“Austerity” has become the watchword of the year. Governors, prime
ministers, and presidents around the world are talking about cutting
welfare benefits, curtailing public union power, and reducing deficits.
We’ve over-promised at the public trough, and now we must pay the price.
Whoever is elected president in November is going to face the need to
retrench.
Yet only one school of economic thought, that of Friedrich Hayek and Ludwig von Mises, predicted and prescribed austerity before the Great Recession. More prominent branches of free-market economics, no less than spendthrift progressives, have been slow to realize that neither fiscal nor monetary stimulus can cure what ails the West. As the psalmist says, “The rejected stone has become the chief cornerstone.”
Nobody in power was talking austerity in 2008, when the financial crisis hit. Big government and its patron saint, John Maynard Keynes, were in the saddle, with Republicans and Democrats falling over each other to run up deficits and pass the Troubled Asset Relief Program. Keynes’s biographer, Robert Skidelsky, came out with a bestseller, The Return of the Master.
The monetarists, meanwhile, students of Milton Friedman and the Chicago school of economics, were extravagant in their own way. The Federal Reserve’s Ben Bernanke had told Friedman on his 90th birthday, in 2002, “You’re right, we did it”—causing the Great Depression by allowing the money supply to collapse—“We’re very sorry. But thanks to you, we won’t do it again.” Yet what was the monetarist response to the crisis?
Read more: http://www.theamericanconservative.com/articles/austeritys-prophets/
Yet only one school of economic thought, that of Friedrich Hayek and Ludwig von Mises, predicted and prescribed austerity before the Great Recession. More prominent branches of free-market economics, no less than spendthrift progressives, have been slow to realize that neither fiscal nor monetary stimulus can cure what ails the West. As the psalmist says, “The rejected stone has become the chief cornerstone.”
Nobody in power was talking austerity in 2008, when the financial crisis hit. Big government and its patron saint, John Maynard Keynes, were in the saddle, with Republicans and Democrats falling over each other to run up deficits and pass the Troubled Asset Relief Program. Keynes’s biographer, Robert Skidelsky, came out with a bestseller, The Return of the Master.
The monetarists, meanwhile, students of Milton Friedman and the Chicago school of economics, were extravagant in their own way. The Federal Reserve’s Ben Bernanke had told Friedman on his 90th birthday, in 2002, “You’re right, we did it”—causing the Great Depression by allowing the money supply to collapse—“We’re very sorry. But thanks to you, we won’t do it again.” Yet what was the monetarist response to the crisis?
Read more: http://www.theamericanconservative.com/articles/austeritys-prophets/
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