Fashionable Economics

by David chalmers

In the 1940s, I read a big novel titled “The Fountainhead.” It is the story of lovely Dominique Francon who falls in love with a beautiful bare-chested quarry worker, Howard Roark, who brutally rapes her (“Fifty Shades” of Howard Roark). Roark turns out to be a genius architect who subsequently dynamites his great construction, rather than have it modified by lesser, conventional men. The author of the novel, Ayn Rand, was a refugee from the collective society of Russian Communism. Gary Cooper played the architect Roark in the 1949 movie; Patricia Neal was Dominique.
In Ayn Rand’s 1957 thousand-page sequel “Atlas Shrugged,” the hero John Galt led the most creative members of society in a strike against a corrupt society and a confiscatory government. For half a century, “Atlas Shrugged” has appealed to bright young readers like Governor Romney’s Vice Presidential choice Paul Ryan and Libertarian Texas Congressman Ron Paul. The movie, Part I, opened in 2011, but current book sales are in the hundreds of thousands, almost 7 million since 1957, and Part II of the movie just opened last October.
Among her close inner group was the economist Alan Greenspan, who wrote that he was “intellectually limited” until he met Ayn Rand. He brought her along to the ceremony when Ronald Reagan appointed him to the Federal Reserve Board.

What appealed to him and many economic conservatives was the idea of laissez faire’s “unfettered market capitalism.” America entered an age of tax cuts and deregulation. When the 21st century market overheated, as the now liberated Wall Street giants bundled sub-prime mortgages into unsound securities and hedge fund managers became billionaires, Fed Board Chairman Greenspan could only marvel at its “irrational exuberance.”
As the falling market tumbled into Barack Obama’s lap, a retired Alan Greenspan admitted that he had too much faith in “the self-correcting power of free markets.” Ayn Rand died in 1982, comforted by Social Security and Medicare, but sales of her books mounted. Ronald Reagan also explained that Government was the problem. Republican office holders and presidential candidates, pressed forward by Tea Party Patriots, cried debt, regulation, and unions were at the heart of things. The solution to a suffering economy, they say, is deregulation, tax reduction for the job makers, reduced public sector spending, leaner company employment, restrictions on labor unions, and no more government stimulus programs. There has also been a sales uptake for Nobel Prize winner Friedrich’s Hayek’s 1944 anti-government “Road to Serfdom,” reprinted by the University of Chicago.
In the depression of the 1930s, Congress investigated the banks and separated commercial and investment banking. With New Deal laws now reversed, the banks “too big to fail” only get bigger, willing to pay billion dollar fines, without admission of misbehavior or loss of million dollar bonuses.
I should end by making my own confession. I think that John Maynard Keynes saw things correctly. In times of depression, stimulate; in better times, tax and make up for it.
As Yogi Berra might say, it has been “déjà-vu all over again.”

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