Recession Again:
Is It Time for Economic Wizards to Button Up?
Robert Clancy
[Reprinted from Land & Liberty,
July-August, 1983]
AS WE TRY to dig our way out of the economic depression - which has
been compared to that of the '30's -- what casualties have there been?
Certainly the unemployed, which still hover around the 10 per cent
mark ... the many businesses which have failed ... the chaos in public
finance and fiscal policy. A minor casualty, by comparison, is the
loss of credibility of the economics profession. So unreliable have
been the diagnoses and forecasting of economists, that what little
prestige they had appears to be waning still more.
This, however, does not appear to be too much of a crisis for them.
The economists do not lose their jobs because of bad analysis or
advice, any more than politicians get sacked because they don't live
up to campaign promises. It's just one of those things.
Colleges have to have economics in the curriculum and someone has to
teach the subject. Economists in Academia are not much bothered about
what goes on in the real world.
And Presidents have to have economic advisers, just as kings of old
had to have court wizards, whether or not they could do anything.
Franklin D. Roosevelt, fifty years ago, said: "See those buttons
on my sleeve? They don't do anything, but my tailor says I have to
have them. Well, my aides tell me I have to have an economic adviser!"
And so we have had Presidential economic advisers, down to Martin
Feldstein who is grappling in vain with our problems.
IT WAS also fifty years ago when the prominent economist Joseph
Schumpeter wrote about The Crisis of Economics (reprinted in
the Autumn 1982 issue of the The Journal of Economic Literature).
It appears that depressions bring on crises among economists, since
all their divinations haven't worked.
One would suppose that economists might be ready to study the
problems with a little more penetration. Instead, we find the same
schools of thought arrayed against one another.
- The supply-siders (Arthur Laffer et al) appear to
have lost face, although they valiantly contend that they are
right.
- The Keynesians are coming out of hiding, and blithely
ignoring past failures, economists like Lester Thurow propose a
return to Key-nesian remedies.
- The redoubtable Milton Friedman, along with his monetarist
colleagues, never got off their perch and stoutly preach their
monetarism, denying that it's not working.
- Marxists continue to point to all the "contradictions of
capitalism" and the chaos of an "unplanned economy",
but can't point to a convincing example of the benefits of
Marxism in practice.
- The unrepentant Austrian school vaunt their version of the "free
market" - which includes private monopoly - and avow that
whatever results from it must be good, even if it is economic
distress.
Governments continue to tinker with interest rates, tight money and
loose money, sliding scales of taxes, regulation and deregulation,
oscillating back and forth.
The French magazine L'Express (in a special issue, February
25, devoted to the world economy) summed it up: "Today, the
nations, each in its way, have tried everything. Devaluation and
revaluation; austerity and loosening up; lowering taxes and raising
them; cutting purchasing power and augmenting it. Nothing works.
Reaganomics beats its wing and French socialism has troubles from the
start."
It looks very much as though whatever recovery is on its way is
taking place in spite of current economic advice and
governmental action.
T THE YEAR 1983 is a double centenary for economics: the death of
Karl Marx and the birth of J. M. Keynes.
Much economic thinking in the world has been dominated by these two,
and continues to be -- despite the failures.
But economists need to look more deeply. They might be reminded that
1983 is also the centenary of Henry George's book Social Problems.
In this work, George said:
"Who that looks about him can fail to see that it is
only the injustice that denies natural opportunities to labour, and
robs the producer of the fruits of his toil, that prevents us all
from being rich? ... To appropriate ground-rent to public uses by
means of taxation would permit the abolition of all the taxation
which now presses so heavily upon labour and capital . . . The
enormous increase in production which would result from thus
throwing open the natural means and opportunities of production . .
. would enormously augment the annual fund from which all incomes
are drawn. It would at the same time make the distribution of wealth
much more equal."
If economists would pay heed to these fundamentals instead of staying
at the tinkering level, going around in circles with Marx and Keynes,
they might secure relief from their crisis -- and ours.
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