Noah
Smith, writing in Bloomberg, says that middle-class
America has indeed been fleeced by our national economic policies. We
agree. But which policies have been responsible?
Smith mentions and immediately dismisses trade, immigration,
economic regulation, and welfare policies. The real villain in his view is an
alleged turn toward managing the economy on free market lines: “Your prosperity
was taken by the very people who promised to ensure and enhance it. The decades
from 1980 through 2008 were the age of neoliberalism — the ideology of the free
market.”
This is a story that we hear more and more. Neoliberals, the
favorite new epithet on the left for free market exponents, have ruled the
roost for decades ( note how the Obama administration is simply ignored in the
preceding quote), and have left the poor and middle class far worse off than
they were.
The truth is that the Bush-Clinton-Bush-Obama era had much in
common, and it was not free market principles. It was an era of unrestrained
crony capitalism, in which special interests formed stronger and stronger
alliances with the government in order to secure economic monopolies and other
privileges.
It was also, not coincidentally, an era of repeated boom and
bust, as the Federal Reserve and other central banks created immense amounts of
new money to keep the crony capitalist game going. The Fed did not create all
the new money to help the poor and the middle class. They did it primarily to
support the government debt machine, which they worried was on the verge of
collapse in 2008. The result is that government debt has now doubled in the few
years since then.
Can Noah Smith, an intelligent writer and economics professor,
really believe that free market principles prevailed in recent decades? The
only possible excuse for this is that crony capitalists tend to hide their
actions behind free market slogans. This is genuinely confusing.
Today, for example, we are told by most commentators that we
have a choice between “free trade” and “protectionism,” and the free trade
position is represented by people like Hillary Clinton and Hank Paulson, the
Bush Treasury Secretary during the last Crash who rescued his old firm, Goldman
Sachs, and coincidentally the value of his shares in that firm, and who more
recently supported Hillary for president. To describe these people as
supporters of “ free trade” is a joke. They are supporters of “ crony trade” in
which so-called free trade agreements are actually written by special interests
in order to escape the pressures of a genuinely free market.
And does Smith really believe that giving government even more
control over the economy will achieve anything other than making crony
capitalism worse?
Oh well, at least Smith did not equate what he called
“neoliberalism” with fascism, as many on the left are now doing in books and
articles. That makes a lot of sense, does it not? Proponents of more liberty in
economics and other areas of our lives are somehow like Hitler or Mussolini?
Note: The
views expressed on Mises.org are
not necessarily those of the Mises Institute.
Hunter Lewis is cofounder of AgainstCronyCapitalism.org. He is
co-founder and former CEO of Cambridge Associates LLC and the author of nine
books, including Where Keynes Went Wrong. He has served on boards and
committees of 15 not-for-profit organizations, including environmental,
teaching, research, and cultural organizations, as well as the World Bank.
