Libertarians – Historically Ignorant
Since the current Republican debates always discuss “limited or no government,” I thought I would discuss the macroeconomic history of laissez faire – libertarianism of the last 150 years. This philosophy has many followers because it sounds simple and accurate. Unfortunately, this is far from the actual failures in practice. These long term failures can only be observed over decades, not years.
In the latter half of the 19th Century, we had the most economically non involved Federal government that could be physically possible to have. We had no income taxes, anti-trust laws, effective unions, minimum wages, Federal Reserve nor any fiscal spending such as Medicare and Social Security.
This resulted in an extreme concentration of individual wealth and large monopolies. Approximately 4500 families owned most of the wealth in the country. (Yes, it was still better than most other countries at the time) Because of this concentration and lack of money, there were severe recessions-panics in 1837, 1857, 1873, 1873-79, 1892-6, 1904 and 1907, cumulating in the Great Depression of the 1930’s.
Then we started to get the government involved in the economy with the before mentioned programs-policies. It still did not get us into a healthy economy until the largest government spending programs of WW II, followed by the Federal Highway System and the GI bill giving free education and reasonable home loans to many. This started to create one of the best economies in the history of the world.
It was surely not perfect but we were always trying to make it better. We really had only one major flaw to correct; that of a very under diversified, unfair monetary system. Then the 1980’s came along with the Reagan Administration reintroducing this 19th Century failed macroeconomic philosophy instead of improving on the policies of the last 50 years. This gradual shift backward eventually culminated in the “Great Recession”.
The Libertarians argue that there was still too much government involved in the 19th Century economy and that the free market place is self correcting. This argument has two major flaws. One, there is no clear definition of “free” market nor what is actually the make up of a market. There are many types of markets with all differing human influences and operations. The second flaw (and the major one) is that it assumes humans and their commercial interactions are perfect. There is no such thing as human perfection either individually or in their institutions.
Therefore, this libertarian philosophy does us extreme harm by always saying “no government” instead of “the right government”!
The following is a list of some of the reactionary policies, implemented in the last 30 years that have hurt the economy:
- Reducing anti-trust enforcement creating many new monopolies and oligopolies reducing competition in the market place.
- Eliminating the Glass-Steegle Act separating the money creators (commercial banks) from the money managers (investment banks) causing the worse financial crisis in modern history.
- Reducing the enforcement of financial regulations making the financial crisis even worse.
- Hindering raises of the minimum wage, reducing Union participation, and sending jobs toAsia. This trade war reduced the quantity and quality of customers, clients and consumers. This created excessive borrowing just to keep up.
So here we are! What do we do? I do NOT recommend going to a more socialistic State. We have seen the failures of socialism in the Soviet Union,China,India,Israel,Cubaand others. Socialism is also based on human perfection of the government.
Our solution is to offset the imperfections of competitive markets-Capitalism by effective government policies. The four major flaws are: inadequate monetary distribution, failure to plan for the long run maximization of profits, inadequate recirculation programs and reducing competition on basic wages and fringe benefits for our customers-employees.
I believe the philosophy should NOT only be providing a safety net as the Democrats keep professing, but also to create better quality customers, clients, consumers and citizens by providing basic minimal support for all by the government. This includes health care, food stamps, education and residential subsidies. This does not mean that government owns or operates these functions. It only means government pays for these basic necessities. Can you imagine the quality of customer that is created when these financial burdens are eliminated or reduced?
Yes, there will be goof offs. Who cares! But, if they want anything extra they will have to do some additional part time work and if they want the real good life they will have to have successful careers as they do now.
The reason the governments need to enact this philosophy is that we do not need all these employees to produce most of the goods and services. The private sector, including agriculture, is just too productive at a continuing increasing pace, including robotics. Then how do our consumers get paid? We have to create a unique win-win 21st Century economy not based on the scarcity of a 19th Century economy.