UPDATED: Talking Truth Until You’re Blue In the Face

Debt,Economy,Education,Political Economy,Propaganda,War


Freedom’s real warriors labor with little support (and by “true” warriors I do not mean the Republican TV circus animals and tele-tarts who get face time and popular love in excess of their worth). Economist Robert Higgs laments “the bitter disappointment of seeing the [invaluable] research and writing [he has] carried out over more than forty years prove to have been completely in vain.” He wonders whether perhaps his mother ought to have strangled him in the crib, to spare him the bitter disappointment:

For all of the good I’ve done in correcting people’s understanding of what happened to the U.S. economy during World War and what lessons one might justifiably draw from that experience about, say, the scientific validity of the Keynesian model or its related fiscal-policy implications, I might just as well have held my breath and turned blue. Here we are in June 2011, and millions of Americans are being presented with the purest potion of economic misinformation one can imagine, an account in no way superior to those the young Keynesians were peddling so confidently in 1944, when I was born. …
When I began to teach U.S. economic history at the University of Washington in the late 1960s, I quickly realized that this tale of the wartime “Keynesian miracle” could not withstand critical scrutiny once one went beyond the barest account of it in terms of the elementary Keynesian model and the standard government macro measures, such as GDP, the consumer price index, and the rate of civilian unemployment. Almost immediately I saw that unemployment had disappeared during the war not because of the beautiful workings of a Keynesian multiplier, but entirely because about 20 percent of the labor force was forced, directly or indirectly, into the armed forces and a comparable number of employees set to work in factories, shipyards, and other facilities turning out war-related “goods” the government purchased only after forcing the public to pay for them sooner (via wartime taxes and inflation) or later (via repayment of wartime borrowing). Thus, the great wartime “boom” consisted entirely of (1) some people’s mass engagement in wreaking death and destruction and (2) other people’s employment in producing supplies for these warriors after the government’s military labor drain, turning out ”goods” never valued by consumers or private producers in voluntary transactions, but rather ordered by government functionaries and priced completely arbitrarily in a command-and-control economy. In no sense was the alleged ”wartime prosperity” comparable to real, normal prosperity. The pervasive regimentation, rationing, price controls, direct government resource allocations, and forbidden forms of production (e.g., civilian automobiles) should have served as a tip-off.

READ “World War II: Still Being Touted as the Quintessential Keynesian Miracle.”

UPDATE (March 5): “WARTIME SOCIALISM”: “… what politician would not warmly welcome an economist who, with the aid of indecipherable econometrics, legitimizes immoral power and property grabs? This is why the anti-free market central planning advocated by the late John Maynard Keynes has been embraced with renewed verve…”

7 thoughts on “UPDATED: Talking Truth Until You’re Blue In the Face

  1. Derek

    I often hear conservatives advocate war because it is supposedly good for the economy. This is the lesson they picked up from our WW2 experience. The point they never seem to get is that the US benefited by destroying, or having others destroy, all the factories of our competitors, whether actual friend or foe.

    To put this into modern context, the Iraq, Afghan and now Iran wars might be good for the US economy if only we could manage to destroy the factories in China while avoiding such destruction at home.

  2. Nick

    George Orwell touches upon war as an instrument of internal control as well. Let’s remember that in ‘1984’, the three superstates wage war merely to keep the population in poverty through an essentially world-wide broken window mechanism.

  3. George Pal

    It may be the best benchmark of civilization that in its ascendency it makes satire of public policy and in decay makes public policy of satire. I have not yet come across a better measure of the ups and downs.

    “We have to pass the bill to find out what’s in it” – Madam Speaker Pelosi

    Against such as this, the masters of Greek philosophy, Roman law and government, the Old and New Testaments, and Liberal political philosophy wouldn’t stand a chance.

    Mr. Higgs need not despair for having done his best in the worst of times. He is not on the wrong side of history but on the wrong slope of civilization.

  4. My RON-PAUL i

    “We are all Keynesians now” said Friedman and Nixon. The body politic can be divided into 3 segments: secular leftist Keynesian socialists like Obama vs. religious rightist Keynesian fascists like Gingrich vs. nutcase dissenting capitalists like Paul.

    The USSR paradise had zero unemployment – everyone had a job including keeping 10% “working” in the gulag. Although people saw what the long haul of “positive rights”, guaranteed jobs, rationing, no-profits, and economic equality brought to the Communist World – many people fear the unemployment, failures, and uncertainties of capitalism. Trabant, the General Motors of East Germany, never had layoffs since their viability was guaranteed by the Red Army. Another wonderful “benefit” was no glaring inequality – the more educated managers of Trabant probably just lived marginally better than the janitors (but worse than VW workers).

    Capitalist/libertarians are “hypocrites” because, like the lion in the zoo, we receive “benefits” from the zookeeper. If you desire life in a cage getting your 3 PM steak, enjoy the command economy. If you are a nutcase lion, then you have to go out and HUNT for your food!!! Most Americans prefer to live a zoo with the cage lined with savannah posters providing an illusion of “freedom”.

  5. Dennis

    JOHN MAYNARD KEYNES as seen by an Austrian Economist:


    Note the second paragraph and the highlighted passage referenced within the foreward of the German Edition of Keynes’s “GENERAL THEORY”.

    Remember “Power corrupts, and absolute power corrupts absolutely.”
    Lord Acton

    Read more: http://www.brainyquote.com/quotes/authors/l/lord_acton.html#ixzz1oFw6uUPP

    There is no Utopia. The political direction in which U.S. Government appears to be headed – hard Socialism – seems to me to be the perfect partner for Keynes’s General Theory as stated in his foreward noted above.

  6. John Danforth

    Anything more than three syllables rules out 95% of the population. We all seem to grow up with the delusion that once people see the truth, they must inevitably accept it. That this is demonstrably not true is one of the hardest lessons of all to learn. It is appalling to discover the price people will pay in order to cling to their delusions. I like Higgs’s work, but I’m not like most others.

  7. Dennis

    Ah, the WORKERS PARADISE! My Russian clients had some interesting things to say about that and several in particular when each spoke about the schools the kids attended here and what these kids wanted to learn.

    Here’s something from Vox Day’s comments today on WND:


    Delusions, Illusions, and Myths – read
    Mark R. Levin’s, “AMERITOPIA” and contrast what he has written about Utopian ideas versus what Ilana detailed in “CANNIBAL” after the new regime took over with their self-styled “enlightened utopian” ideas and leaders. [Levin the Talker? He’s a neocon-cum-Jacobin. Hopefully nobody on this site wastes money on his books.]

    The reality of life is – TANSTAAFL.

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