campaign between Mr. Obama and John McCain. Mr. McCain and his running mate, Gov. Sarah Palin of Alaska, repeatedly accused Mr. Obama of wanting to “spread the wealth,” an offshoot of Mr. Obama’s caught-on-tape exchange with an Ohio plumber (i.e. “Joe the,” last seen signing copies of his new book at CPAC).

Nothing is remotely new about tyranny either.

The quote on my sidebar, attributed to Burke, seems relevant: The only thing necessary for the triumph of evil is for good men to do nothing.

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