PaperStab

tullip:

Steven Horwitz

One of the most pernicious myths in the economic history of the twentieth century is the belief that the Great Depression was caused, or at least worsened, by Herbert Hoover’s dogmatic commitment to a “do nothing” laissez-faire policy in the aftermath of the stock market crash. This argument is part and parcel of the set of beliefs about the Great Depression that I have dubbed the “high school history” version of that event. (It includes the claims that laissez faire caused it, Hoover’s inaction worsened it, the New Deal did wonders, and World War II got us all the way out.) This claim about Hoover’s dedication to laissez faire is, as I have suggested, utterly false. In fact Herbert Hoover was long known as a Progressive who favored much more government intervention in the economy. From his days with the U.S. Food Administration in World War I through his time in the 1920s as secretary of commerce, Hoover constantly pushed his beliefs that laissez faire did not work and that government must take a more active role. When the economy went south during his first year as president, it came as no surprise that he put those beliefs into action.

Hoover not only signed the Smoot-Hawley Tariff, as everyone knows, he also encouraged businessmen to keep wages up, expanded the real amount of government spending, reduced immigration to near zero, set up all manner of government lending facilities, and increased the budget deficit. Along with the Federal Reserve System’s failure to do its job, resulting in a 30 percent drop in the money supply, these Hoover interventions were responsible for turning what might have been a severe, but short recession into a Great Depression. So the “high school history” story is right to blame Hoover–but it does so for exactly the wrong reasons.

Hoover’s Well Known Views

How did this myth get started? Hoover’s beliefs were widely known before he was elected. Indeed “in 1920 [Franklin] Roosevelt backed Hoover for the presidency–as a Democrat.” During Hoover’s presidency, numerous commentators pointed out his activism. Hoover himself made it a selling point of his 1932 presidential campaign against Roosevelt. Roosevelt knew it too: Part of his campaign was an attack Hoover’s expansion of the budget deficit. Roosevelt’s advisers also understood what Hoover did; they noted that much of the New Deal was taken from programs that he had started.

So where did the myth of Hoover come from?

I don’t have an easy answer to this question, but it’s an important one because we may well be in the middle of a parallel myth. This is the belief that so-called “austerity” programs have prevented economies in Europe, and perhaps the United States too, from recovering more strongly from the Great Recession. Pundits such as Paul Krugman blame what they see as dramatic budget-cutting (“austerity”) in European Union counties for the lackluster recoveries and even double-dip recessions around the world. For Krugman this proves that an even larger Keynesian-style stimulus is needed.

What Austerity?

In the face of this argument various classical-liberal economists have offered compelling evidence that in fact the reductions in spending in Europe have either been nonexistent or very small. In almost all cases, they have been accompanied by tax hikes that are counterproductive in a recession. These economists also argue that the lackluster recovery might be the result of various policies that these governments have adopted, such as stimulus programs at the onset of the recession and/or the very tax hikes associated with supposed austerity. Without a serious attempt to deal with the rising costs of maintaining their expansive social programs, the countries of the EU (and the United States) will eventually have to pay the piper. Their reluctance to face that reality does not inspire investors to want to take long-term risks there.

The danger at the moment is that the Myth of Austerity will become the Great Recession equivalent of the Myth of Hoover. The damage the Hoover myth has done extends all the way to the Great Recession itself: Many argued in the fall of 2008 that anything short of the enormous intervention we got that winter would be “Hooverism” and plunge us into a second Great Depression. In fact, the Myth of Austerity is really just a warmed over version of the Myth of Hoover.

When people like Krugman come face to face with the failure of the ideas they’ve been peddling for decades, rather than confront that truth they retreat to the same old myths. Just as the defenders of intervention in the 1930s and ’40s needed the Myth of Hoover when the New Deal didn’t deliver as promised, so do their modern counterparts need the Myth of Austerity to explain away the failure of their interventionism today. There is no more important task for classical liberals right now than to prevent the Myth of Austerity from taking hold.

Especially relevant here in the UK, where Tories say they’re cutting spending (when they’re not), and Labour say the cuts are destroying the economy (and ignore the tax hikes and red tape)

(Source: indietullips)

baseballlibertarian:

by John Stossel

When my wife was a liberal, she complained that libertarian reasoning is coldhearted. Since markets produce winners and losers — and many losers did nothing wrong — market competition is cruel. It must seem so. President Obama used the word “fair” in his last State of the Union address nine times.

