Robert Higgs

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Great Depression and Current Recession Compared

October 9, 2009 in Economics by Greg | 1 comment

Earlier this week, Robert Higgs, Senior Fellow in Political Economy at The Independent Institute, spoke about the similarities and differences between the Great Depression and the current recession at the Economic Liberty lecture series. Although he finds considerable differences between the two events, he feels there are only a few similarities between the Great Depression and the current recession.

Below are my notes of his presentation.

http://www.vimeo.com/6966224

There are some similarities as well as differences.

The media and journalists have rushed to see these similarities.

I was shocked.

The Great Depression was so much more horrible, devastating, than the current recession.

They were using this talk to sell some type of policy to the people who look to the government for answers.

I don’t feel the two events are fully comparable.

People would be much happier living through today’s recession than during the Great Depression.

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Cause of Economic Crisis

June 23, 2009 in Economics by Greg | No comments

Anatomy of a Train Wreck: Causes of the Mortgage Meltdown is a research report written by a University of Texas at Dallas economics professor about the cause of the current economic crisis. If you’ve read Pharaoh’s Dream – A Modern Interpretation by J. Reuben Clark, Jr., then you’ll be especially interested in this excerpt from the executive summary of the report:

Train_wreck Why did the mortgage market melt down so badly? Why were there so many defaults when the economy was not particularly weak? Why were the securities based upon these mortgages not considered anywhere as risky as they actually turned out to be? This report concludes that, in an attempt to increase home ownership, particularly by minorities and the less affluent, virtually every branch of the government undertook an attack on underwriting standards starting in the early 1990s. Regulators, academic specialists, GSEs, and housing activists universally praised the decline in mortgage-underwriting standards as an “innovation” in mortgage lending. This weakening of underwriting standards succeeded in increasing home ownership and also the price of housing, helping to lead to a housing price bubble. The price bubble, along with relaxed lending standards, allowed speculators to purchase homes without putting their own money at risk.1

As Robert Higgs noted in Participatory Fascism:

In all cases a coalition of big business and the government has emerged, as “fascism’s abrogation of the market in favor of political control over the economy inherently favors big business at the expense of the small entrepreneur.” Characteristically there has been an “extensive interchange of positions between ranking civil servants and high corporate executives”.

If you have time, you might enjoy this video that explores the cause of the crisis from the PBS show McCuistion.

YouTube Preview Image

Sources:

  1. Leibowitz, Stan J. “Anatomy of a Train Wreck: Causes of the Mortgage Meltdown”. 3 October 2008. The Independent Institute. 21 June 2009.↩

General Motors Bankruptcy

June 3, 2009 in Business by Greg | 6 comments

General Motors Corp. filed for bankruptcy and became the second-largest bankruptcy in U.S. history. According to the Wall Street Journal:

President Obama defended his decision to take a majority stake in GM, saying it was unavoidable and temporary. “We are acting as reluctant shareholders,” he said in a televised address.1

2006 GM TEN Event - Stacy Keibler The story went on to state:

Some Republican lawmakers called the move another sign of the administration’s deepening incursion into the private sector. And the risk remains high that the administration or Congress could meddle in the company’s day-to-day affairs, an experience familiar to banks that took government bailout cash last fall.

Since it was reported that General Motors approached the government about a possible bailout2, this scenario reminded me of the following quote about how business leaders often seek government to intervene for the so-called “public good”:

Businessmen have done more than their full share to foster the active regulatory state from its very inception. Consider William Simon’s recent description of the relation of business and government as he witnessed it during his tenure as Secretary of the Treasury in the 1970’s:

“I watched with incredulity as businessmen ran to the government in every crisis, whining for handouts or protection from the very competition that has made this system so productive. I saw Texas ranchers, hit by drought, demanding government-guaranteed loans; giant milk cooperatives lobbying for higher price supports; major airlines fighting deregulation to preserve their monopoly status; giant companies like Lockheed seeking federal assistance to rescue them from sheer inefficiency; bankers, like David Rockefeller, demanding government bailouts to protect them from their ill-conceived investments; network executives, like William Paley of CBS, fighting to preserve regulatory restrictions and to block the emergence of competitive cable and pay TV. And always, such gentlemen proclaimed their devotion to free enterprise and their opposition to the arbitrary intervention into our economic life by the state. Except, of course, for their own case, which was always unique and which was justified by their immense concern for the public interest.”

