The last 100 years presented us with the amazing opportunity to test two radically different economic systems on a large scale. One needs to be grotesquely ignorant of history or mentally incapacitated by leftist ideologies to ignore the results. Capitalism, with private ownership of the means of production and market allocation of resources and consumer goods through the price mechanism, has proven its superiority over socialism's state ownership of land and factories and comprehensive bureaucratic regulation of production and distribution. The cost of testing was high-hundreds of millions of lives were taken or ruined-and we can pray that enough people have learned the lesson to prevent the running of the same experiment again in the near future.
If only we could have used the last economic crisis to test the Austrian theory of the business cycle against the ideas of Keynes. European governments were quick to realize that the latter do not work and began shrinking themselves in order to free up resources for private entrepreneurs. Unfortunately, they are also too quick to raise taxes and too slow to remove red tape. Since 2008, two American governments have been throwing trillions of dollars at the problem with the understanding that massive government spending is the only cure for the sharp contraction of private consumption and investment in the aftermath of a financial meltdown. Now, just two years into this new Keynesian experiment, the American government indicates its willingness to abandon the path walked by FDR and try some supply-side economics à la Reagan.
Economists like Paul Krugman are understandably upset. They were so hopeful that the stimulus would exonerate Keynesianism for its miserable failures 40 years ago. As for me-I am in a pickle. On the one hand I don't want the government to enslave me, my wife, and each of my children, grandchildren, and great-grandchildren with hundreds of thousands of dollars of government debt per person. On the other hand, this seems like a small price to pay for one final discrediting of interventionism-small, that is, compared to the price my parents and I paid for socialism to be tested on us. Of course, it would be best if free market capitalism could win the battle of ideas without another stagflation. Thus it is my intention to seek wisdom from Friedrich August Hayek, a champion for economic freedom, and present it to the readers of WORLDmag.com in the next few weeks.