Chickens Coming Home to Roost

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The NBC Nightly News headline reads, “In second inaugural, Obama appeals to his progressive base.” We also read in Tim Iacono’s column, “German Gold Repatriation And Surging Silver ETF Holdings Drive Precious Metals Higher.” Iacono writes, “The on-again/off again debt crisis in Washington was surely responsible for some of the buying in precious metals markets last week.” And should we be surprised? People are worried about the value of paper. To understand this, one only has to consider the paper obligations of a government that financially supports a hundred million human beings. As Obama said in his inaugural address, “Together we resolve that a great nation must care for the vulnerable and protect its people from life’s worst hazards and misfortunes.”

We can pretend that the president was paying lip service to some vague philanthropic ideal. In reality, he was proposing what he truly believes is necessary: that is, government intervention in the economy. According to Obama, “For we, the people, understand that our country cannot succeed when a shrinking few do very well and a growing many barely make it.” The president wants to eliminate the “hardship” of the many. “We do not believe that in this country freedom is reserved for the lucky or happiness for the few. We recognize that no matter how responsibly we live our lives, any one of us at any time may face a job loss or a sudden illness or a home swept away in a terrible storm. The commitments we make to each other through Medicare and Medicaid and Social Security, these things do not sap our initiative. They strengthen us.”

Yet here we are, $16.5 trillion in debt – and that only counts the federal government’s debt. Furthermore, the president also reminded us that a great nation must save the planet. “We, the people,” he said, “still believe that our obligation as Americans is not just to ourselves, but to all posterity. We will respond to the threat of climate change, knowing that the failure to do so would betray our children and future generations. Some may still deny the overwhelming judgment of science, but none can avoid the devastating impact of raging fires, and crippling drought, and more powerful storms. The path towards sustainable energy sources will be long and sometimes difficult. But American cannot resist this transition. We must lead it.”

Whatever the specifics of these proposed and wide-ranging interventions (and they are many), economic science teaches that these effects will be negative; that is to say, severe financial and economic losses will occur as the result of all these programs. And it was the Austrian economist, Ludwig von Mises who explained in his book Liberalism in the Classical Tradition that government intervention into the economy “must necessarily prove unsuccessful.” It doesn’t matter if you are saving spotted owls or attempting to prevent global warming. Government intervention means planning and, as Mises noted, “planning always means planning by government enforced by the police power.” As such it is a denial of freedom, “the antithesis of free enterprise and private ownership of the means of production.” And when you deny freedom you destroy productivity.

Obama’s inaugural address is suggestive of economic planning – made necessary by people’s “vulnerabilities” and by global warming and societal inequality. The government must step in with a plan; and as Mises emphasized in his book Omnipotent Government (p. 240), “Planning and capitalism are utterly incompatible. Within a system of planning production is conducted according to the government’s orders, not according to the plans of capitalist entrepreneurs eager to profit by best serving the wants of consumers.” According to Mises, wherever government authorities direct the economy in any way, “there is socialist planning.” Under such a system capitalist enterprises are no longer free, but “subordinate state organs bound to obey orders.” Here the government leadership acquires what Mises calls “the dictatorship complex.”

Since economic planning is incompatible with freedom, whoever proposes a controlled economy is proposing dictatorship whether or not he realizes it himself. We do not know what is in a leader’s heart or head when he proposes socialist measures. All we have are his words and deeds to judge by. From all appearances President Obama believes that socialist planning is necessary to some degree. Of course, he talks of freedom and of America’s founding principles. But these principles are always contradicted by social and environmental concerns.

In his inaugural address, Obama is attempting to reconcile two ideas that are irreconcilable. This is a problem for our politics and our economy; for in the last analysis we must go one way or the other. We cannot have liberty and prosperity along with socialism. It is not going to work.

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About JR Nyquist