For as long as the present economic system lumbers along,
Keynesians will control the levers of power and influence. But when at last
the system goes down in a heap, and central banks cannot restore the system,
there will be a quest for answers. . . .
When people's retirement plans are smashed, they are going
to look for somebody to blame. That means Keynesians. The Keynesians will not
be able to transfer this responsibility to somebody else. . .
I can see people blaming specific Keynesians, such as
Yellen or Bernanke, but not Keynesianism itself.They will not blame
"Keynesian Economics" — unless it’s to update it.Voters will demand
reforms.They’ll want heads to roll.Those at the top of the food chain will
find a way to exploit their outrage, even if it means starting a major
war.But as long as the government hasn't become a failed state
Keynesianism itself will still be enthroned.
When the Federal Reserve finally is not in a position to
restore economic growth by means of inflating the currency, Keynesians are
going to get blamed.
Austrian economists will blame them, as they’ve done since
2007-2008.But who will listen, especially now that economic
growth has returned according to the Fed’s Beige Book collection of
anecdotal reports that reveal increased consumer spending?
Keynesians tell us the crisis was a result of lax lending
standards, limited regulation of non-depository financial institutions, and a
glut of savings. Wikipedia:
The temptation offered by such readily available savings
overwhelmed the policy and regulatory control mechanisms in country after
country, as lenders and borrowers put these savings to use, generating bubble
after bubble across the globe.
From this, laymen could easily conclude the crisis was
beyond anyone's control, or at least not the fault of any economic
theory.When the next crash arrives we will be reminded once again that economics
is hard, something mere mortals shouldn’t practice at home.
In 2008 Queen Elizabeth II asked Professor Luis Garicano
of the London School of Economics how something as big as the financial
crisis could strike without warning. His
insipid answer: ‘At every stage, someone was relying on somebody else and
everyone thought they were doing the right thing.’ Four
years later an economist at the Bank of England elaborated: We got
complacent. Regulation wasn't necessary. You know how it is,
Your Majesty.
Of course she does. This was the Great
Moderation: Central bankers had solved the business cycle volatility
problem. No wonder they were complacent.
Austrians could have told the Queen that only by closing
shop could central bankers begin to solve the business cycle problem.
Austrians could have told her sound economics requires unfettered
markets. But for most people Austrians are the devil they don't know.
Austrians are a devil they've never heard of or care to hear about.
The Great Depression and free markets
The myth still lingers that adherence
to the gold standard was a major reason for the Great Depression.
Gold was the free market's money. Only after governments abandoned gold
did recovery begin, Keynesians tell us. A casual viewing of some charts
suggests they might have a point. Never mind that the world was running
on a government-rigged
gold standard, the free market was holding back recovery. We can't
trust the free market ever again.
During the Depression, one of the few defenders of the
Austrian viewpoint in the English-speaking world was Lionel Robbins, who
published The Great Depression in 1934. Yet he eventually
repudiated his position. A biographical note
informs us that after the war Robbins published another book in support of
“Keynes’s policies of full employment through control of aggregate
demand.” To laymen his apostasy could’ve been well-founded or
expedient. In either case it didn’t help the cause for free markets.
I certainly hope North is right, that Keynesians will get
hammered. Logically, the buck stops with them. But if this means
Keynesianism will be tried and convicted, who will do it? Keynesians
will write another Wikipedia article that eases any doubts about who or what
is to blame. They’ll go on cable shows and point fingers. The
Queen will be fed another lame excuse. Though I wish it were otherwise,
the working public will not spend their evenings studying Austrian economics
or watching Austrian economists on YouTube. They’ll vent on Facebook
instead. They’ll be as likely to champion a Bernie Sanders as a Ron
Paul. They’ll want redress, not understanding. For understanding
they’ll defer to the experts, and the experts will still be Keynesians.
The situation reminds me of government’s checks and
balances. It’s government that does the checking and balancing. No
matter what atrocities it commits it never seriously finds fault with
itself. Somehow it always finds a way to increase its power.
Yet I'm probably at least as optimistic as Dr. North. And
there’s no question he’s optimistic. See here for details.
I think the future will be some
combination of Rothbard and Kurzweil. Keynesianism will still be
around intellectually because it is far too useful to the ruling elite to be
abandoned. Yet the institutions that put it in play will be on the
ropes. Broke governments will leave us with nearly free markets, while
the law of accelerating returns will continue to open up radically new
economic opportunities.
