Big Economic Theory Underpinning Libertarian Economics Is Total Baloney

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http://www.alternet.org/economy/big-economic-theory-underpinning-libertarian-economics-total-baloney

Since the 2014 midterm elections, Democrats have been trying to figure out what happened. There are probably dozens, if not hundreds, of reasons for the Democratic bloodbath. But one reason, in my opinion, is that Democrats never discuss, much less analyze, the fundamental theories of modern conservatism. As a result, erudite-sounding nonsense is passed off as wisdom, and sways an electorate grasping for answers. Republican calls for limited government find fertile ground with workers whose wages are stagnating.

One of the intellectual foundations of this idea of limiting government comes from an Austrian émigré economist named Friedrich A. Hayek, in his 1944 book The Road to Serfdom. Conservatives use that term as shorthand for the idea is that socialism and centralized economic planning don’t work and ultimately lead to totalitarianism, which ends up enslaving the people and impoverishing a nation. That idea taken alone isn’t necessarily wrong, but the theory actually takes a step back and says that any form of centralized economic planning, including government regulation of business, is the first step on the road to serfdom.

Hayek argued that government intervention almost always creates more problems than it fixes, and many current Republicans believe this as a matter of faith. Rand Paul mentions Hayek as one of the intellectual forefathers of his economic ideas and former vice-presidential candidate Paul Ryan discussed Hayek frequently on the campaign trail. Ryan is also notorious for giving copies of The Road to Serfdom to his staffers.

At the time Hayek wrote the book in the early 1940s, governments around the world were engaged in central economic planning. Russia had been collectivizing and devising “five-year plans,” for nearly two decades, and a number of Eastern European countries were following Russia’s lead. Germany had created a massive war machine through central planning. Beyond that, many Western democracies, including the United States and Britain, had instituted various degrees of centralized economic planning to help deal with the economic collapse of the Great Depression and then with the emergency of the second world war.