Leftist Government’s Vacations from Economic Reality Always Self-Limiting

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Imagine that free market idealists’ worst nightmares come true in the next couple years: A all-out assault on investors, entrepreneurs and business managers in the form of draconian new regulations, punitive taxation, favors to unions and left-friendly rent-seekers (from ACORN to Boone Pickens), and a vast expansion of government’s scope and size.

 

How screwed would we be?

 

Pretty screwed, but perhaps not permanently so. In “The Ruling Class Does Not Rule,” a 1977 article by the eminent (and probably left-leaning) sociologist Fred Block published in Socialist Review (eek!), he analyzed what happens when leftist governments are elected, tracing out “the dynamic of business confidence on managers of the state apparatus.” Here’s a (chopped up) excerpt that distills the argument:

From the moment the left wins the election business confidence declines. . . Reformist governments are always under suspicion that they will pursue inflationary policies . . . (through) higher levels of employment, redistribution of income toward the poor, improved social services . . . An increased rate of inflation and an eventual international monetary crisis are likely. . .  

 

(The government) will have to act to insulate its economy from the pressures of the international market by imposing some form of price controls, import controls and exchange controls. . . A sharp decline in business confidence leads to a parallel economic downturn. High rates of unemployment coexist with annoying shortages of critical commodities. The popularity of the regime falls precipitously (and it eventually falls).

 

(T)he chain of events unfolds without any members of the ruling class consciously deciding to act “politically” . . . Conspiracies are basically superfluous, since decisions made by individual capitalists according to their own narrow economic rationality are sufficient to paralyze the regime . . . 

 

 

In addition to abusing the term “reform” and assuming since-discredited economic concepts like the  “Philip’s Curve,” Block was thinking more about places like Allende’s Chile (and the Venezuela of Hugo Chavez) than the U.S. However, given our smaller relative share of the world economy (not a bad thing since it’s due to a rising tide having lifted all boats, ours included), his scenario perhaps has more relevance for us than it would have in 1977. (Although interestingly, the new Carter administration then was about to play out a similar scenario.)

 

The mention of “annoying shortages of critical commodities” may be particularly relevant. Block is referring more to store shelves empty of staples like corn and beans, but our modern left’s opposition to domestic energy development suggests that gas lines, brownouts and worse are a real possibility here in the next few years – and those will really make “the regime” popular with the public (not).

 

Actually, maybe this isn’t really all that optimistic. :rolleyes: The wonderful Amity Schlaes recently described how the political/public policy assault on business confidence in the 1930s is what really made the Great Depression “great,” that is prolonged, by killing the “animal spirits” that provide the energy for dynamic capitalism and the prosperity it creates.

 

Some economists have suggested that the recent acceleration of information flows means that bad  public policy will be exposed and presumably reversed before too much damage can be done. I fear that this underestimates the ability of the political class (and their MSM enablers) to mystify the public regarding cause-and-effect   look at the campaign underway right now to dodge accountability for the mortgage meltdown.

 

In the coming era, connecting the dots for the public between bad policy and bad outcomes may be the greatest challenge for the free market, limited government movement –  and if we’re successful our most valuable contribution to a future restoration of liberty and prosperity.

 

Update:

Adam Lerrick said essentially the same thing in the Oct. 22 WSJ, “Obama and the Tax Tipping Point.”

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3 Responses to “Leftist Government’s Vacations from Economic Reality Always Self-Limiting”

  1. Nick Says:

    First things first, great closing paragraph.

  2. Nick Says:

    Second things second, we’re up to the challenge!

    We have to be.

    –Nick
    http://www.RightMichigan.com

  3. Jason Gillman Says:

    Permanence becomes irrelevant when an entire generation can be denied the freedom to pursue liberty based market function. In the spirit of fairness to all, we will have to fight a little harder.

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