naked capitalism

eric anderson says:

“You conclude: ‘Sometimes the answer to badly run government is well run government, but that runs counter to their ideology.’

“That sums it up so eloquently.”

@DownSouth

Problem: Since power corrupts, as government increases in size and power, corruption increases asymptotically toward absolute tyranny (and probably bankruptcy as well).

If you want well run government, it must be small, and watched like a hawk.

Is this ideology, or merely history? You may find a few examples of benevolent monarchs who ruled with only as much force as necessary. But I would submit that these are exceptions which prove the rule.

Whittle down the number and the scope of things you require the government to supervise, control, regulate, and you are more likely to get something that works for us instead of against us. If there is a flaw in this logic, then I would need to see more than a few historical examples that counter it.

DownSouth says:

eric anderson,

Your comment beautifully exemplifies the disease that lies at the heart of Austrian-Libertarian ideology.

You fear only government, and are completely blind to the fact that wealthy non-government actors, like corporations, can and always do emerge that are every bit as abusive as government. The grotesque notion that the lone individual is a match for these corporations has no basis in reality. And yet this far-fetched nonsense is what lies at the heart of Austrian-Libertarian ideology, and is what causes it to lose all limitations through common sense. Power must be met with power, and government–which in a functioning democracy represents the people–is the only hope the common man has of matching the power of the wealthy corporation.

Since history never bears out the laissez-faire, anti-government absolutism that is the Holy Grail of the Austrian-Libertarian, he must invariably resort to historical revisionism. Thus the orgy of laissez-faire that preceded the Great Depression had nothing to do with causing it. Instead, the Great Depression was caused by faulty monetary policy. Likewise, the laissez-faire fervor that began growing in the United States in the 1970s and reached its crescendo in 2007 had nothing to do with causing the Great Financial Crisis. Riding the tide of laissez-faire absolutism were Greenspan and Bernanke. And yet it wasn’t their zealous embrace of limited government that caused the GFC, it was their monetary policies.

But here’s where the real fun begins for the Austrian-Libertarian. When his policies are implemented and everything comes crashing down, which it always does, laissez-faire never gets the blame. For instance, here’s how Frederick Lewis Allen in Only Yesterday describes Hoover’s role in the run-up to the Great Depression:

[Coolidge’s] proudest boast was that he cut down the cost of running the Government by systematic cheeseparing, reduced the public debt, and brought about four reductions in federal taxes, aiding not only those with small incomes but even more conspicuously those with large. Meanwhile his Secretary of Commerce, Herbert Hoover, ingeniously helped business to help itself; on the various governmental commissions, critics of contemporary commercial practices were replaced, as far as possible, by those who would look upon business with a lenient eye; and the serene flattering pronouncements upon business and assurances that prosperity was securely founded.

But the Austrian-Libertarians don’t excommunicate Hoover for his laissez-faire absolutism, the fundamental cause of the Great Depression. Instead, it is his break with laissez-faire absolutism , as described here by Lewis, for which he is excommunicated:

And in America, as in other parts of the world, the economic system had now become so complex and interdependent that the possible consequences of widespread bankruptcy–to the banks, the insurance companies, the great holding-company systems, and the multitudes of people dependent upon them–had become too appalling to contemplate. The theoretically necessary adjustment became a practically unbearable adjustment. Therefore Hoover was driven to the point of intervening to protect the debt structure–first by easing temporarily the pressure of international debts without canceling them, and second by buttressing the banks and big corporations with Federal funds.

Iacono’s pronounces Hoover’s excommunication as follows:

It was Herbert Hoover, not FDR, that broke the mold of what had been a Laissez-fare approach by government in regards to the economy, a dramatic change from the Coolidge years when the president is said to have made little use of his office yet, to this day, is credited with fostering “Coolidge Prosperity” for most the decade.
http://themessthatgreenspanmade.blogspot.com/2010/01/few-points-on-great-depression.html

Bush, a laissez-faire zealot just like Hoover, also intervened to bail out the banks and big corporations after everything came crashing down. Bush is excommunicated from the Austrian-Libertarian church for the same reason as Hoover.

Greenspan and Bernanke, also a laissez-faire zealots, are excommunicated for their heresies regarding monetary policy.

But no one ever gets excommunicated from the Austrian-Libertarian church a fanatical adherence to laissez-faire. Laissez-faire is like the sacred fire kept perpetally burning on the altar of the Roman goddess vesta, guarded by the vestal virgins.