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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:

 

  1. Reducing anti-trust enforcement creating many new monopolies and oligopolies reducing competition in the market place.
  2. Eliminating the Glass-Steagall Act separating the money creators (commercial banks) from the money managers (investment banks) causing the worse financial crisis in modern history.
  3. Reducing the enforcement of financial regulations making the financial crisis even worse.
  4. 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, Cuba and 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.

 

Then the question is how to we pay for all these programs besides taxation.  The answer is in the monetary reform movement at www.progressive-economics.com and www.monery.org.

 

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.


2 comments

  1. combusean says:

    As a staunch defender and historian of cities and urban interests, I take severe exception with this statement:

    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.

    The Federal Highway system and federal housing programs were two of the most disastrous policies for metropolitan areas and minorities in American history.

    FHA guidelines from the 1930s on dictated specific standards for housing that have left most Americans completely dependent on the financial black hole of automobile ownership, the single biggest contributor of pollution in their household. FHA design restrictions for new suburban housing developments birthed the disastrous policy of single family homes on oversized lots, overly wide neighborhood streets that are a natural hazard for speeding and distracted driving, and were built far away from established private transportation networks and not at a density that would have allowed them service. Even today, it’s difficult to get FHA financing on an urban condo–something you couldn’t even do until not that long ago–because there’s a bunch of building restrictions.

    The Interstate Highway Act as it played out was a severe corruption of Eisenhower’s sensible vision for a defensive road network to be built across the country. What ended up being built was a foul spaghetti plate of urban highways and parking lots that wreaked havoc on established urban areas, enabling incredible white flight to the aforementioned suburbs and the otherwise impractical Sunbelt and partly contributing towards the race riots of the 1960s in American cities.

    These government programs were only beneficial towards middle class white Americans who could afford to finance cars and new homes. Poor Americans were relegated to the rotting central cities and minorities were redlined into ghettos for decades as a matter of policy. All the privately owned streetcar and passenger rail systems that well served compact urban areas across the county only began to lose more and more money until they were ultimately absorbed into money-losing public transportation networks that are a shadow of their glorious past. Even more absurd is that those same private operators like UP/SP and various streetcar owners were frequently taxed to subsidize their publicly owned competition.

    All these programs simply “redistributed the wealth” in Libertarian terms from cities and encouraged a lifestyle that simply hasn’t worked over the long term. Hundreds of billions of dollars have been spent in vain attempts to pave everyone out of congestion, the Great Recession came about from mindlessly loose lending guidelines. All because the government decided that cars and single family homes were the only way to go without the hindsight of the modern era.

    Decades later, planners across the country are trying to correct these mistakes. In San Francisco, Oakland, and Detroit, active movements are underway to demolish unnecessary freeways and in Seattle and Boston billions and billions of dollars have been spent rerouting them underground. New transit networks are being built across the country, frequently in the same corridors and rights of way that were abandoned long ago–had they not it would have been far cheaper to upgrade them incrementally to modern standards. Cities across the country are investing huge amounts of money in revitalizing their downtown as generational attitudes have shifted toward a return to cities.

    Don’t get me wrong, I’m totally in favor of transit spending and infrastructure and the idea of affordable home ownership and things like that. In no way do I expect modern transit systems to be profitable. I just think American cities and this country would have been much better off without the exact policies of the past and we wouldn’t have to spend money fixing its problems.

  2. admin says:

    What did you expect human perfection and 20-20 hindsight. Many of the negatives were pushed by private enterprise i.e. banks, auto and oil industries. Environmental concerns didn’t even exist!

    The economic living conditions of the average American and even the minorities were far better after WWII than in anytime in human history! Then, these conditions were brought to Europe and Japan.

    Do we still have problems of course and we always will. The problem is we elected in 1980 the libertarian minded Republicans who implemented policies to bring us back to the 19th Century instead of improving what we started. This period had 99% of the population living in poverty in terms of the latter half of the 20th century. Where 4500 families own 99% of the assets at the end of the 19th Century.

    It is not redistribution! It is recirculation. It is spent right back into the economy and the hands of businesses.

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