A New New Deal Is A Bad Bad Idea

"Underlying a lack of faith in free markets is an underlying lack of faith in freedom itself."~~~Milton Friedman

Enthusiasts of excessive control of the market enthusiastically liken President Obama to FDR.  This enthusiastic comparison rests on a flawed premise, that FDR's hyper intervention via the New Deal saved the country from a crushing depression.

The comparison of our current president with FDR is not a flattering one, however, when we take the long view of the Great Depression.  As Jim Powell amply illustrates in his book FDR's Folly, government control and manipulation of nearly all aspects of the economy--and therefore society--turned a depression not uncommon to American history into a deep and abiding depression, lasting over a decade.

If President Obama is the new FDR we have worse economic times ahead.

Put another way, why was this one depression bad enough to be remembered our only great depression?   It was, after all, the only one "great" enough in American history to be remembered by that name. 

A market economy runs primarily on freedom: cooperation among individuals, contractual agreements, entrepreneurship, pursuit of respective self interest, and marginal business growth all require a free society.  In order to create wealth, employment, and a rising standard of living for a diverse population of millions, capital and limited resources with alternative uses must be efficiently allocated and utilized.

Controlled and over- regulated markets have never been up to the task of efficiently meeting the demands of advanced societies; socialism, in whatever degree and form, creates uncertainty in market condition-- lack of freedom, that is--that stagnates growth.  Government obstruction of the freedom required by the market and regulation beyond its proper role (and there is a good role for government) inevitably brings about economic stagnation and high unemployment.

Remember to ask, what and who is "the free market," or what is more commonly tossed around, "the private sector"?  It is nothing less than you, me, and other individuals freely and responsibly pursuing our respective self interests.

As the above quote from Milton Friedman pointedly reminds us, not trusting "the market" is not trusting in freedom itself--it is a distrust of ourselves.  A demand for more regulation of "the private sector" is not a demand to control some faceless entity out there in the murky distance; it is a distrust of and demand to control yourself and your own lives! 

Of course, it's never ourselves and our own liberty we don't trust; it is always some other guy.  In a free society based on a free exchange economy, that someone else is you.  During the New Deal when the federal government ordered millions of pigs slaughtered and acres of wheat plowed under, people everywhere went hungry longer than they needed to because some people were not free to produce the food millions of others demanded.

The more freedom was increasingly needed the more it was repressed, and the depression dragged on and on and on.

So let's make sure we're not in for a New New Deal.
 

Enrico Pallazzo, Part II: Books and More Books!

Adam,

I hope you didn't take my email the wrong way, I guess I was trying to add some sarcasm.  I still would like to meet up for a beer some night and discuss FDR, but several other items too.  A big question that I have is, why do some countries force their style of government/economy on others, e.g., democracy/capitalism has historically fought with communism/socialism.  Why do these countries care?  Why don't they worry about their own people?

I would also like to add to my reading list.  I believe I mentioned to you before that a buddy at church gave me a list of reading recommendations, some of them matched your book reports on your website, and yet a third source provided me with similar matches so I'm thinking these are good books to read:

The Federalist Papers

Road to Serfdom

Capitalism and Freedom

I'm also considering Economics in One Lesson.  I took a basic Econ class as a freshman in college but I dont remember a whole lot about it and I'm thinking I need a refresher.  I borrowed the text book from my hallmate to save money so I dont have anything to recall.  I've heard Animal Farm is a good book too.  Maybe that will help me answer my previous questions.  My friend also recommended a lot of books by Larry Schweikart, but some of his titles have me concerned I'll be getting a biased opinion.  I want to read objective opinions, not biased.

Anyway, maybe if our schedules permit we could grab a beer late next week (I'm just getting over a cold) and have a discussion.

Enrico

~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Enrico,

We really need to get together.  The books and authors you express interest in are excellent resources, and the questions you raise are excellent.  I love this stuff and it rarely occurs that someone I know expresses interest in it.

The Federalist Papers are a tremendous insight into what the Constitution was designed to do.
Hayek's Road to Serfdom is a classic--a must read.
Friedman's Capitalism and Freedom I read for the first time just a couple years ago and is another good one.

