Recently, Spain’s government has banned cash transactions over 2,500 Euros. This policy is complete insanity and a gross violation of natural rights. But, the European Union did not reach this point of insanity recently, nor are they alone. The crisis is the result of a greater madness, which is not foreign to the United States government.
The original economic madman of the 20th century was John Maynard Keynes. Keynes became much more than an influential thinker to modern liberalism; he became, in terms of economics, their patron saint, guru, and witch doctor. In stark contrast to this, the thinkers from the same period who promoted truly free markets—such as Ludwig von Mises, F.A. Hayek, and Henry Hazlitt—were chided as lunatics—either being heartless industrialists or wearing metaphorical tinfoil hats. In short, is no great feat to say that Keynes is revered by many in economics and academia. Paul Krugman, another venerated economist and New York Times writer, is a disciple in the cult of Keynes. Ben Bernanke and Barack Obama are also prominent, powerful followers of John Maynard Keynes.
So then, what are Keynesian Economics? As with any economic viewpoint, it would be easy to spend a long, detailed amount of time explaining it, but a brief overview of Keynesian Economics is not difficult. If one is familiar with the ideas of any of the free market thinkers—whether Adam Smith, Ludwig von Mises, or Milton Friedman—and turn them upside down, one would arrive at the ideas of Keynes. Keynes purported that the government may create a market demand and that a government may do more than possible monetarily, by utilizing the policy of “taxing and spending.” Keynes also was obsessed with unemployment and the failures of the free market — his solution being government. Other important ideas that Keynes argued for were government-influenced inflation, central banking, destruction of the gold standard, and massive government public works projects.
While those in charge of the European Union may not be blatantly waving their copies of General Theory of Employment, Interest and Money in the air, the European Union’s system of central banking would certainly yield approval from Mr. Keynes. As Philipp Bagus writes in his article “Why Is There a Euro Crisis?” the direct cause is easily seen by applying F.A. Hayek’s contribution to economics—the Austrian business cycle theory. The theory states, in short, that when low interest rates—as set by a government—are implemented, the result is an arterial boom, followed by a bust (also known as the “boom-bust”). The issue of debt within the European Union is also a key cause as well—as has been the starting of many riots across the EU. Also, as Robert P. Murphy notes, the European Union’s monetary system of fiat currency (i.e. worthless paper, with no backing), has also played a role.
The problems of the European Union are by no means simple, but they are all a result of a rejection of sane economics, whether in central banking, debt, or currency. But the frightening, and most important, point is that these insane policies are being put into practice by the federal government of the United States. On top of this, none of it is new. Franklin Delano Roosevelt was a disciple of Keynes, with the New Deal being a textbook example of Keynesian thought. There has been much written about the New Deal, though it is not radical to call it a massive failure and responsible for prolonging and worsening the Great Depression. Now, at our time in history, Keynesian policies have been re-adopted—ranging from the American Recovery and Reinvestment Act of 2009, to TARP, to quantative easing (government-induced inflation), and to the bail out of General Motors. Again, Mr. Keynes would be giddy at these policies.
The brilliant and influential economist Frederic Bastiat once wrote that one must look not just as “that which is seen” but also “that which is not seen.” The seen effects of liberal economic policies are abundant, but the unseen effects are much more sinister. Some unseen effects of liberalism are the loss of economic opportunity—in the way that the wealth and property confiscated is taken from what would be put into the economy—and a loss of liberty. But there is another unseen consequence of economic liberalism. The growth of the welfare state is a natural parallel to implementation of Keynesian economic policies. Within this, the “seen” is that a great many people are enabled to remain in economic bondage. The “unseen”—and, in some ways, more important—consequences are that an entire class is built that feels entitled to the property of others, and an entire culture of entitlement is built. Logically, this group also provides an easy target for the Occupy Movement. All of this is only confirmed by the plentiful rioting in nations that are forced to take “austerity measures”—Greece being the worst hit. Simply put, the rioters are addicts of the welfare state, railing against the eventual withdrawal.
It is imperative that the Federal government change its economic policies, and get control of its debt. Adopting completely free market policies is the only solution that both conforms to our nation’s Constitution and Founders, and works in a utilitarian sense. If government was to withdraw in all areas, and simply allow the free market to have its way, the crisis of Europe will be avoided.
In all honesty, I have nothing against Europe, per se. (In fact, I would love to travel in Europe.) But it is their politics which I despise and fear. It is these policies of liberalism that have been adopted in America, and which, if not soon halted, will destroy the last bastion of freedom.