Here’s Lionel Robbins, from his 1934 book The Great Depression, giving us the advice that was ignored then and is being ignored now:
“The habit of intervening to prop up unsound positions and to support particular interests must cease. Nothing must be done which will encourage business men to believe that they will not be allowed to go under if they make mistakes or if the conditions of the market make necessary a contraction of their industry. Instead of being more and more an official of the State, hampered on all sides by administrative rules and regulations, the business man should be freed as far as possible to perform that function which is his main justification in a society organized, not for the benefit of the part but of the whole, namely, the assumption of risk and the planning of initiative. The same principle must underlie the treatment of private property. Property must be left to stand on its own legs. Intervention to maintain the value of existing property – i.e., to frustrate the effects of change in the conditions of demand and supply – must cease. The property owner must learn that only by continually satisfying the demands of the consumer can he hope to maintain intact its value. Only in such conditions can we hope for the emergence of a structure of industry which is stable in the sense that it can change without recurrent catastrophe.”
{ 18 comments }
A large percentage of the executives I have known are proud of the fact that they have attained a position of power, prestige, and wealth. The problem is that once they arrived, they have no idea what they are supposed to be doing. They order people around and demand “results” but have no vision or motivation to do the job they have aquired.
Obviously, and thankfully, plenty of good executives actually do fulfill the leadership role they occupy, but it is an uphill battle to make good things happen in business. The “go along to get along” and “don’t rock the boat” mentality lends itself to socialism (aka team play). All the comfortably numb executives who resent innovation in others are quite willing to throw themselves on the mercy of government stooges all-to-willing to trade souls for bailouts.
Perhaps we are ushering in a disaster of monumental proportions. The great depression might not be a big enough comparison. Looking back at an even greater world wide collapse of sound economic principles, the result was called the dark ages and the new social system was feudalism. Maybe we really are on the road to serfdom more than we would like to imagine.
“Maybe we really are on the road to serfdom more than we would like to imagine.”
There is absolutely no “maybe” about it.
Anyone who has the least question about it also does not know what’s happening.
It’s amazing how timely many writings from that era ring true right now.
David:
Given that I am the proud father of a one year old, it saddens me greatly that I tend to agree with you.
Galt’s Gulch anyone?
I must admit that I’m a bit teary eyed, for I do not have in my possession an oracle that can tell me the future. I do know that numbers do not lie!!! According to Richard Fisher, member of the FOMC & CEO of the Dallas Federal Reserve, has indicated that the total US debt is 99.2 Trillion dollars!!! This includes debts from entitlement programs like Medicare & Social Security. In order to ameliorate this massive amount of debt one of two things must occur: 1) increase tax revenues by 68% or 2) cut government spending by 97%. Neither one of these will happen. There was a third option. I omitted it on purpose because it was the “least painful” plan of all…3) monetize the debt. Turn on the printing presses to produce enough money to pay for the debt. Let’s do the math. Mr. Fisher has stated that doing the math is painful (LOL). That’s 99.2 trillion dollars under a fractional reserve banking system. The reserve requirements are 10:1, so 99.2 trillion increased by a factor of 10 equal???…..992 trillion dollars or 1 quadrillion. If that’s not hyperinflation, I don’t know what is. Germany 1924, Zimbabwe 2008, America circa 2012! I do expect there to be a significant reduction in the quality of life here in America. Serfdom is a very real possibilty, just examine executive order 11000. The State did not become ominous overnight. We must unite & fight this pernicious beast to the bitter end. May the principles of Liberty & Property rights be with us all!!!
Hehe they seem to be caught up in the “do something!” mentality, David… which brings to mind Britney Spear’s awful song with that name.
It has been a long time since “money” was an asset, not in the lifetime of most living people. Money is a useful concept for comparing the value of dissimilar assets and for work hours and assets.
Money is a conversion factor which operates like a conversion process. One can turn corn into booze by fermentation and distillation or by selling corn and buying booze. The end result is the same. The difference is the speed of the process.
In the 1950′s most people could purchase a new car for about a half year’s pay. In this year most people can purchase a new car for about a half year’s pay. This year’s car is a MUCH better product than a 1950′s car. Has the cost of a new car inflated or deflated?
40 years ago a new car cost around a dollar a pound. This year, a new car cost around $10 a pound? Hasn’t wages roughly paced cost?
I propose that cost of living be measured in median man hours required to purchase the market basket of goods and other items.
I am always surprised when I find something written long ago that could have been written today.
It just proves that “all we learn from history is that we don’t learn from history”.
“I propose that cost of living be measured in median man hours required to purchase the market basket of goods and other items.”
I believe there are statistics that are calculated this way and show that our standard of living has stagnated since 1973…..
Then obviously they are wrong. Surely we have higher standard of living than thirty years ago.
Nowadays, both the husband and the wife work most of the time. Thirty or fourty years ago, far more women stayed at home with the kids. This is a simple factor that is very important to consider.
scineram,
Only because that higher standard of living is supported by a massive expansion in consumer debt and government capital.
This is what we mean when we say “a phony economy.” Just two years ago, Iceland claimed to have the highest standard of living.
billwald,
Your analogy is based on a faulty premise: that products should maintain the same price over time. Innovation causes prices to drop, not plateau. To get a better car at the same price 50 years later isn’t exactly something you should hang your hat on. That’s how you watch the world pass you by. See: India for an example of a country that is about to lap us repeatedly very soon.
Actually, we DO learn something: We learn all the ways that most people don’t learn. For example, in 1934 there was no Mises.org or Ron Paul describing in detail how the current idiots were recapitulating the errors of a previous generation of idiots. That is a qualitative change. And Billy, that’s exactly why it IS maybe and not certainly.
