Goodbye to All That
By Jim Van Houten
In 1929 Robert Graves was 33 when he wrote his bestselling book, Goodbye to All That. In biographical form it describes his boyhood in English public school and the heady experience of being a member of the British Foreign Service in Cairo. When the narrative moves into his experience during the First World War (then the “Great War”), the tone becomes ominous. Graves’ concerns were mainly post-war. And we now know he was right: the British Empire never regained its stature and world influence after its “victory” in 1918.
Similar to Great Britain during the First World War, the United States now faces a great uncertainty which may result in both a tactical “victory” over its current financial markets problem, while suffering a strategic loss in world confidence in its historic free market philosophy. To achieve the former without the latter is the task at hand. So far the outlook is discomforting.
The London Times, among others, has written extensively of the damage being done to the world economy (which the World Bank estimates at $54.3 trillion in nominal GDP) by the U.S. financial crisis. (The World Bank estimates U.S. GDP at $13.8 trillion; or 25 percent of world GDP). The Financial Times reports that the new French president, Nicolas Sarkozy, is calling for an emergency G8 meeting for the world to address the U.S. problem. The Financial Times also quotes G8 member Peter Steinbruck, Germany’s finance minister, saying that, “the U.S. will now lose its status as the super power in the world financial system and be replaced by the emergence of better capitalized centers in Asia and Europe.” And Reuters reports that Venezuelan President Hugo Chavez ($0.2 trillion, or 1.5 percent of U.S. GDP) is telling anyone who will listen that this is a crisis of capitalism, and that socialism is the only solution to the world’s economic problems.
It’s not surprising that the media are reporting every scary opinion given the readership benefits which result from a big story. However, it’s surprising that much of recent reporting (the New York Times, for example) has been prescriptive rather than informational – advocating for government to manage broad aspects of complex financial markets without noting that previous meddling by those same players is a major cause of the current crisis. Few are urging caution and thoughtfulness in what the Economist called “the argument by some that the Federal Reserve and the U.S. Treasury are nationalizing the economy faster than you can say Hugo Chavez.” And few have reminded their audiences that there is a dearth of evidence that beneficial long-term effects follow when a nation increases government’s role in free markets.
U.S. history in this regard is telling. Franklin Delano Roosevelt regulated almost everything, including the price to be charged to press a pair of pants, but could not end U.S. economic stagnation during the Great Depression. In April 1938 unemployment remained at 20 percent, about the same as when he took office in March 1933, five years before. At the time he was also being warned by the liberal but policy-exhausted economist John Maynard Keynes that, “it is a mistake to think businessmen are more immoral than politicians.”
So far the only group consistently “standing athwart history yelling ‘stop’ ” (paraphrasing William F Buckley, Jr.) is the minority party in the U.S. House of Representatives. Whether or not they can win this argument with a majority party less concerned about free markets remains to be seen. If they fail we will be ready for another bestseller with Graves’ title.
Jim Van Houten is a former CEO of the MSI Insurance Companies and served as a member of American Experiment’s board of directors during the Center’s early years.
September 30, 2008 |