And Economics in One Lesson is a great book.  It should be taught in every high school and in every Econ 101 college course.  I was considering rereading it and posting several thoughts on it on the site.  It is most likely a good thing you do not remember much from your college econ 101 course; at the risk of sounding flippant, it was probably not worth remembering.  That is, if it were like the one I took many years ago.

It is a good thing you're after objective insights.  So much of what we hear from "economists" is thinly-veiled partisan cheerleading.  They have a progressive, statist agenda and wrap economic "insights" around it in order to give it some public validity.  One important aspect of the "Austrian Economists" school of thought is that economics is the study of human action and interaction, therefore an objective study of society and civilization.  Why, for example, were the vast majority of humans destined to lives of hand-to-mouth poverty for thousands of recorded history right up to the Industrial Revolution, then almost instantly (from an historical point of view) the standard of living leaped forward to what we enjoy today? 

What's the reason for all this progress and leisure time that allows for human cultivation, the arts, etc.  Line workers can come home to heated and lit homes to spend hours not concerned how they will feed their families.  (I learned a love of reading from my father who worked for 35 years in an aluminum plant.  He came home and cultivated a family, always eager to discover life through books.)  The answer to that question comes down to the central theme of human freedom.  Whenever and wherever some of us are free enough to provide what the rest of us need an want, human civilization prospers.  Whenever and wherever humans are less free, they are concomitantly less prosperous.  It sounds un-sophisticatedly simple, but history and facts are stubborn things.  (As John Adams would say.)

That's a long-winded way of responding to your desire to go after non-biased opinions.  Frankly, the Austrian school and similar economists and thinkers are interested in the bare historical record and understanding and explaining why things are the way they are.  Yes, they have an opinion but that opinion is rooted in a good-faith effort to get to the truth of the matter, not the creation of truth outside of what we can gather from history, human nature, and empirical evidence.  The socialists have never been so interested.  They have opinions, but theirs are opinions rooted in speculations drummed up by Marx, seemingly out of thin air.   Starting with Marx and Engels, they from the outset have been interested in rewriting history and imposing upon society their vision and philosophy of how the world works.  They are interested in having some of us (government authorities and their elitist "intellectual" apologists) plan and control what the rest of us can and cannot do with our time, capital, labor, energies, all in order to control and shape society into an image of their choosing.  I've found anyone affected in the least with this thought will from the outset not be interested in unbiased reporting of history and events. 

This brings me to more book suggestions: Thomas Sowell's A Conflict of Visions lays out this split in world visions starting with the Renaissance right up to today (1995 when the book was published).  The Vision of The Anointed is another one of his dealing with this issue.  And his latest, Intellectuals and Society is sort of a summation of all his thoughts on the elitist statists mentality and the pro-freedom, we-don't-know-everything-so-

it's-better-to-let-society-shape-itself view.   Sowell has written many books for public consumption; his books read quickly and easily without all the economist mumbo-jumbo jargon.

This is a very long e-mail but I would be remiss if I were to not recommend Ludwig von Mises' Liberalism: The Classical Tradition.  If I had to recommend three pieces of literature for a rebirth of freedom to society they would be 1) this book, 2) Hazlitt's Economics in One Lesson, and 3) the US Constitution w/ the Declaration of Independence.  Mises also writes clearly and spares the reader all the jargon.

We have to get together!  This weekend is out, unfortunately.  I'll check about some things and maybe one night this week?

Adam

ObamaCare and Model T Fords: Give Free Exchange a Chance

Who made more money and became a household name around the modern world: Henry Ford or the guy who started the Rolls Royce company?  (See, I have no clue who the latter is.) 

Now that Obamacare has been back in the news it is a good time to consider why Ford became so rich and renowned.  What's the connection?  When it comes to health care we reflexively assume it is a political problem and not an economic one.  Being that it is a heart an economic issue, what would be the best way to delivery affordable health care to 300+ million Americans who, presumably, actually want affordable health care?

