Austrian Economics on RTE
Here is Jill Kirby on Morning Ireland discussing the Austrian approach to handling business cycles.
Here is Karl Whelan of irisheconomy.ie on the matter. It appears he posted the link so everyone could get “some entertainment” from the clip. I’ve made a few comments below Whelan’s piece.
Note: RTE requires RealPlayer.
*Edit: Ok, after listening to the clip a couple of times I noticed a couple of things. First off, I noticed that the presenter placed a large amount of emphasis on “suffering” through the recession. This is sneaking in morality tales in by the back door. It’s not unusual to criticise the Austrian response to recessions this way. For instance see Krugman:
It turns the wiggles on our charts into a morality play, a tale of hubris and downfall. And it offers adherents the special pleasure of dispensing painful advice with a clear conscience, secure in the belief that they are not heartless but merely practicing tough love.
Unfortunately, the presenter allocated very little time for Stephen Harford to respond. It would have been great to see an economic cage match between Kirby and Harford. But in the short time he was given, Harford managed to squeeze in part of the famous Andrew Mellon “liquidate, liquidate, liquidate” quotation. This no doubt gave the listener the idea that Herbert Hoover’s administration persued a laissez-faire policy during the Great Depression. Hoover did no such thing. His interventionism ranged from increasing government spending, persuading industries to keep wage rates high, raising tariffs and tightening bankruptsy laws. In fact many of Hoover’s policies were continued and expanded during Roosevelt’s New Deal. If anyone’s still interested, here’s what Hoover himself wrote in his Memoirs:
Two schools of thought quickly developed within our administration discussions.
First was the “leave it alone liquidationists” headed by Secretary of the Treasury Mellon, who felt that government must keep its hands off and let the slump liquidate itself. Mr. Mellon had only one formula:
“Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate.” He insisted that, when the people get an inflation brainstorm, the only way to get it out of their blood is to let it collapse. He held that even a panic was not altogether a bad thing. He said: “It will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up the wrecks from less competent people.”
…[3 paragraphs later]…
But other members of the Administration, also having economic responsibilities—Under Secretary of the Treasury Mills, Governor Young of the Reserve Board, Secretary of Commerce Lamont and Secretary of Agriculture Hyde—believed with me that we should use the powers of government to cushion the situation. To our minds, the prime needs were to prevent bank panics such as had marked the earlier slumps, to mitigate the privation among the unemployed and the farmers which would certainly ensue. Panic had always left a trail of unnecessary bankruptcies which injured the productive forces of the country. But, even more important, the damage from a panic would include huge losses by innocent people, in their honestly invested savings, their businesses, their homes, and their farms.
The record will show that we went into action within ten days and were steadily organizing each week and month thereafter to meet the changing tides—mostly for the worse. [Source, pp. 30-31, large pdf]
Or if that’s not convincing enough, here is a Hoover speech from 1932:
…we might have done nothing. That would have been utter ruin. Instead we met the situation with proposals to private business and to Congress of the most gigantic program of economic defense and counterattack ever evolved in the history of the Republic. We put it into action. . . . No government in Washington has hitherto considered that it held so broad a responsibility for leadership in such times. . . . For the first time in the history of depression, dividends, profits, and the cost of living, have been reduced before wages have suffered. . . . They were maintained until the cost of living had decreased and the profits had practically vanished. They are now the highest real wages in the world.
Creating new jobs and giving to the whole system a new breath of life; nothing has ever been devised in our history which has done more for . . . “the common run of men and women.” Some of the reactionary economists urged that we should allow the liquidation to take its course until we had found bottom. . . . We determined that we would not follow the advice of the bitter-end liquidationists and see the whole body of debtors of the United States brought to bankruptcy and the savings of our people brought to destruction. [Source]
Herbert Hoover: strict anti-liquidationist. And yes, I am enjoying my copy of America’s Great Depression!