One of the brightest stars in the free market galaxy is the work of the Hispanic American Center for Economic Research, HACER. HACER provides, among many other key services, a multilingual “Drudge Report” for free market news and opinion, crucial to nurturing the growing embrace of free markets.
HACER, uniquely, reaches millions of Hispanics. Its “goal is to promote the study of issues pertinent to the countries of Hispanic America as well as Hispanic Americans living in the United States, especially as they relate to the values of personal and economic liberty, limited government under the rule of law, and individual responsibility.” HACER is a beacon of integrity in an often murky world.
One of its current projects is providing a venue for one of the first major full length works of libertarian economics to emerge from South America, Axel Kaiser’s Intervention and Misery: 1929 – 2008. HACER describes it succinctly: “With a perspective of Austrian economics, Axel Kaiser explains the causes of the Great Depression in 1929, the crisis that started in 2008, the role of statism in the road to ruin and the key importance of the gold standard and capitalism for a prosper future.”
HACER’s executive director, Eneas Biglione, invited a foreword to Intervention and Misery from this columnist. It is entitled “Kaiser’s Postulate,” and is here reproduced to highlight how Kaiser makes an important contribution to world economic discourse.
Intervention and Misery: 1929-2008 by Axel Kaiser is an important book. Economics has become, in Kaiser’s apt word, an astrology. The more miserable grows our economies the more pretentious (as in Hayek’s 1974 Nobel speech indictment, The Pretence of Knowledge) grow professional economists.
The discourse of today’s leading mainstream economists often resembles nothing so much as the peroration of the (MGM) Wizard of Oz, from the basket of his hot air balloon:
“I, your Wizard, par adua outer, am about to embark on a hazardous and technically unexplainable journey into the outer stratosphere to confer, converse and otherwise hob-nob with my brother wizards.”
What if the road out of misery, to prosperity, is axiomatically simple and all else is simply obfuscation? Kaiser uses a maxim of Ben Franklin to open Chapter IV: “The way to wealth depends on just two words, industry and frugality.” He then proceeds to skewer those who pretend, pretentiously, that it can be otherwise.
Why is something so apparently simple so important? Keynes, in the General Theory of Unemployment, Interest, and Money (chapter 24, part V) famously wrote:
But apart from this contemporary mood, the ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back. I am sure that the power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas. Not, indeed, immediately, but after a certain interval; for in the field of economic and political philosophy there are not many who are influenced by new theories after they are twenty-five or thirty years of age, so that the ideas which civil servants and politicians and even agitators apply to current events are not likely to be the newest. But, soon or late, it is ideas, not vested interests, which are dangerous for good or evil.
Keynes was, as described by his biographer, Sir Roy Harrod, a man of “expedients.” (We also do well to keep in mind Hayek’s posthumous tribute to Keynes, “He was the one really great man I ever knew, and for whom I had unbounded admiration.”) Converting Keynes, that most anti-dogmatic and great-hearted of men, into the very “defunct economist” against whom he railed moves us from tragedy to farce. Kaiser is important because he moves the discourse toward sense.
Statism is based on faith, not reason. The Black Stone — the primordial artifact — of the Kaaba of canonical economics today is the claim that the free market somehow caused, and failed to cure, the Great Depression. Kaiser directly and capably critiques this, the very foundational myth upon which Statism, that most modern of religions, is built. He capably strips away much of the veneer of theoretical legitimacy upon which Statism depends.
The illegitimacy of Statism is beginning to achieve the status of open secret. As even Liaquat Ahamed notes about the New Deal in his Pulitzer Prize winning Lords of Finance (The Penguin Press, 2009, p. 457):
The string of measures was a strange mixture of well-meaning steps at social reform, half-baked schemes for quasi-socialist industrial planning, regulation to protect consumers, welfare programs to help the hardest hit, government support for the cartelization of industry, higher wages for some, lower wages for others, on the one hand government pump priming, on the other public economy. Few elements were well thought out, some were contradictory, large parts were ineffectual. While much of the legislation was very laudable, aimed as it was at improving social justice and bringing a modicum of economic security to people who had none, it had little to do with boosting the economy.
Governments cannot and do not create prosperity. It is well past time to strip away the last remnants of the secrecy surrounding this fact. They only can create a climate that fosters or throttles enterprise, and, with it, prosperity. Kaiser puts an astute mind to dissipating the myth that state intervention possibly can lead to prosperity. He shows how Statism is a sure road not just to serfdom but to misery. As its title suggests, this work brings its readers from the Crash of 1929 and ensuing Great Depression through economic confusion that set the stage for the Panic of 2008 and the Great Recession. While my own policy assessments are not always in complete accord with those of Kaiser, his integrity in critiquing the sacred myths contaminating modern economics is admirable and his arguments always thoughtful.
Kaiser concludes his work by calling for the “end of the mystery [which] implies the end of the witch doctors and the definite defeat of the economic astrology that has prevailed in recent decades.” The most powerful contribution to the discourse of this work, however, may lie not in his learned deconstruction of the prevalent Statist nonsense. The greater power lies in his shrewd revival of an aphorism of Benjamin Franklin: “The way to wealth depends on just two words, industry and frugality.” Call it Kaiser’s Postulate. From Page 79:
“Needless to say, this idea that the origin of prosperity is hard work and frugality was exhaustively formulated by Adam Smith in The Wealth of Nations. Among the many reflections that highlight this idea of Smith’s, the following is very much to the point: ‘It seldom happens, however, that great fortunes are made even in great towns by any one regular, established, and well-known branch of business, but in consequence of a long life of industry, frugality, and attention’. Smith believed that the same was applicable to a whole country, whose prosperity depended on frugality, economic freedom and disposition towards hard work.”
This — a succinct statement of a veritable law of nature and a roadmap of the road to riches — deserves to be at the center of our policy. No matter how the government games the system, no matter how much mumbo-jumbo is uttered by our modern astrologers in their “technically unexplainable journey into the outer stratosphere,” the way to generate wealth is by industry and frugality. Certainly, state interventions that punish industry and frugality and reward sloth and profligacy cannot but facilitate the propagation of misery. Kaiser’s Postulate, containing so much self-evident truth, coupled with his lucid deconstruction of prevalent myths, provides a powerful antidote to the nonsensical obfuscations into which economics has descended. Read, enjoy, and flourish.