Ford found a way to provide millions of Americans with something they wanted.  He dropped the price of an automobile from $850 in 1909 to $290 in the 1920s.  By "dropped the price" I mean he saw that  economy of scale and selling more cars to more people would make him more money so he decreased the cost of production through greater efficiency.  This profit mongering made the horseless carriage available to more and more people at a cheaper price.  

Ford operated in a vastly freer and broadly less government controlled environment.  Providing affordable automobiles to millions of Americans was also not a politically-charged endeavor wherein politicians demagogued the car industry at every turn and people assumed they had a "right" to not have to pay for one. There were no government subsidies, Motorcare, or Motorcaid getting in between Ford and his goal of delivering affordable and reliable Ts to his customers.   

In short, Ford did not have the government stopping him from providing Americans with what they want. 


For decades now the health care system has become increasingly entangled in cumbersome state and federal regulations and mandates.  Add to this efficiency-killer the insurance problem: for generations Americans have become accustomed to the third party model of paying for services.

Were Ford alive today and interested in turning his time, talents, energies, and capital towards providing Americans with more affordable health care he would have a much more difficult time delivering lower costs.  Actually given all the restrictions, regulations, government intervention, and insurance cartels provided by ObamaCare, he probably would not even give it a go.  Government is simply in the way.

The 2,700+ page health care law that will get piled onto all this mess (What could go wrong?!) will compound the very problems that have led to unnecessarily high prices in health care: increased bureaucratization, increased governmental command, and less consumer control.

So the Republicans have symbolically repealed Obamacare in the House.  That's nice, but how about publicly discussing that whole freedom in the market place thing that's worked somewhat well for us since the colonial days?  In every market that is unsubsidized and not controlled through the regulatory regimes in DC, Americans enjoy affordable and quality products and services. 

Milton Friedman makes the case:
   
Pro-freedom policies are a proactive, forward-looking approach to lowering the price of

health care.  Insisting on more central planning, corporatism, and government control of our lives is a turning back of the clock to the times that predate free markets and prosperity in modern society.   

We don't need to resurrect Henry Ford.  We need to resurrect the free market environment in which he made his millions by lowering the costs of a product Americans desired.  Now that's a progressive policy for health care. 

John Stossell on Friedman's Free To Choose

Here is a very good introduction of an excellent book, Friedmans' Free to Choose:

Video: Now and The New Deal

 "Underlying a lack of faith in free markets is an underlying lack of faith in freedom itself."~~~Milton Friedman

Are there similarities between the current recession and the FDR New Deal era?  The folks at Reason put this video together arguing so much.

Statists and enthusiasts of excessive control of the market enthusiastically liken Obama to FDR, the premise of their enthusiasm being FDR's hyper intervention saved the country from a crushing depression.

The comparison of Obama with FDR, however, is not be a flattering one.  As Jim Powell amply illustrates in his book FDR's Folly, government control and manipulation of nearly all aspects of the economy--and therefore society--turned a not uncommon to American history depression into a deep and abiding depression, lasting over a decade.  If President Obama is the new FDR, we have worse economic times ahead, and for a long time.

Hence, the great depression.

Put another way, why was this one depression bad enough to be remembered our only great depression?

A market economy runs primarily on freedom: cooperation among individuals, contractual agreements, entrepreneurship, pursuit of respective self interest, and marginal business growth require free society.  In order to create wealth, employment, and standard of living for a diverse population of millions, capital and limited resources with alternative uses must be efficiently allocated and utilized.  Controlled and over regulated markets have never been up to this task and create the uncertainty in market condition-- lack of freedom, that is--that stagnates growth.  Government destruction of the freedom required by the market and regulation beyond its proper role (and there is a good role for government) inevitably brings about economic stagnation and high unemployment.

Remember to ask, what and who is "the free market," or what is more commonly tossed around, "the private sector"?  It is nothing less than you, me, and other individuals freely and responsibly pursuing our respective self interest.  Demand more regulation of "the private sector" and you're demanding more control of your own lives! 

Of course, it's never ourselves and our own liberty we don't trust; it is always the other guy.