Monday, February 09, 2009

Congress: Don't Just Do Something; Stand There

The U.S. government has shown repeatedly that as an economic manager it is not to be trusted. What we need most are authorities wise enough to follow the dictum, "First, do no harm." The stimulus package will do enormous harm. The huge debt burden it entails, by itself, ought to condemn the measure. America is already drowning in debt. But the measure will also wreak harm in countless other directions by effectively reallocating resources on a grand scale according to political priorities, rather than according to individual preferences and economic rationality. As our history shows, the economy can recover strongly on its own, if only the politicians will stay out of the way.

~Economic historian Robert Higgs, in the CSM

HT: Cafe Hayek

7 Comments:

At 2/09/2009 10:29 AM, Anonymous Machiavelli999 said...

Because the huge debt burden of US and Britain after WWII condemned us to a world of low growth for decades...


Oh wait, the 25 years after WWII were some of the highest growth years the United States has experienced in the 20th century and we have never been able to achieve that level of growth since.

But why look at history, facts and evidence, when you have ideology to guide you.

 
At 2/09/2009 5:54 PM, Blogger misterjosh said...

There's a song "You say it best when you say nothing at all"

Congress does their job best when they do nothing at all.

 
At 2/09/2009 10:37 PM, Blogger FoxyMtnBiker said...

Mach,

You are focusing too much on one potential variable for growth. You are apparently ignoring the rebirth of the global economy that was disturbed by WWI and destroyed by the Treaty of Versailles. The Marshall plan not only rebuilt Europe, but also rebuilt globalization, allowing global markets to take off (again) and allowing everyone's piece of the pie to grow, including the US's. Debt was no doubt an issue, but one worth taking on because of real value obtained from essentially a "new market". Debt without associated long term value is dangerous, for an individual or a society.

And finally, America had a special place for growth in the post WWII globalizing world, as it had an unfair advantage over even the industrialized world: its factories weren't bombed into the stone age. ...this fact now eludes most that analyze the auto industry, as they think that the competetive advantage that 'american' auto companies once had was something to do with the character of the companies or their products. Unfortunately for the 'big 3', it was due to world events and geography, namely that it was difficult if not impossible for Nazi Germany or Imperial Japan to negatively impact US economic activities because of the expanse of the US (large land mass with factories spread throughout the north 'rust belt') and distance required from strategic attack. Distance and expanse would only later be possible at threatening American production base from Soviet Intercontinental Ballistic Missiles (ICBMs) and Nuclear explosives (as opposed to conventional bombs).

 
At 2/09/2009 10:46 PM, Blogger FoxyMtnBiker said...

Mach, you are right in claiming the high growth rate, but remember that the rest of the world was rebuilding and US production was actually assisting in (re)creating that industrial baseline, and helping expand it beyond the Western industrial powers that fought each other in two world wars.

 
At 2/09/2009 11:04 PM, Blogger FoxyMtnBiker said...

I think the real issue we face now is how to create economic opportunity and economic dynamism WITHOUT growth. I see the 'continuous growth' paradigm as increasingly dangerous. Both politically, economically, and environmentally. Do we go to war with another power because their 'growth' impeds or threatens ours? How many landfills do we create and grow to maintain the FDR economic policy (dreamed up to end the 'Great Depression', however actually executed after WW2) of planned obsolecence as a means of ensuring constant production? How much long term debt do we take on for short term pipe dreams?

I think there are some serious issues, and it doesn't have anything to do with numbers, but actually old outdated paradigms.

I have been thinking lately that historically a lot of economic and physical conflict (read: wars) comes about due to periods of time that see tremendous technological changes. The technological changes appear to always provide the opportunity to reinvent the world, however 'culture' always is the impediment for change. The gap between cultural motivation for change and the potential (or sometimes need) for change tends to create this friction.

I've been reading on American Civil war history lately, and there appears to be good example of this occuring in this history... It appears that slave based agriculture was economically bancrupt, with the 19th century driving America towards industrialization, the need for agarian reform (agrarian efficiency!) to provide the necessary manpower to power urban industry. This 'rub' created a lot of friction in the south. As the Nebraska-Kansas legislation provided an opportunity for Slavery to grow, I believe the Slave based agrarians emotionally/irrationally believed they could save their economic system through spatial growth. This despite the fact that slavery was economically suffering in the states it was still legal.

Add to this the culture surrounding the southern slavery economy, a culture that was predominantly Aristocratic. This American aristocracy felt it had the right to exist, and knew that the death of slavery equated to the death of their Aristocracy. Hence their rush to splitting the Union and going to war at Fort Sumter (threatened many times before, also probably because of the increasingly difficult task of actually making slavery economically feasible as the rest of American agriculture increasingly industrialized.) Aristocracy tends to have a disdain for 'new money' or those that actually earn a generous living through their own effort, rather than acheive financial success based off of their father's name.

So you're right Mach, in that people are very irrational. Slavery would end, and the great migration would happen, and many American blacks would move from the rural south to the urban north to take industrial jobs and help the US industrialize (along with other immigrants from Europe).

Ideology (in this case and Aristocratic one) was a very dangerous thing to defend.

 
At 2/10/2009 10:43 AM, Blogger NoWhining said...

"But why look at history, facts and evidence, when you have ideology to guide you."

Man...you are an idiot, shouting down arguments that don't support your viewpoint and pointing to those who make those arguments as ideologues. Sounds like you are defending your own ideology.

I have read Higg's work and found it very enlightening. His research is sound and his defense of his conclusions nearly flawless.

It's ok if you don't agree with him. No one is asking you to. But don't disparage his work as ideology just to defend yours. You should just plead agnosticism and admit you haven't read his work or done as exstensive research as Higgs in this matter. Better to do that than to plug your ears and shout at the top of your lungs just to avoid listening to view points that don't support yours. That really makes you look stupid and, chances are, you aren't as clueless as you come off as being.

 
At 2/10/2009 2:55 PM, Blogger VangelV said...

Aren't you folks missing something? The growth being discussed came as governments were paying off debt, not borrowing like drunken sailors to finance marginal projects. From what I see Higgs is on the money and the left is just as pissed off at him on the stimulus issue as the right is when he writes about national defence.

 

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