Principles in Practice: The Blog of the Objective Standard

Monday, February 18, 2008

Brook Takes Force to Mat, Wins

Posted by Craig Biddle at 1:19 PM

Yaron Brook’s latest commentary at Forbes.com, “To Stimulate the Economy, Liberate It,” is an excellent lesson in how government coercion, by violating individual rights, cripples the economy. Don’t miss it—and do pass it along to all your active-minded friends and relatives. This is the rare kind of short essay that can actually change a mind. Here are the opening paragraphs:

While some in Washington are quibbling about the details of the economic stimulus package, nearly everyone agrees with its basic idea: that our ailing economy needs Uncle Sam to play doctor and hand out some $150 billion in consumer spending money. But this sort of government intervention is not the cure for our economic troubles. It is the cause.

To understand why, we must first recognize that the key economic activity that causes growth is not consumer spending but production.

Economic growth means an increase in the amount of wealth that exists in a country—and all wealth must be produced. Houses, health care, air-conditioning and transportation do not come ready-made from nature. We have them only to the extent that individuals and businesses bring them into existence.

The focus of today's stimulus packages on consumer spending is therefore completely backward. Consumption is a consequence of production. This fact is ignored by the Bush plan, which attempts to achieve prosperity through $100 billion in deficit-spending. Though this might bring the appearance of prosperity, in the same way that an unemployed man appears prosperous if he goes on a shopping spree with his credit cards, the reality will be the opposite.

The fact is that consumer spending is slowing because production is slowing. There have been massive misallocations of capital—witness, for instance, the housing market—which are now coming home to roost. The resulting financial losses, economic uncertainty and more tenuous job market are all contributing to the American consumer's inability or unwillingness to spend.

If the Bush spending plan can't productively stimulate the economy, what government economic plan can? None. Production does not need stimulation from the government; it needs liberation from the government. What a productive, dynamic economy requires of a government is that it restrict itself to protecting property rights from force and fraud, and refrain from interfering in free production and trade.

Read the whole thing.

Labels: Business and Economics, Individual Rights and Law