[Vision2020] Don't Choose This Brew: The Tea Party and "Austrian" Economics

[nickgier at roadrunner.com]

Hail to the Vision!

This is my radio commentary/column for this week.  The full version is attached as a PDF file. Read all of my columns about "The Third Way" at www.home.roadrunner.com/~nickgier/ThirdWay.htm

There is much more that I could write about Ron and Rand Paul's "paleolibertarianism," and I'm saving these notes for later. Interestingly enough, some of the paleolibertarians have teamed up with Wilson's friends in the Neo-Confederacy.

Nick

DON’T CHOOSE THIS BREW: THE TEA PARTY AND "AUSTRIAN" ECONOMICS

At the Maine GOP convention in May the delegates scrapped the previous platform and instead supported Tea Party policies, which one observer described as a "mix of right-wing fringe policies, libertarian buzzwords, and outright conspiracy theories."

The call for "Austrian" economics was probably the most confusing reference, and many people might be wondering why these conservatives are including something positive from Europe, the home of those Godless socialists.  

Let me begin with the economics of post-war Austria as way to argue against what the Tea Party means by "Austrian" economics. The Social Democratic Party and the conservative People’s Party have ruled Austria for 45 out of the last 61 years.

The two parties developed a welfare state with taxes taking 43 percent of GDP compared to 40 percent in other European Union countries. (The U.S. share is 28 percent.) At purchasing-power-parity Austria is the fourth richest country in the European Union and has, thanks to strong tax revenues, a budget deficit of 5 percent. Economic growth over 10 years and through the Great Recession has been a respectable 2.3 percent and unemployment is steady at 4.9 percent.

More than half the Austrian workforce is unionized, and workers and management follow the German model of "consensus" labor relations. Completely contrary to the Tea Party’s "Austrian" economics, unit labor costs, according to The Economist, "fell by an astonishing 38 percent" from 1995-2005. Just like its huge neighbor Germany, Austria has maintained a strong manufacturing base with 19 percent of "value added to the economy" compared to the US and the UK at 13 percent. 

The Tea Party means something very different by "Austrian" economics. They are referring to the Austrian economist Ludwig von Mises, who influenced free marketeers Milton Friedman, Ayn Rand, Ron and Rand Paul, and Alan Greenspan, long-time chairman of the Federal Reserve. Although Ayn Rand angrily rejected the term, this movement has been called "libertarianism."

Von Mises was one of the first to predict the collapse of Communism and he was right about the abysmal failures of the "command" economy. He stubbornly believed, however, that any government intervention in the economy would be disastrous.  The world-wide success of the social democratic "Third Way" between Communism and unfettered capitalism stands as strong empirical disconfirmation of his theories.

Libertarians believe that businesses are the best judge of their own interests and that, as rational actors, they will not do anything that will jeopardize their investments. This principle stood behind the Bush Administration;s policy of voluntary self-regulation in industry.  

The oil and gas industry has an exemption from the Clean Water Act and other environmental laws, and its leaders have promised that it would stop using benzene as part of its fluid mixtures for fracturing gas-bearing rock. But in July, 2008, cancer causing benzene at 1,500 times safe levels was found in a Wyoming fresh water well in an area where Halliburton was drilling.

In testimony before a Congressional committee in 2008 Greenspan confessed that he was in a state of "shocked disbelief" that the unregulated markets that he had championed for years had failed.  He admitted that he made "a mistake in presuming that the self-interests of organizations, specifically banks and others, were such that they were best capable of protecting their own shareholders and their equity in the firms." 

Ideologues of all strips are a stubborn lot so we have to admire Greenspan’s honesty.  Today there are die-hard Communists who insist that the failure of Marxist-Leninist economics was due to a lack of theoretical purity and application.  Libertarians also declare the failures of countries that applied libertarian solutions, such as the U.S., Iceland, Ireland, and the Baltic States, did not go far enough in tax reduction, spending cuts, and deregulation.  Both camps are living under grand delusions.

It is almost a cliché to say that the truth always lies in the middle, but Confucius, the Buddha, and Aristotle were right about the Golden Mean between extremes, and Social Democrats have proved that the Middle Way between economic extremes is the best one to follow.

Nick Gier taught philosophy at the University of Idaho for 31 years.  

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