We are imprinted to prefer a world that is “fair.” Our close relatives the chimpanzees freak out when one chimp gets more than his fair share, so zookeepers are careful about food portions. Chimps are hardwired to get angry when they think they’ve been cheated — and so are we.

Filmmaker Michael Moore took this notion about fairness to its intuitive conclusion during an interview with Laura Flanders of GRITtv, saying of rich people’s fortunes: “That’s not theirs! That’s a national resource! That’s ours!” As is typical, Moore was confused or disingenuous. In our corporatist economy, some fortunes are indeed made illegitimately though political means. The privileges that produce those fortunes should be abolished. But contrary to Moore, incomes are not “national resources.” If he’s concerned with illegitimate fortunes, he should favor freeing markets.

Fairness is related to justice, the recognition of people’s rights to their own lives.

A free market will create big differences in wealth. That wealth disparity is simply a byproduct of freedom — vastly diverse individuals competing to serve consumers will arrive at vastly diverse outcomes.

That disparity is not unfair — if it results from free exchange.

The free market (which, sadly, America doesn’t have) is fair. It also produces better outcomes. Even “losers” do pretty well.

A more astute observer than Moore might show how unfair government intervention is. Licenses, taxes, regulations and corporate subsidies make it harder for the average worker to start his own business, to go from being a “little guy” to being an independent owner of means of production. Most new businesses fail, but running your own business is the best route to prosperity and — surveys suggest — happiness, too.

I once opened a dinky business called “The Stossel Store” in Delaware, hawking hats, books and other goodies on the street. It was hard to open this store. I chose Delaware because it’s supposedly the state that makes that easiest — but “easiest” didn’t mean “easy.” I still required help from Fox’s lawyers to get the permits, and the process took more than a week. In my hometown, New York City, it would have taken much longer.

By contrast, in Hong Kong, I started a business in one day. Hong Kong’s limited government makes it easy for people to try things, and that has allowed poor people to prosper. Regular people benefit most from economic freedom.

What makes it hard for people to embrace markets is that anti-market zealots, with their talk of Americans pulling together to take care of one another, remind us of the coziness of village life. Instinct tells us that’s where we’ll find trust — and fairness.

But our intuition fools us when it leads us to think that government models that institutionalize what resembles village life must be good. Assuming that government can foster togetherness better than our own voluntary associations, businesses and private charities leads to coziness of the bad kind: back-room dealings between the well-connected and government.

If we’re going to have a large-scale, modern society, we need relatively simple rules that respect individual rights and that can be applied to all sorts of new situations without having to put global commerce on hold until the hypothetical village elders come up with a plan.

Since most human beings still lived as farmers two centuries ago, the idea of stranger-filled cosmopolitan life outside the small, close-knit village is still novel. It was only around the 18th and 19th centuries that the ideas we now think of as classical liberalism, libertarianism, anarchism and laissez faire began to be articulated. As Westerners became accustomed to living without the rule of kings, aristocrats and village elders, they began, for the first time since the dawn of writing, to imagine living ungoverned lives.

Sure, it’s scary, but surrendering your fate to politicians and bureaucrats is a lot scarier.

(Source: moralanarchism)

na na na na na revolution
na na na dum da dum power to the people
brum bum pa bum socialism
la la la we are the 99 percent
na na na revolution
ba ba dum ba power to the people not the baaaaaaaaaaaaaaaaaaaanks
na na na na revolution
ba dum dum ba dum 99 percent
GENERAL STRIIIIIIIIIIIIIIIIIIKE (meant to be screamed in a high-pitched shrieking voice)
ba ba dum ba ba profits are bad
na na na revolution

—(via logicallypositive)

(Source: rigatonideology)

An Avidity to punish is always dangerous to liberty. It leads men to stretch, to misinterpret, and to misapply even the best of laws. He that would make his own liberty secure must guard even his enemy from oppression; for if he violates this duty he a establishes a precedent that will reach to himself.

—Thomas Paine (via hipsterlibertarian)