Fast forward 120 years. A crisis is beginning to form on the horizon of the American economy. Stock market numbers are low, foreclosures are hitting record highs, the unemployment rate is beginning to look European, and people are having to skip a cup of Starbucks to be able to buy their gas! Pandemonium! And in an election year, too. The conditions are so ripe for an economic showdown of titanic proportions, and all the candidates are taking off their gloves, offering their unique solutions to the issue (yes, even John the-issue-of-economics-is-not-something-I've-understood-as-well-as-I-should McCain is talking about it). The problem is that all of the fixes being thrown out aren’t inherently any different. They are all part of the same kind of statist Keynesianism that got our economy here in the first place!
Here is a good picture of how the leading candidates and their “expert” advisors (Bernanke included) will get us out of this mess: inflate the money supply with more fiat currency; bail out homeowners with money Washington does not have; borrow money from China; give the borrowed money to Africa, the Middle East, and Latin American allies; enforce trade embargos on Cuba, Iran, Venezuela, and possibly the Vatican; spend more money Washington does not have on welfare programs to protect Americans; GO TO WAR WITH IRAN (after all, Keynesian theory does say that war is beneficial to the economy…).
But these have been the suggested (and implemented) solutions for all economic woes since the Depression! Why hasn’t it fixed anything? Or better yet, why are politicians and the “experts” at the Federal Reserve perpetuating the same policies that have created this situation? It’s simple: the leaders of this nation have been following the same statist-based economic philosophy for the last 80 years, and, until now, they really haven’t been challenged. Enter the Austrians; the 2nd round of the Methodenstreit has begun.
The Austrian Method in a Nutshell
So what’s the deal with Austrian economics anyway, and why is it quickly becoming a favored science for combating mainstream theory? Truth be told, there’s not much new with the Austrian Method. In fact, it reads very much like the ideas of the Founding Fathers. Simply put, Austrian Economics is one of the only true free-market philosophies out there, not like those pseudo- “free market” theories involving interventionist free trade agreements (an oxy-moron for sure), enforcement of “privatized” social security and other half-baked ideas the neo-cons have been pushing for so long. Whereas volumes can be written on the intricacies of the Austrian Method, there are four points of this style of economics that will give a basic outline to the Austrian neophyte.
Firstly, Austrians advocate a hard currency; the Gold Standard is a pillar to the stability of the dollar and essential to prosperity. Like many of the Founders’ writings, Austrian theory shows that without this standard, the value of money becomes volatile, and things that shouldn’t be artificially manipulated, like interest rates, will be at the whim of a few bureaucrats. Next, in relation to having a gold standard, Austrians believe in the decentralization of banks. Centralized banks not only lead to intervention into what should be a free market, but also always lead to the creation of fiat money. A quick look at the dollar’s current performance against other currencies will show just how deadly fiat money can be. Third, war is not seen as a vehicle to boost the economy, but rather one that kills it through the creation of even more fiat by the central bank to fund the war chest, and furthermore through the seizure of freedoms that are detrimental to the true free-market. Lastly, Austrians assert that economic theory can only be found through logic and the study of human action (or praxeology), not by exhaustive mathematical and statistical calculations. For this last reason, the Austrian school has been widely scoffed at by traditional economists who employ advanced formulas to predict and analyze the economy, viewing the Austrian Method as an easy shortcut around difficult but essential arithmetic.
Many of these ideas resonate well with those who study and believe in the Constitution and the philosophies behind its creation. Behind all the points above is the firm belief in a very limited government, one that will allow the market to make its own corrections, one that will protect the value of the currency, and one that will not squander hard earned taxpayer money either through large state welfare or imperialist warfare. These were the beliefs of Washington, Jefferson and Jackson. They were beliefs that had been shoved towards the back of American economic policy. But the blunders of the theories that replaced these ideals are causing the Austrian Method to resurface, and it’s not likely to go away so easily this time around.
(For a much, much, much more comprehensive explanation of Austrian Economic Theory, please visit mises.org)Ron Paul’s Real Victory
The forthcoming of Austrian Economics in America as an actual force in the political, academic and business arenas can be mostly attributed to the aggressiveness of Texas Congressman Ron Paul. Yes, Ron Paul, that annoying little voice you heard (just before it got cut off) at all those CNN and FoxNews debates; that idealistic know-it-all who takes his marching orders from that outdated Constitution; that old fool who won’t stop his constituents from spamming your Facebook group or from holding up big signs at your Clinton rally; that ignoramus who won’t drop out of the race despite McCain’s apparent victory. Dr. Paul left his successful career as an OB/GYN because of his conversion to the principles of Austrian economics, feeling that the only way for the US to truly maintain its liberty and prosperity was to stop the Keynesian machine at the policy-making level. This led to the Ron Paul Revolution. Despite claims by some of the more rabid Paulites, the Revolution and its associated bid for the presidency was never about a White House victory, but rather to spread a philosophy, an ideal, a vision. And in this, Revolution has been victorious.
Paul’s candidacy has forced voters to evaluate just what is happening with their money. The dollar is weakening as if it had terminal cancer, and deficit spending coupled with international borrowing is creating a doomsday for the future generation. No wonder the congressman has been so popular among younger voters; who in their right mind would be content with trading his future financial well-being to satisfy the over-indulgent needs of the current establishment? As youngsters watch Bernanke artificially cutting interest rates by creating money from nothing, and watch their tax money going to fund warfare and welfare that the US cannot afford in the least, they have been drawn towards the true conservatism and fiscal responsibility embodied in Austrian Economics.
Luckily for them, more and more opportunities to get an education in the Austrian method are popping up all over the nation. Mark Skousen, a well-respected investment advisor, economist, professor and writer, reports that many prominent schools, such as NYU (ranked in the top 20 in the nation for economics programs), George Mason, Auburn and UNLV, are adopting courses and graduate studies on Austrian Economics. A growing number of students, hobbyists and concerned voters alike are gaining more resources to prepare themselves for the inevitable battle of wits in the economic ring, a new Methodenstreit on American soil. And Ron Paul is leading them there.
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