House ‘Progressive’ at ‘WaPo’ Attacks Austrian Econ

3020281035_4fb652b541_bEvery week seems to bring a new attack on the Austrian school, or even the Mises Institute specifically.  This week, it’s the turn of E.J. Dionne, that aging “progressive” at the Washington Post whose idea of proving something correct consists of noting that it is popular.

He starts out by describing the popularity of Ron Paul and Paul’s work in bringing the Austrian School to the fore of the American ideological debate. Being a lifelong beltway player, however, Dionne sees everything in terms of D.C. He ascribes the fact that his precious Keynesianism in Washington is under attack by claiming that Republicans are now devoted Austrians. In reality, it’s the voters who are far more Austrian than they’ve ever been, and the politicians, who couldn’t care less about free market economics, but feel obligated to play lip service to it nonetheless, are making a show of their short-term opposition. In the end, the supposed Austrians in congress will approve a higher debt ceiling and more government spending ad infinitum.

Dionne fails to understand that ideology means nothing in D.C. beyond the ideology of power that motivates virtually everyone in the place. What Dionne mistakes for Keynesianism is really just politicians doing what they love to do: telling other people how to live. The fact that Keynes offered an intellectual patina for this type of thinking made Keynesianism popular. It’s unlikely that the Austrian School will ever be popular in D.C., but it is becoming popular among the people that politicians hate and fear most: the taxpayers. Because of this, Dionne and his pals are pulling out all the stops attacking it. Below, I examine Dionne’s article. My comments in brackets:

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 “we’re all Keynesians now.” Paul observed that back then, even Republicans “accepted liberal economics.” Those days are gone. [I'll believe it when I see it. There is precisely zero reason to believe that Republicans have abandoned Keynesian economics. Republicans certainly loved it when Bush was president, increasing federal spending by 75 percent during Bush's tenure. The Republicans certainly embraced Keynes in 2008 and 2009 when they repeatedly voted for a variety of bailouts. Meanwhile, the supposedly free-market US Chamber of commerce agitates for bailouts and special favors, just as they always have. So have the Republicans had a change of heart?  It's not likely, and any skepticism will likely be rewarded the next time there's a financial crisis and Republicans absolutely fall all over themselves shoveling money at every banker they can think of because, well, Republicans are as Keynesian as ever.]

Paul’s 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. [It was bipartisan! So it must have been good.] Government’s exertions, both during the New Deal and more completely during World War II, helped rescue the U.S. economy from depression.[Never mind the fact that the Depression lasted 15 years(!), Dionne is saying. Roosevelt "saved" us from it. On the other hand, it is easier to find a job when all Japanese people have been thrown in concentration camps and most men of fighting age have been sent by force to go stop a  bullet in Europe or the Pacific. Even mainstream economists admitted long ago that WWII did nothing to end the Depression. It lessened unemployment, but the standard of living went nowhere fast during the war. It was the collapse of government spending after the war and the opening up of crippled European markets to American goods that ended the Depression in spite of the crippling government interventions that persisted under Truman.]

Postwar Keynesian approaches, including the Marshall Plan, let loose an economic juggernaut across the Western world. [Wow, how many tired economic cliches can Dionne fit into this article?]  Secular and Christian parties of the moderate right and social democratic parties of the moderate left ["moderate" must = good!] created free societies and regulated market economies that delivered the goods — literally as well as figuratively — to tens of millions. [The markets delivered the goods. There's no question. Of course that's what markets do. The fact they were regulated simply shows how well markets work in spite of impoverishing European mercantilism.] (The actual country of Austria, by the way, largely ignored the “Austrian” economists and followed a similar path.) [Not a particularly informative or relevant point, but Dionne thinks he's being clever here.]

Those who follow Hayek and Mises would have us forget this history or rewrite it beyond comprehension. [We Austrians rewrite it because the "official" history is wrong.] They would also have us overlook that Hayek’s “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 Judt’s 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.” [The Keynesians love to bring this up because they think it shows that Hayek was a nut. Hayek's error here was political and sociological and not economic. In fact, by the 1970s, The UK did indeed get a Hitlerian economy. That is, the standard of living was declining and they were in a shortage economy, just like Germany under Hitler. Also, Dionne is either deeply ignorant or just disingenuous by using Hayek as the personifaction of Austrian economics. Ron Paul, who is, according to Dionne, Austrian econ's chief popularizer right now, draws upon Mises's economics more than Hayek's. But of course Dionne ignores Mises because Mises is a harder target to hit, and Dionne probably doesn't know anything about Mises's economics anyway.]

Yet today’s conservatives are in thrall to Austrian thinking, [They're not in thrall to it. Many conservatives feel obligated to profess a liking for Austrian economics because more of their constituents than ever actually are devotees of Austrian economics. But, just as Michelle Bachmann's claim that she reads Mises on the beach is nothing more than pandering, so it is with most politicians who claim to be Austrian.] and this explains a lot of what is going on in Washington. Broadly popular measures [they were "popular" and therefore good.] such as raising the minimum wage and extending unemployment insurance — normal, bipartisan [It was "normal" and "bipartisan." Translation: all reasonable people agreed. The way Dionne talks reminds me of the aging hippies I know who can't understand why anyone would oppose their pet projects. How could anyone oppose "the right thing to do"? In other words, social democracy is just "normal" and anyone who opposes it must be motivated either by malice or insanity.] legislation during the Keynesian heyday — are blocked on the assumption that people are better off if the government simply keeps its mitts off the market. [Because "laissez-faire" clearly describes people like John Boehner.]

It is now difficult for Congress to pass even the kind of spending that all sides once saw ["all sides once saw." Do I detect a theme here? If "all sides" (In Dionne's mind, a handful of ivy-league bankers and politicians count as "all sides") agree, then it must be good.] as necessary public investment in transportation, research and education. It’s that “road to serfdom” again: Anything government does beyond enforcing contracts and stopping violence is denounced as the first step of a fox trot toward dictatorship. [Clearly all wrong in Dionne's mind since things like the NSA and Obama's proclamation that he plans to rule by decree are all part of Dionne's treasured and holy consensus.]

So let’s give Ron Paul credit for unmasking the true source of gridlock in Washington: Too many conservatives are operating on the basis of theories that history and practice have discredited [in the minds of Washington Post columnists]. And liberals have been more reluctant than they should be to call the ideological right on this, partly because they never fully got over the shell shock of the Reagan years [I hate to break it to Dionne, but the 1980s ended a long, long time ago.]  and also because they have a strange aversion to arguing about theory. When it comes to government policy, the Austrian economists paved the road to paralysis. [To the extent this is true, it's a pretty great achievement.]

Photo Credit: Dion Hinchcliffe

Comments

  1. Well- now I am truly embarrassed for my rant that was off-topic of the article on Rubin— Dionne’s article burned me up so bad that I completely left topic and placed comment that should have been here- but, my friends, I MISSED this well-done piece that does not need my duplication! Thanks again Mr. McMaken, for your good work and thorough handling of the argument.

  2. Writes JS: “Thank you for your great take down of Dionne. I would add one thing. He wrote, “(The actual country of Austria, by the way, largely ignored the ‘Austrian’ economists and followed a similar path.)”

    Actually, Austria didn’t follow even the limited free market reforms of Germany, Japan, etc. in the 1950s. It waited until the early 1970s, after which its economy boomed. Jim Rogers made a good part of his fortune when he recognized this in the early days of Austria’s market reforms.

    Whether or not people realize it, even a little Austrian economics goes a long way.”

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