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Hornberger's Blog is a daily libertarian blog written by Jacob G. Hornberger, founder and president of FFF.
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The Fantasy Debate over Economics


One of the amusing things about liberals and conservatives is how they sometimes lock themselves in their own little conservative-liberal paradigm and carry on a silly debate over the causes of America’s economic woes.

For example, liberals cry, “America’s economic woes demonstrate the failures of capitalism,” and then point to “deregulation” during the Reagan-Bush eras to prove their point.

Conservatives cry, “No, it’s liberalism that has failed” and point to “regulatory excesses” during the Clinton administration.

A new example of this inside-the-cocoon fantasy debate is an op-ed by liberal E.J. Dionne Jr. in today’s Washington Post entitled “Capitalism’s Reality Check.”

Dionne says that the “deregulation” in the banking industry demonstrates once again that capitalism has failed. Why, Dionne even repeats the old canard about how the Great Depression “discredited the radical laissez-faire doctrines,” completely ignoring the fact that free-market economists (e.g., Ludwig von Mises, Friedrich Hayek, Milton Friedman, Murray Rothbard, and others) have conclusively demonstrated that the Great Depression was a direct result of monetary manipulation by the Federal Reserve, which was then aggravated by New Deal economic policies.

Another example of this liberal-conservative fantasy debate is Naomi Klein, a liberal who writes that the nation suffered under Ronald Reagan’s adoption of Milton Friedman’s free-market philosophy. See, for example, her recent article “ Beware the Chicago Boys that appeared in the June 12 issue of The Nation.

Not surprisingly, neither Dionne nor Klein mentions the term libertarian in their articles. The reason is simple: Libertarianism is an alternative paradigm to the liberal-conservative cocoon in which Dionne and Klein carry on their debates with each other.

Libertarians know that for most of the 20th century and 21st century, Americans have lived under a socialist-regulatory-interventionist economic system. We understand that that was what the Franklin Roosevelt administration was all about — the embrace of a revolutionary economic system involving a combination of socialism and fascism — and without even the semblance of a constitutional amendment. For a while, the U.S. Supreme Court was declaring some of much of Roosevelt did unconstitutional — and rightfully so, but ultimately Roosevelt and his anti-capitalist programs prevailed over the Court and the Constitution.

Thus, libertarians are bemused when liberals such as Dionne or Klein issue indictments against some period of post-New Deal America in which there has been some sort of “deregulation” or reduction in income taxation For them, that’s what goes for “capitalism” or “free markets.” That’s what comes from operating within a closed paradigm in which libertarianism doesn’t even exist and, thus, isn’t mentioned within the context of those silly inside-the-cocoon debates.

What would be a truly capitalist or free-market system? One in which there is no income taxation, Social Security, Medicare, Medicaid, public (i.e., government) schooling, a central bank (i.e., Federal Reserve System), paper money, immigration controls, trade restrictions, welfare, subsidies, grants, or economic regulations. In other words, the type of economic system that our 19th-century American ancestors embraced—one that was called “free enterprise” because economic activity and wealth was genuinely free of almost all government control.

Now, a simple question for Dionne and Klein (and conservatives): When you indict the failures of “capitalism” (or “liberalism”) aren’t you indicting a system in which all of those programs exist, albeit in various forms or degrees?

Yes, you are, which means that in actuality you are indicting not capitalism or a free-market system but rather the statist economic system that all you favor and whose results you obviously detest.

This post was written by:

Jacob G. Hornberger is founder and president of The Future of Freedom Foundation. He was born and raised in Laredo, Texas, and received his B.A. in economics from Virginia Military Institute and his law degree from the University of Texas. He was a trial attorney for twelve years in Texas. He also was an adjunct professor at the University of Dallas, where he taught law and economics. In 1987, Mr. Hornberger left the practice of law to become director of programs at the Foundation for Economic Education. He has advanced freedom and free markets on talk-radio stations all across the country as well as on Fox News’ Neil Cavuto and Greta van Susteren shows and he appeared as a regular commentator on Judge Andrew Napolitano’s show Freedom Watch. View these interviews at LewRockwell.com and from Full Context. Send him email.