It’s taken a long time, but finally reality is settling in and we are starting to see reports like this from the Wall Street Journal:
The resilience of the U.S. economy, which rebounded from wars, terror attacks and a crash in tech stocks in the past quarter century, has been weakened in the aftermath of the housing bust, and shock absorbers that cushioned blows in the past are no longer working.
The government on Friday reported that the economy grew at a rate of just 1.3% in the second quarter, failing to bounce back from knocks earlier in the year. Estimates of first-quarter growth were also revised down to 0.4%. As a result, the pace of economic recovery has been one of the worst since World War II, weaker than all but the short-lived recovery of the early 1980s. That’s particularly bad news as the economy confronts the threat of a default on the nation’s debt.
Among the reasons the economy is so vulnerable: Debt-laden consumers with scant savings are prone to slash spending when their incomes drop. Household confidence is more fragile. Individuals are moving less often to find jobs, making it harder for firms to fill vacancies. And the government, for decades the rescuer of last resort with interest-rate cuts, tax reductions and spending increases, has run out of string.
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Pax Americana is falling down. New dark ages are upon us. The last time they happened – they lasted half a millennium. We should consider ourselves lucky if these end in 100 years. Who knows what forms of government humanity will invent after dark ages? I certainly hope it would be something like a network of thousands of city-states.
Cheers to you too.
It seems to me that Libertarian economics can ONLY work if there is no moral hazard. That means if a company, business or corporation engages in dishonest, immoral or dangerous business practices IT’S EXECUTIVES AND THE PEOPLE INVOLVED MUST GO TO JAIL. AND THEY MUST BE FINED MORE THAN THEY MADE. THEIR FAMILIES MUST BE MADE DESTITUTE!!!!! Secondly it can only work if there are no monopolies. THIS MEANS BUSINESSES THAT GET TOO BIG MUST BE DISMANTLED! Just like Standard Oil and Rockefeller. When I read about Austrian economics these two points are rarely, if ever, made. Why is this? Without these two checks you end up with an infinitely worse situation than the last 40 years. You will turn the country into a fascist dictatorship. It makes me suspicious of the Austrian Schools intentions. Someone please explain.
“Someone please explain.”
http://mises.org/books/
Cheers. I’ve got some studying to do!
The legal fiction that is the corporation really helps particularly unethical executives avoid the pitchforks and torches
William,
Your assessment assumes a government is going to stop these abuses and deliver retribution but your thinking is mistaken. The reason these abuses occur in the first place is due to government.
Moral hazard is a consequence of government intervention… not lack of it.
Remember, the current system is a web of government, banking, and Wall Street as well as a plethora of very powerful, well-connected corporations, industry lobbyists, and unions. This group influences the laws and reg’s in this country. Businesses only engage in dangerous business practices because government encourages them through these laws and regulations. This creates the moral hazard you speak of. (e.g. housing boom and bust)
In a freed market, there is very little room, if any, for such dangerous practices. There is no government to bail you out or to create barriers to entry for your competitors.
As far as monopolies are concerned, historically speaking, prices dropped and were a benefit to consumers. In a freed market, their impact is limited due to rapidly changing market conditions.
If they are vertically integrated in an extreme sense, they will suffer from the same calculation problems that socialist countries suffer from.
Last, monopolies have existed with the blessing of government…that’s how most were created in the first place.
The fascist dictatorship you fear is going to come about because of government. Only a society founded on the ethical principles of free will, property rights, and non-aggression is immune.
Note:
There is much debate within the libertarian community on the legitimacy of the corporation in an anarcho-libertarian society (see Daniel below) but that is a whole other discussion.
By the way, that’s (see Daniel above)…I hit the wrong reply…dam it!
Libertarianism is about individuals. Businesses, Corporations and Governments are groups of individuals. There is nothing special about Governments.
IT’S POLITICIANS AND THE CRONIES INVOLVED MUST GO TO JAIL. AND THEY MUST BE FINED MORE THAN THEY MADE.E!!!!! Secondly it can only work if there are no monopolies. THIS MEANS GOVERNMENTS THAT GET TOO BIG MUST BE DISMANTLED!
We just need to apply the same set of rules to Congress and the Administration and the Fed that were applied to Bernie Madoff, Enron, Arthur Andersen, Andrew Fastow and Jeff Skilling.
What is the point of spending $20 million to pursue Roger Clemens for lying to Congress.
What about everybody else who as lied to Congress. Why does Al Gore get a pass? Why is it OK for members of Congress to lie everytime they open their mouths.
Why is it OK for the CBO to use fraudulent accounting practices?
I agree with your comments too. I’m so confused! If there is no government who is going to put the criminals in jail?
I would be happy enough to see “The Bernanke”, Obama, Harry Reid, Nancy Pelosi, and their ilk struggling and failing at managing such places as convenient stores or 2nd-rate fast food restaurants. It would be hilarious seeing a bunch of lazy wise-ass teenagers working for them give them the respect they truly deserve.
There is no need to put these people in jail. Without the police and military used to force the public to finance their schemes their own misery working dead-end jobs and being laughed a for kissing the asses of their mid-level managers in corporations would be hell enough and all the punishment and humiliation they would ever need to correct their corrupt ways.
Libertarianism is, i think, an ethical position and not an economic doctrine. Just like capitalism is an embodiment of a millennia-old maxima ‘don’t steal’ (which had existed since at least bronze age when it was recorded into Torah by savage nomadic semitic tribes, but were never, ever actually followed en mass until 19th century. Same applies to not kill, as well as other commandments), the libertarianism is just an ethical doctrine elaboration of a maxima ‘no violence’ or ‘less violence’.
