When I was coming of age, the economic ideology of Keynesianism was going bust. Keynesians couldn’t explain the stagflation of the 1970s. Monetarists triumphed and the Austrian School experienced a resurgence.
Now, monetarist disputes are hard to follow, and the Austrian Theory of the Business Cycle is not exactly a piece of cake. But Austrian economists’ preferred policies possess a kind of common sense: The thing to do is prevent false booms. Once you hit bust, it’s too late: we are going to experience the pain of readjustment, “recalculation,” as we find new prices and levels. I riffed on this theme last weekend, in my column “Dead Hobo in Trunk.”
Keynesians, now back in the limelight, have it easier, promising “less pain.” They offer drugs to make us feel better: Borrow, go further into debt, and spend, spend, spend!
So you can see why today’s Keynesians would hate Austrian wisdom. Not inflating the money supply, not engaging in deficit spending? Risible! And “austerity”? Keynesian shill Paul Krugman never tires of pillorying that program.
Which brings us to Estonia.
The little post-Soviet Baltic state was one of the few countries to actually restrain spending after the 2008 bust, freezing pensions and cutting public employee salaries by 10 percent. Krugman infamously blogged about it, noting that the country’s current recovery hasn’t yet reached the height of the pre-bust boom. He thinks this tells against “austerity.”
But to Estonian economists, the height of the boom was a false prosperity that couldn’t last. They’re glad their country’s rid of it, and note that their current recovery is above the pre-2005 levels.
In other words, Estonians not only understand their country and their situation better than does Paul Krugman, they understand economics better.
This is Common Sense. I’m Paul Jacob.
The inefficiency of political control of an economy has been demonstrated more often, in more places, and under more varied conditions, than almost anything outside the realm of pure science.
Liberty, as we all know, cannot flourish in a country that is permanently on a war footing, or even a near war footing. Permanent crisis justifies permanent control of everybody and everything by the agencies of central government.
If there is no struggle, there is no progress. Those who profess to favor freedom, and yet depreciate agitation, are men who want crops without plowing up the ground. They want rain without thunder and lightning. They want the ocean without the awful roar of its many waters. This struggle may be a moral one; or it may be a physical one; or it may be both moral and physical; but it must be a struggle. Power concedes nothing without a demand. It never did and it never will.
The main thing that every political campaign in the United States demonstrates is that the politicians of all parties, despite their superficial enmities, are really members of one great brotherhood. Their principal, and indeed their sole, object is to collar public office, with all the privileges and profits that go therewith. They achieve this collaring by buying votes with other people’s money. No professional politician is ever actually in favor of public economy. It is his implacable enemy, and he knows it. All professional politicians are dedicated wholeheartedly to waste and corruption. They are the enemies of every decent man.