February 06, 2009
Must See Video for Any One Supporting Keynesian Bailout
If you haven't seen the PBS series Commanding Heights about the rise and fall of Keynesian economics and how it was discredited by Hayek's vision of free people and free markets it's really a must see. I watched Part 1 again today, and I left feeling inspired and depressed.
Inspired by the triumph of the market, depressed that so many are willing to forgo it. Prescient, I think, given that so many today are clamoring for the government to do something.
The courage to do nothing is what we need from our politicians today. Unfortunately, democracies are such that people expect politicians to do something, even if the solution to the imagined problem just makes it worse.
I've embedded the entire video below. It's long, but worth watching. Especially analogous to today's crisis are two segments. First, the discussion by George Schulz and Milton Friedman on Nixon's abandonment of the market during the economic crisis of the early 1970s. Something, the people clamored, must be done! And so it was, and the crisis was deepened.
The second set of segments deal with Margaret Thatcher and Ronald Reagan's handling of economic crisis in the US and UK. Thousands of economists, schooled by the Keynsians, begged Thatcher to stop her spending cuts during a recession, only a few dozen urged her on. They warned that if she did, than the deep recession would become a depression. Sound familiar?
And it came to pass, as Thatcher says, thousands of economists were wrong.
Reagan's response is also enlightening given that Reagan, too, was begged not to cut domestic spending due to the fact that people would lose jobs. It is in this context that Reagan says, "If not now, when? If not us, who?" And so it was that the recession did go on for three years, but it ended, and from the ashes of the regulatory state came nearly three decades of nearly unfettered growth.