This article originally was published on March 2, 2009, as part of a symposium on President Obama and the New Progressivism. More than two years later, Thomas E. Woods Jr.’s warnings about the government’s meddling in the economy seem prescient, and his prescriptions seem sound for an economy heading toward a double-dip recession.
Barack Obama is already making the Clinton and Bush years seem like the good old days.
Close to a trillion dollars are being tossed around in a “stimulus” package that no one in his right mind—and I do not here include the mainstream of the economics profession, which has disgraced itself in this crisis—expects to bring about recovery. Economist Robert Wenzel rightly describes the stimulus as “just the insiders raiding the till while there is still money in it.” Trillions of dollars are likewise being thrown at financial institutions that (if we actually believe in the free market) richly deserve to go bankrupt. Nationalization of the banks is being openly discussed—an outcome our rulers assure us they would undertake only as a last resort, deploring every minute of it, and only for our own good.
We are learning what it is like to live in an Orwell novel. Our television screens are filled with people offering choices between idiotic and suicidal option A and idiotic and suicidal option B. We are being told that we must at least partially nationalize our banks, prop up zombie companies, lower interest rates to zero, and pass stimulus packages in order to escape the fate of Japan—which, um, partially nationalized its banks, propped up zombie companies, lowered interest rates to zero, and passed eight stimulus packages. We have a president who tells us we cannot rely on the free market to get us out of this mess because the free market is what got us here, as if the Federal Reserve and its bubble-inducing monetary policy never existed.
F. A. Hayek won the Nobel Prize in 1974 for showing how central bank manipulation of interest rates gives rise to the kind of boom-bust cycle we are experiencing now, and that such phenomena are not caused by the unhampered market. If by some miracle you manage to hear this point of view on television, it will be sandwiched between hours and hours of Keynesian droning.