The far left in this country has limited economic insight on the origins of prosperity. You really have to wonder about Mr. Krugman when he writes that capitalism is inhumane and the free market is amoral. It escapes him that wherever it has been practiced, capitalism eliminated starvation, rolled back disease and dramatically improved living standards. As economist, Lewellyn Rockwell puts it, "The market economy has created unfathomable prosperity and, decade-by-decade, century-by-century, miraculous feats of innovation, production, distribution, and social coordination. To the free market, we owe all material prosperity, all leisure time, our health and longevity, our huge and growing population and nearly everything we call life itself."
I'm afraid most of the Keynesians running our country don't have any more understanding about wealth creation than does Mr. Krugman when he writes, "Nobody really knows why the U.S. economy could generate 3 percent annual productivity growth before 1973 and only 1 percent afterward; nobody really knows why Japan surged from defeat to global economic power after World War II, while Britain slid slowly into third-rate status." Believe it or not, they don't know that low taxes, less regulation, sound money, high savings and a market economy free of exchange controls, powerful labor unions, welfarism and bureaucracy will experience rapid growth. Rather, they see injustice because everybody's economic outcomes are not the same. It drives them crazy that paupers and poets don't get the same share as successful entrepreneurs.
We are in real danger when an influential, Nobel prize winning liberal economist can write that we "don't know how to make a poor country rich or bring back the magic of economic growth when it seems to have gone away." It's certainly true that the liberals in Washington don't know how to invigorate our economy. In fact, if the politicians continue to follow Mr. Krugman's advice, we can throw in the towel on the economy.
It's not that hard. Adam Smith summed it up. "Little else is required to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes and a tolerable administration of justice." Or how about Ben Franklin, "In short, the way to wealth, if you desire it, is as plain as the way to market. It depends chiefly on two words, industry and frugality." Economist, Ludwig von Mises sums up what Keynesians and liberals never seem to understand regarding the need for savings. "A country becomes more prosperous in proportion to the rise in the invested capital per unit of its population."
The reason that liberalism is so dangerous to America is that they never learn from their failures (welfarism) or from the successes of capitalism. Newsletter editor Bill Buckler writes about one such triumph. "In the aftermath of WW II, large parts of Germany were little more than piles of rubble or smoking ashes. Most of their major cities had been all but destroyed by bombing. Their infrastructure and transportation links lay in ruins. The nation itself was fully occupied by the conquering powers and in the process of being split in half with the eastern half swallowed by USSR sponsored totalitarianism…..
"The Germans themselves were utterly demoralised, having lost a world war for the second time in one generation. What economic exchange there was took place by means of barter. Cigarettes were used as money for those who had no access to the "scrip" issued by the occupying powers….. "Aid" did not resuscitate the western half of Germany - a return to sound economics and (relatively) sound money did.
"The process was simplicity itself. In one move over a long weekend in mid-1948, the German government….. [abolished] controls on prices and wages and [lifted] most of the regulatory structure on the economy….. The next day, the German people almost literally began to construct a new nation out of the rubble. Inside of a decade, Germany had one of the most dynamic and richest economies in the world and a currency which was arguably the soundest in the world.
"In the words of the great Austrian Economist, Wilhelm Roepke, advisor to German Economics Minister Ludwig Erhard at the time: "...here is to be found the most convincing case in all history against collectivism and inflationism and for market economy and monetary discipline."
Rather than adopt the free market economic policies that have time and again proven their merit, Mr. Krugman espouses socialistic schemes that have never worked. As Winston Churchill once quipped, "The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of misery."
The essence of our contemporary application of Keynesian economics is best described by analyst Michael Metrosky. "Spend all the money you have. When you run out of money, borrow all you can and spend that too. When nobody will loan you any more money, just print the money and keep spending." It's a fitting epitaph for an economy in the process of being killed by the likes of Mr. Krugman, the New York Times and the Keynesians in Washington who have been in charge over the past five administrations.
James R. Cook
President - INVESTMENT RARITIES
Editor, Silver Newsletter