Monday, August 26, 2013

The Economic Philosopher's Outcast: Mises

The Economic Philosopher's Outcast: Mises

With cities like Detroit ($18.5 billion in debt), Philadelphia ($8 billion in debt), and Sacramento ($1.9 billion in debt) why are Mises disciple’s voices silenced at major economic councils in Washington and throughout the country? Robert Reich, former Clinton Administration Secretary of Labor, singles out the huge economic and political discrepancies between the Tea Party and the Occupier movements sparked by the Wall St. government bailouts. In a recent series of articles in the Huffington Post, Reich cites the high correlation “between inequality and political divisiveness.” He correctly points out that America was never so divided regarding income, wealth and power since the 1920s. What Reich fails to address are the conditions that fed the growth of extremist movements, such as the Nazis and Communists, which later imploded as a result of the economic policies of debt and printing money.

Mises, the modern day creator of the Classical Liberal movement (today also called libertarianism) destroyed the intellectual arguments of socialism by proving that it was impossible to allocate scarce resources effectively without private property and free-market prices. He showed that the more the state limited economic incentives to individuals, the greater the harm to low-income people and the general population. Centralized planning, something that was characteristic of all three types of socialism: the Nazis, the Fascists and the Communists, led to the ruin of an economy, and resulted in more and more tyranny and the rise of the totalitarian state. What economists failed to understand was that massive government spending and a authoritative centralized government would bring economic ruin to Germany, Russia, and many other countries.

Sooner or later government debt has to be repaid out of tax receipts. Our current revenue base is not strong enough to sustain a viable repayment program to service the debt. Today we create money — billions a month — to meet the debt repayments. As new money floods the market its value declines. The country experiences inflation destroying the savings, and pensions of its citizens. Similar conditions led to the downfall of the Weimar Republic. The rampant inflation of the 1920s in Germany was a contributing factor to the rise of Hitler, Himmler and the centralized planning of the ultimate socialist organization the National Socialist Workers Party (Nazis).