Saturday, April 11, 2009

The Case for Big Government By Jeff Madrick

The case AGAINST big government, the policies that have evolved from and the financialization of commerce and industry that have accompanied growing suspicion of big government in the United States since the 1970's have undermined growth in the standard of living for the majority of its' citizens. 'What history and contemporary examples teach us is that the nation has the capacity to regulate, tax, and invest adequately in public goods without undermining the entrepreneurial capacity and material prosperity of the nation'.

The failure of both political parties, Congress and the presidents to address serious problems in health care, education, housing, infra-structure and the environment during the last four decades has led to a decay of Productivity and growth in the Gross Domestic Product unprecedented in American history. In light of the record its seems exceedingly doubtful that restoration of the credit markets ('the bail-out') as they existed before the bursting of the housing bubble in 2007 represents a credible or lasting solution to the current recession since it is primarily designed to underwrite the very markets (finance, insurance and real estate) to which the public good has been sacrificed.

Perhaps the economist Michael Hudson has stated the problem more forcefully:

"You have to realize that what they (the antagonists of 'big government) are trying to do is to roll back the Enlightenment, roll back the moral philosophy and social values of classical political economy and its culmination in Progressive Era legislation, as well as the New Deal institutions. They’re not trying to make the economy more equal, and they’re not trying to share power. Their greed is (as Aristotle noted) infinite. So what you find to be a violation of traditional values is a re-assertion of pre-industrial, feudal values. The economy is being set back on the road to debt peonage. The Road to Serfdom is not government sponsorship of economic progress and rising living standards, it’s the dismantling of government, the dissolution of regulatory agencies, to create a new feudal-type elite."

As noted, a crucial document in the political and economic developments that have brought this country to the brink of depression is Friedrick Hayek's "The Road to Serfdom", published in 1944. For Hayek "the road to serfdom" inadvertently set upon by central planning, with its dismantling of the free market system, ends in the destruction of all individual economic and personal freedom." In the wake of World War II- what with the exposure of the horrible excesses of the Nazis regime and Stalinist totalitarianism- Hayek's libertarian philosophy was widely acclaimed although it did not get much political traction until the elections of Thatcher and Reagan both of whom were great admirers of his work.

Both John Maynard Keynes and George Orwell wrote fairly positive reviews of this book but, interestingly, hedged their praise with clear reservations. Keynes wrote "In my opinion it is a grand book...Morally and philosophically I find myself in agreement with virtually the whole of it: and not only in agreement with it, but in deeply moved agreement" but at the end of his letter conceeded 'your greatest danger is the probable practical failure of the application of your philosophy in the United States.'

George Orwell stated: "in the negative part of Professor Hayek's thesis there is a great deal of truth. It cannot be said too often — at any rate, it is not being said nearly often enough — that collectivism is not inherently democratic, but, on the contrary, gives to a tyrannical minority such powers as the Spanish Inquisitors never dreamed of". Yet he also warned, "[A] return to 'free' competition means for the great mass of people a tyranny probably worse, because more irresponsible, than that of the state."

More of this interesting part of the story at

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