Monthly Archives: February 2014

One of my favorite moments during the 2012 Republican presidential contest came when Ron Paul, fresh from his strong showing in Iowa, triumphantly told his supporters: Were all Austrians now!

I imagined many Americans scratching their heads and wondering: Why do we want to be Austrians? They live in a nice country with stunning mountains and all that, but arent we perfectly happy to be Americans?

Of course those in the know, particularly Pauls enthusiasts, understood the libertarian presidential candidates reference: that Americans were rejecting the economic ideas of John Maynard Keynes that encouraged government intervention and provided intellectual ballast for the New Deal. Instead, they were coming around to the principles of the anti-government economics of Austrians Friedrich A. Hayek and Ludwig von Mises.

Hayek and Mises perceived little difference between democratic governments that used their power to plan against recessions and dictatorships that did the same thing. In this view, the policies of Franklin Roosevelt led down what Hayek called the Road to Serfdom and were thus objectively comparable to those of Hitler or Stalin.

At the time, Paul offered some context for his Austrian journey. He was quoting a supporter who had noted a line attributed to President Richard Nixon that were all Keynesians now. Paul observed that back then, even Republicans accepted liberal economics. Those days are gone.

Pauls words are worth remembering not only because they are entertaining but also because he has a point. To a remarkable degree, our politics are haunted by the principles of Austrian economics and their sweeping hostility to any actions by government to keep downturns from becoming catastrophes or to promote greater economic fairness.

This is, indeed, an enormous change. When Nixon declared his allegiance to Keynesianism, he was reflecting an insight embraced across partisan lines. Governments exertions, both during the New Deal and more completely during World War II, helped rescue the U.S. economy from depression.

Postwar Keynesian approaches, including the Marshall Plan, let loose an economic juggernaut across the Western world. Secular and Christian parties of the moderate right and social democratic parties of the moderate left created free societies and regulated market economies that delivered the goods literally as well as figuratively to tens of millions. (The actual country of Austria, by the way, largely ignored the Austrian economists and followed a similar path.)

Those who follow Hayek and Mises would have us forget this history or rewrite it beyond comprehension. They would also have us overlook that Hayeks own historical justification for apolitical market economics was entirely wrong, as the late Tony Judt put it in Thinking the Twentieth Century, his extraordinary dialogue with his fellow historian Timothy Snyder, published in 2012, after Judts death.

Hayek believed, Judt said, that if you begin with welfare policies of any sort directing individuals, taxing for social ends, engineering the outcomes of market relationships you will end up with Hitler.

See the original post:
Dionne: An economic school has led to gridlock in Washington