Economic quackery

The cause of the economic crisis, according to Keynesian theory, was not enough spending. Yet the western nations have just had the biggest orgy of spending in the entire history of the world. If that’s not enough, whatever is?

Prime Minister Rudd and President Obama have never run so much as a corner shop in their lives. They get their policies from professional and academic economists: all of which, while disavowing socialism, preach the need of more “economic management” by government central planning. The more it fails, the more they assume the cure must be more spending, more debt and more central planning.

Yet for every job the government creates, it must destroy more than one job. This is because the government does not get the money to pay for make-work jobs from a moonbeam, as politicians seem to imply. It takes it from people engaged in productive activity, and gives it to people engaged in loss-making activity.

The utility of a road, or other infrastructure, is all the argument it needs. If we are “investing” in infrastructure to create jobs, then the more wasteful we are, the better! But destroying wealth does not make us richer. This is mere economic incoherence: we are back to the fallacy of creating wealth by burning down our houses. (As true today as it was when Frederic Bastiat wrote in 1850 about public works in That Which is Seen, and That Which is Not Seen)

Looking to government to fix the problem is in vain for, if the original problem is that individuals in general are too ignorant or too greedy to know or to do the right thing, government action cannot be argued to be any improvement, because government is constituted by these same people.

The only way the government can assist to cure the recession, is to reduce both taxes and government. A good start would be to stop restricting and penalising the population for engaging in employment, saving, business, and investment.