Tuesday, November 25, 2008

The Scary Economy

Reason's Nick Gillespie nails the real problem with our economy.

What worries me the most about these seemingly endless string of actions is that they replicate the absolute worst part of the FDR's response to the Depression: an undending string of generally misinformed attempts to fix things.

As Amity Shlaes documented in her excellent history of the New Deal, The Forgotten Man, it was precisely Roosevelt's ethos of "bold, persistent experimentation" that kept everyone guessing about what intervention might come next and how it might completely undermine the previous reform. The net result is to freeze people's actions rather than get back to anything like business as usual or adapt to a new normal (however bad that new normal might be). Within pretty broad limits, certainty—even a very ugly, harsh certainty—is much better than continuing uncertainty and drift when it comes to restarting economic activity, investment, and the like. Between the Bush administration's stutter-start actions and what is almost certain to be a whole start-over once Obama takes office, all manner of problems are being strung out longer and longer.

I've blogged very little on the economy mostly because I have little to say. The general proposals have tended from bad (bailing out functional financial firms that made bad investments) to worse (bailing out manufacturers with completely unworkable business models.) It'd be silly of me to say that I know for certain that the government should just sit back and do nothing, but I do wish that just letting the markets fix themselves could actually be on the table.

The real problem here is history, or rather the traditional narrative people are familiar with. The traditional narrative tells us that way back in the Great Depression, Hebert Hoover was a do-nothing President and FDR was a hero who came in and solved the Great Depression with government action. It doesn't matter that any honest historian of any political stripe knows that such a narrative is a vast oversimplification because "the New Deal saved us" is the five second Wikipedia sound bite.

The time has never been more ripe for libertarians and free-market conservatives to offer a new path. One that rejects massive the influx of capital into business in an impossible attempt to have government "fix" the market in favor of a far more limited attempt to help those Americans who suffer because of economic dislocations and turmoil. Sure, it may be a bit excessive for traditional libertarians, but it's a hell of a lot better than the proposed alternatives we've been seeing.


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