Ron Morley's Freedom Blog

This is the place where I do my little bit to explain the evils of the State.

Why the State Loves Keynesian Economics, continued

As a result of my last entry here some people have commented that my statement, “ matter how it is sugar-coated, the policies of John Maynard Keynes are essentially ways of increasing the power of the central government at the expense of individual freedom”, was too strong. Some readers felt that I had not made a sufficient case for that statement. I will attempt to correct that issue here.

The current discussion of whether or not to bailout the Detroit automakers by providing billions of dollars in loans is as good a starting place as any. The basic idea of Keynesian economics, that deficit spending by the Federal government will stimulate the economy during an economic downturn, applies to the proposed bailout. The end result of the proposed policy is to save jobs in the hope that doing so will cause Americans to, once again, resume their profligate spending habits and pull the economy out of its doldrums via the mechanism of consumer spending. There is no substantive difference between the Federal government giving the automakers billions of dollars, via the mechanism of deficit spending, or its spending those billions on some other form of “stimulus package” such as President-elect Obama's spending on infrastructure projects. The money is still obtained by borrowing, which denies the private sector access to those funds, and the Federal government still controls how the money is to be spent.

How does this act to limit individual choice and freedom? For the answer one has to look at what the proposed office of “Car Czar” will be empowered to do. The Federal officer who will be put in charge of the bailout of the automakers will have tremendous powers to determine what actions the manufacturers may take. He will decide whether or not the Big Three put together reorganization plans that will “make them viable”. There is every reason to believe that those decisions will extend to what types of vehicles the companies will be allowed to produce. After all, forcing the Big Three to make small, fuel-efficient cars is a project near and dear to the hearts of politicians such as Nancy Pelosi and Harry Reid. That will certainly mean that GM and Chrysler, at least, will be required to put a lot of emphasis on building the small, fuel-efficient cars that Americans have supposedly been demanding, in spite of all the evidence to the contrary, for the last thirty years. Gone, or at least severely limited, will be the supply of large SUVs and pickup trucks that have been so beloved by Americans for the last decade at least. In their place will be vehicles such as the Chevy “Volt” and the various small hybrids that have been developed over the last several years. The judgment of one person will be substituted for that of the millions who make up the market for new autos. In the process individuals will be denied the ability to purchase the type of vehicle that they may want and be forced to take, in its place, a substitute that, by and large, the marketplace has deemed inadequate to the needs or desires of many Americans.

The stimulus package that is being proposed by President-elect Obama will act in a similar way to limit the choices of individuals. As I pointed out in my last entry, deficit spending by the State acts to limit the amount of money available to private enterprise. Thus, the vast majority of the jobs that will be “created” by the proposed State spending will be construction jobs as it's difficult for salespeople, computer programmers, or those engaged in manufacturing to build the bridges, roads, airports, and other infrastructure projects that are so dear to the heart of the President-elect. By limiting the amount and type of jobs that the market would ordinarily be able to provide the State will, again, be acting in a way which arbitrarily limits the freedom of choice of Americans. Once again, Keynesian economic policies act to limit freedom.

There is simply no way around it. The fact is that the Federal government will not provide money to the states or once-private enterprises without establishing rules for how that money may be spent. The limitations that the Feds will put on how the funds may be used will, in the end, act to limit the freedom of individual Americans, even if only in seemingly inconsequential ways. It is time for Americans to realize that there is no such thing as a free lunch, and that while the State may say it is “giving” money or services to help citizens during these economically-troubled times, that money, or those services, invariably come with rules about who may qualify for them and what actions they may or may not take to remain eligible. The more Americans acquiesce in allowing the State to nationalize large pieces of the United States' economy, the more they will find their freedom of action limited by the arbitrary actions of Washington bureaucrats and politicians. And that, in the end, is why the State loves Keynesian economics: adopting those policies, by limiting the freedom of action of the marketplace, automatically enlarges the powers of the Federal government and diminishes the freedoms of the people.


Simon L said:

A very good article that supports the earlier assertions and claims of both Mises and Higgs regarding state intervention in economic activity (among others).

What some people fail to realize is that these new jobs are a form of debauched nepotism with a new segment of society whose livelihood depends directly upon the whims and wishes of Obama and the Federal Government. We shall see a scenario transpire similar to Venezuela where people will have to remain loyal to President in order to receive their dole of bread crusts, but at the same time blaming the "evil machinations of the free market" for their state of deprivation and poverty. The elite really know how to confuse and mislead the masses about the real enemies of progress and prosperity.

# December 11, 2008 12:32 PM