Standard Oil didn’t need to be dismantled, it was already collapsing under the weight of more nimble competitors when the Justice Department went after it. Call it an excuse for a government agency to justify it’s existence when it was becoming painfully obvious it’s existence is not necessary. If anything, the Sherman Anti-Trust Act ensured that Standard Oil’s offspring would be immense organizations by tying them to political decisions. No one in the DoJ would be henceforth willing to admit that their interventions turned a dying dinosaur with shrinking market share into a government protected monopoly. Their decision was claimed to be for “the best of the market”, so any failures must be ignored.
Exactly. The DoJ stepped in and acted well after Standard Oil had already been “defanged” by market competition. Standard’s peak was in the 1880′s, not the decade of the 1900s. Realizing they couldn’t fight off the competition, they turned to government to help them, and boy, did they!
The WSJ reports that the core reason for the weak recovery is that government has run out of things to help the economy. The WSJ never seems to consider that it could be those exact things the government has done that have created the bust in the first place and are prolonging recovery.
Sounds a bell… In “The Roosevelt Myth”, Flynn writes:
1937: “The dark realities of the country had sunk deeply into Roosevelt’s mind now. There were just a year and six months before a Democratic convention would meet to pick his successor. All that gaudy edifice of recovery of which he was the be-medaled architect was crumbling around him. One thing was certain. The Second New Deal was a flop. The First New Deal had been abandoned, as we have seen, immediately after his inauguration. A wholly new approach and a completely unheralded series of devices were put together to the roll of the drums and the blaring of the trumpets. This was the Second New Deal. One by one all of its parts had been dis-
carded save a few well-meaning but quite ineffectual social reforms. The President had settled down to a realization that after all priming the pump—spending billions—had by itself done the job and he hoped to skate along on that to the end of his term. But now even that had failed. Despite the billions and the debt, the depression was back. And it was not a new depression. It was the old one which had not been driven away but merely hidden behind a curtain of 15 billion dollars of new government debt. And, worst of all, he did not have a single new idea that he could use. He actually faced at this moment the appalling prospect, after all the ballyhoo, of going out of office in a depression as great as the one he found in 1932. The prospect was humiliating in the extreme, especially to a man whose vanity had allowed him to be blown up into such a giant depression-killer.
…
He told Farley he would have “to go in for pump-priming or relief.” Farley agreed. But then Roosevelt confessed to a difficulty little understood at the time, or since. What could he spend on? That was the problem. There is only a limited number of things on which the federal government can spend. This grows out of the character of the federal system. The federal government can build schools, hospitals, roads, institutions of all sorts. But they are built in cities,
counties, states and the activities which go on in these buildings are within the jurisdiction of the states. The states have to pay the teachers or nurses and staffs, have to support and maintain the roads and so on. The federal government can spend money on agricultural experimentation, on scientific research, on national parks, on power dams, etc. But in the end the outlays on these things are limited. The one big thing the federal government can spend money on is the army and navy. Roosevelt explained to Farley that he could not spend on local projects because the states and cities did not want any more buildings and institutions which they would have to support. They were having trouble enough paying the bills of those already built. Roosevelt revealed to Farley that many WPA projects approved by the government were abandoned because the states and cities could not raise the money to support them. He had to spend – but what could he spend on? The 1938 Congressional elections and Roosevelt’s purge were on and of course Harry Hopkins was dishing it out as fast as he could without very much regard to utility or even decency. That was to meet a political emergency and couldn’t go
on indefinitely. And the whole problem was becoming complicated by the fact that inside his own official family the pressure for balancing the budget was growing embarrassing.”
Walt, I agree. Confusing.
“”The chances of a significant improvement in the long-term credit profile of the government coming from deficit reductions of the magnitude proposed in either plan are not high.”
http://thehill.com/blogs/on-the-money/801-economy/174447-moodys-neither-plan-protects-the-nations-aaa-rating
Don’t tell me Moody’s are actually going to grow a pair?
I came to the conclusion that Austrian economics has pointed out the logical structure in human action and that it presupposes the existence of a sufficient number of non-fools and non-knaves. The logical structure is impeccable, but the presupposition is unfounded. Because of the latter, Austrian economics can only serve as a comforting dream for some intellectual elites, the truly perspicacious of whom have awaken from that dream and become as pessimistic as Albert Jay Nock in his late stage of life. There is always a remnant. But the remnant will make no difference at all.
Praxeology does not presuppose a sufficient number of anything.
I correct myself: Free economy presupposes those. I sense that the number of fools is increasing. Every crisis helps to solidify the foolishness of more persons. I don’t see any hope.
For the fools, there is no rightly recognized long-term interest. For the knaves, their rightly recognized long-term interest is to use the State to exploit as many persons as they can. Neither the fools nor the knaves can live without the State, or so they think.
That’s pretty well covered by the bodies of work covering praxeology.
There are two fundamental methods which a person can acquire wealth:
1. Through voluntary exchange of goods. This is acquiring wealth through the economy.
2. Through the use of force. This includes acquiring wealth through the use of politics.
Now when people are left to their own devices use the least amount of effort possible to achieve their goals. If people feel that they can achieve their ends through the use of force, through political means, then they will use those means. It takes more imagination then most people possess to realize that it’s in their own best interests to gather wealth through voluntary exchange.
This is why democratic government is going to be a failure. Or at least the form of ‘state’ democratic government we have now is always going to fail. State government is fundamentally corrupting. There is no way around it.
They can’t ignore the truth about the economy forever without looking like idiots or jerks so at some point, then the reality becomes evident for everybody, they have to adjust to reality and acknowledge it.
And with even official inflation rates at 3%+, all of that “growth” can be attributed entirely to more money being pumped into the system, enough to wipe out a real economic retraction.
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