Actually, a little research, rather than selective quoting to further an opinion, would show that Robbins himself later in life recanted and rejected his earlier theories on economics, and addopted and supported Keynes’ school of thought…”Robbins’s repudiation was published in his 1971 Autobiography: “I shall
always regard this aspect of my dispute with Keynes as the greatest mistake of my
professional career, and the book, The Great Depression, which I subsequently
wrote, partly in justification of this attitude, as something which I would willingly
see forgotten.†(Robbins 1971: 154). ** By Murray N. Rothbard Originally published in Dissent on Keynes: A Critical Appraisal of Keynesian
Economics, Edited by Mark Skousen. New York: Praeger (1992). Pp. 171–198.
Online edition Copyright © 2003 The Ludwig von Mises Institute
John H., I already knew that, of course. But just because Robbins foolishly thought his work was without merit doesn’t mean it was in fact without merit. He is describing the situation then very accurately, and with eerie prescience, our own.
Oh, that makes sense. Now I get it! So my mom was wrong when she said “Learn from your mistakes”? I will go back to thinking the way I did when I was a teenager then, since the way I think now after decades of life experience is all wrong, and the way I thought back then is actually the truth in life. Foolish me…. And, I think I’ll start smoking 2 packs a day since all this cancer stuff is hogwash, cigarettes were perfectly healthy in the 50s…and next time my doc wants to write me a prescription, I’ll just tell him to stick some leaches on me…Economic theory is very much contextual, however funny thing is that the “do nothing” approach did nothing then, and it won’t work now either.
Actually this was more of a drive-by rather than an engagement. I was linked here by an acquaintance’s Facebook. With whom I engage in lively debate. I am too exhausted to engage any talking heads in rational discussion. It is tiring to explain to the average person, and far too tiring to explain what is really going on to those who have already formed a mob and are lighting the torches.
You want to punish greedy CEOs and Wall Streeters for Capitalism run amock? Be my guest. I never made $200 million a year, and I think it’s absurd that anyone does. But that is a few people…. “Nothing must be done which will encourage business men to believe that they will not be allowed to go under if they make mistakes or if the conditions of the market make necessary a contraction of their industry.”…Unfortunately, that AIN’T what’s going on here. It’s not about business men/women suffering loss for poor decisions, it’s about everyone suffering loss due to a calamity of circumstance largely beyond most peoples’ control, while at the SAME time being fueled by everyone (including you) no doubt unknowingly. Don’t advocate punishing the innocent masses for the misdeeds of a few. They/we don’t deserve it. And we’re all in it now, like it or not.
Did you live through the Great Depression? If not (you didn’t, and I hope none of us does now) then go find someone who did, and run that “we should do nothing” deal past them and see what they say.
When you have lost everything, let me know how it worked out for you when you advocated doing nothing. If you don’t think you can, then just perhaps you don’t have a grasp on the depth of the situation. That’s not coy, that’s a caution against hubris. Some of us have learned that pride gets you nowhere, and no matter how insulated you think you are, you can still lose it all. Post this or not. Reply or not. I don’t expect anyone reading this to agree in the slightest. I am leaving this site so you can get back to your books and rally-cry…and I can get back to educating people so they can protect their futures, and those of our children. Good luck to you, and God help you…and I mean that sincerely…
John, baby, you’re hysterical. My point stands: why couldn’t Robbins just as easily have been wrong when he repudiated his book? Hello?
Your anti-intellectual approach to the situation, which favors not learning any economic theory but proceeding on the basis of panic, pursuing the same policies that got us here, is probably not the best way to go. Learning the Austrian theory of the business cycle might be nice.
Thank goodness you weren’t around in 1920 to tell people to “do something” about that depression. It was over so quickly because the market was allowed to adjust itself without interference by the geniuses you have such confidence in.
Well, Tom, you made me smile! You seem like a nice guy, and we are all entitled to our own opinions: it’s one thing no one can ever take away.
If it were only so simple as to let the “markets” (that’s a broad and undefined term as it’s used these days) work themselves out, I’d be all for it. Unfortunately, that’s not the case this time. Like I said, perhaps there are things no one I have yet heard are taking into account. Things not reflected in any media outlet, or even in any attainable data, because it hasn’t entered the radar yet. Not only possible, it’s true. I have the info. But, neither you nor I is interested in taking pages to explain it. Let’s just leave the door open that it might be there. Lack of intervention will not be an option. Theoretically speaking, I think you would agree that all the belief in the world will not prevent water from draining out of the tub, no matter how adamantly you believe it will, only a plug will. Just like your cancer will not just go away as soon as you improve your lifestyle choices.
Let’s agree to disagree. One way or another, I think we both hope things will improve sooner rather than later. I hope you, and your readers and colleagues, have a great New Year!!
Dr Woods, I thought you might find this link interesting
http://www.thedailybeast.com/blogs-and-stories/2008-10-22/why-the-right-should-leave-fdr-alone
Conrad Black who, in is own words is “content—as long as my confinement is not overly prolonged—and in fact very proud to be in a US prison sharing the fate of hundreds of thousands of other wrongfully convicted or grossly over-sentenced people, and to be surviving it quite well” and also happens to be the author of a 1,280-page biography, Franklin Delano Roosevelt, Champion of Freedom (ISBN 978-1586481841) surely has the spare time to engage in a relevant debate on this matter. I would also hope that if he is convinced that he has misunderstood the economic prescription of the day, that he would also be a worthy champion of economic freedom.
Comments on this entry are closed.