One wonders whether anyone – with the possible exception of a few right-wing ideologues – any longer supports the free-market system as an inviolable desideratum; whether anyone is willing to bear its costs in order to preserve its benefits. Talk is cheap, and accordingly business people often talk as if they favor capitalism. But the blatant hypocrisy of their rhetoric suggest that it is either a political device, deliberately employed as part of a “public relations” strategy, or a mindless reflex inherited from the past and readily abandoned when it seems incompatible with short-run gain.3

What’s your view point?

Should the U.S. government continue to intervene in free-enterprise?

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Sources:

  1. King, Neil, Jr. and Sharon Terlep. “GM Collapses Into Government’s Arms”. 2 June 2009. The Wall Street Journal 3 June 2009.↩
  2. Rasmussen, Scott. “Americans Have Voted ‘No’ on GM Bailout From Day One.” 1 June 2009. Rasmussen Reports. 3 June 2009.↩
  3. Higgs, Robert. Crisis and Leviathan: Critical Episodes in the Growth of American Government. Oxford: Oxford University Press, 1987. 243.↩

Participatory Fascism

January 2, 2009 in Fascism by Greg | 18 comments

Participatory fascism is a phrase coined by Charlotte Twight. For most people, fascism in America is a difficult subject for a person to get their head around. Recently, I’ve been reading Crisis and Leviathan by Robert Higgs when Jimmy pointed me to his brief review of Jonah Goldberg’s Liberal Fascism: The Secret History of the American Left, from Mussolini to the Politics of Meaning.1 As I read his post, it reminded me of this passage in Higgs’ book2:

As critics decry the pervasive governmental intrusion in the economy as “socialistic”,” it clearly has not produced an economic order resembling any standard form of socialism.

Anarchism in Spain - Poster with Fascism Snake Has it instead produced “fascism”? The term unfortunately has been abused by Americans in at least two distinct ways. On the one hand, “fascist” serves merely as a loose term of opprobrium by which radical leftists characterize anything they dislike about the present political economy. On the other hand, and more commonly, it simply brings to mind the regimes of Mussolini and Hitler, which are generally considered to have nothing in common with the postwar economy of the United States. Indeed most Americans find the mere suggestion of such similarities offensive and repellent – did Americans not spill their blood to destroy the fascist regimes? – and refuse to consider seriously the possibility that the United States may be fascist in some respects.

The term fascism, however, has a definite meaning; and one may employ it as an analytical concept independent of distasteful historical examplars. As Charlotte Twight has shown, the essence of fascism is nationalistic collectivism, the affirmation that the “national interest” should take precedence over the rights of individuals. So deeply has the presumption of individual subservience to the state entered into the thinking of modern Americans that few people have noticed – and no doubt many would be offended by the suggestion – that fascism has colored countless declarations by public officials during the past fifty years. Unfortunately, as Friedrich Hayek noted during WW II, “many who think themselves infinitely superior to the aberrations of naziism, and sincerely hate all its manifestations, work at the same time for ideals whose realization would lead straight to the abhorred tyranny.”3

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  1. Smith, Jimmy. “Liberal Fascism: The Secret History of the American Left”. 29 December 2008. Analytical Insights. 31 December 2008.↩
  2. Higgs, Robert. Crisis and Leviathan: Critical Episodes in the Growth of American Government. Oxford: Oxford University Press, 1987. 240-242.↩
  3. Twight, Charlotte. America’s Emerging Fascist Economy. New Rochelle, New York: Arlington House, 1975. Chapter 1; Hayek, Friedrich A. The Road to Serfdom. Chicago: University of Chicago Press, 1944. 4.↩