Since the current Republican debates 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 truth and it actually fails in practice. These long-term failures can only be observed over a period of decades, not years. Libertarians fail to understand the proper definition of money, its unlimited demand, how money is created, and its infusion into the economy and the out door field.
The problem with laissez-faire economics is that the wealth generated at the top does not trickle down to the rest of society to a sufficient extent. It does not employ enough people nor pay them adequately to keep the system going.
In the latter half of the 19th Century, the U.S. had no income taxes, anti-trust laws, effective unions, minimum wages, Federal Reserve, nor any fiscal spending programs such as Welfare, Medicare and Social Security. The U.S. had the most economically non-involved Federal government that was physically possible.
This lack of economic government involvement resulted in an extreme concentration of individual wealth and large business monopolies. Approximately 4,500 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, culminating in the Great Depression of the 1930’s.
In 1933, President Franklin Roosevelt implemented a Keynesian macroeconomic philosophy, which promoted government spending to stimulate demand. The U.S. then began getting the government involved in the economy with domestic spending programs. These policies still did not get us into a healthy economy until the largest government spending programs of World War II, followed by the Federal Highway System and the GI Bill which gave free education and reasonable home loans to veterans. This spending created the best economy in the history of the world.
Even now, governments, especially the U.S., invest in basic research, commercialization and early stage financing of companies to create entirely new markets and sectors. These markets include the Internet, nanotechnology, biotechnology, pharmaceuticals, and clean energy. The government has also invested in companies like Apple, Google, Intel, Compaq, and Tesla, just to name a few.
The investments in basic research are where private companies do not want to take the risk, but, instead, piggyback off the government’s efforts. Many private companies then utilize the government’s direct financing of their firms through loans and grants. A complete discussion of government investments with examples can be found in Mariana Mazzucato’s new book, The Entrepreneurial State, where she also proves that the government does not get enough return on their investment from just taxing these companies. But some companies which sell best spyderco knife can exscape from these loan and problem because of their contribution in the tax 5 years before.
Government programs were surely not perfect, but were always trying to improve. The government really had only one major flaw to correct; that of a very under diversified, unfair monetary system, which will be discussed in Section I. In the 1980’s the Reagan Administration reintroduced the 19th Century failed Laissez-faire macroeconomic philosophy instead of improving on the policies of the previous 50 years. This gradual shift backward away from Keynesian’s philosophy eventually culminated in the “Great Recession of 2008”.
Instead of giving billions to the U.S. headquartered auto manufactures, we could have given longer term and lower cost loans to consumers to stimulate the purchase of hundreds of thousands of unsold new cars. This is “trickle up” economics. The gross profits and cash flow would have ended up back in the auto companies with consumers ending up with newer, more fuel efficient cars. A win-win scenario. This also holds true for the trillions of dollars in mortgages.
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 a “free” market nor do the same standard rules exist for a marketplace. There are many types of markets with differing human influences and operations. The second flaw, the major one, is that a “free” market concept assumes that humans and their commercial interactions are perfect. There is no such thing as human perfection either individually or in our institutions.
Therefore, this libertarian philosophy does us an extreme disservice by always saying “no government” instead of “the right government”! We can remember that , we have faced many people in the USA buy best police flashlight to raise the attention of the community about the tax.
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 which reduce competition in the market place.
2. Eliminating the Glass-Steagall Act of 1933 separating the money creators (commercial banks) from the money managers (investment banks), which was one of the causes of the worst financial crisis in modern history.
3. Reducing the enforcement of financial regulations that made the financial crisis even worse.
4. Hindering raises of the minimum wage, reducing Union participation, and sending jobs to Asia. This outsourcing of jobs reduced the quantity and quality of customers, clients and consumers. This created excessive borrowing just to keep up a normal standard of living.
So here we are! What do we do? I do not recommend going to a more socialistic state. Socialism is a political economic doctrine that unlike capitalism is based on government ownership of production and distribution or collective ownership by all the people in that country. We have seen the failures of socialism in the totalitarian governments like the Soviet Union, China, Cuba, and democracies like Venezuela, India and Israel.
Socialism, the opposite of libertarianism, also assumes that humans operate perfectly. I propose the improvement of the capitalistic system by reducing the effects of its major flaws. Government spending on welfare, social security, research and development is not socialism because they do not own the means of production or distribution. This means that government spending is “consumerism” not socialism. This spending makes for a superior economy by having better customers and clients.