Hello. I'm new here but I would like to throw my $.02 in if I may. Many in the past 30-40 years have began to subscribe to what is know as the Austrian economic model. Whether it derives from Friedman, Greenspan or from the psuedo science fiction writer Ayn Rand or perhaps a mixture, i do not know. However, these ideas are co-opted by another political movement know as Libertarians. This being a uniquiely western phenomenon as most the rest of the world associate the term Libertarian with it's more traditional definition Social Libertarian or Anarchism.
While I will admit I have not went into great detail studying what I consider to be a dead-end model of political achievement, from what i have learned from my research into the subject led me to this conclusion.
The Austrian School of Economics is a tiny group of libertarians at war with mainstream economics. They reject even the scientific method that mainstream economists use, preferring to use instead a pre-scientific approach that shuns real-world data and is based purely on logical assumptions. But this is the very method that thousands of religions use when they argue their opposing beliefs, and the fact that the world has thousands of religions proves the fallibility of this approach. Academia has generally ignored the Austrian School, and the only reason it continues to exist is because it is financed by wealthy business donors on the far right. The movement does not exist on its own scholarly merits.
A rather simplified example, but I believe you will find it to be quite accurate: Austrians economists would have you believe that demand for goods and services is infinite. That if we merely encourage the “creators” of wealth then they will hire more people and “create” more jobs and more wealth. Nothing could be further from the truth. Here’s a little story to tell why.
Let’s suppose that I am one of the right’s “job creators.” I have a factory that produces widgets. Widgets are necessary in everyday life, but they have a limited lifespan. Ideally, they would be replaced every two months, but in a pinch they can last up to a year. During the Clinton Administration, my factory was fully utilized and I was producing 250,000 widgets a month and selling all of them. There were three other widget factories in the country as well, but mine was the biggest and the most productive. During the Shrub’s first term, I noticed a slight drop off in my sales and my warehouse had a small surplus of widgets. Not enough to be a problem, in fact I saw it as a good thing because now my customers were not unhappy about my missing the occasional delivery date. Oh, and I was still making good money.
When the Shrub was elected for a second term, I noticed a problem immediately. My warehouse was filling up. I laid off my third shift. Two of my competitors closed their doors and the third one outsourced to China. My widgets still outsold those from China because they work better and last longer, and IÂ’ve cut my prices to match the imports. For a while things looked up and my warehouse started to empty out, but it didnÂ’t last. When my inventory started to increase again I laid off my second shift. Then came September of 2008 and the demand for my widgets dropped through the floor. The Chinese widgets were primarily selling in Europe but they cut their production so much that they were no longer a factor. I cut my remaining staff by half and was extremely happy I owned my facilities outright. Because of that, IÂ’m still making money.
Now Romney wants to lower my taxes and give me more money: great! It won’t cause me to build more widgets. My warehouse still has a three-month buffer and that is where I’m keeping it with a ¾ staffed single shift. If I hire more people and build more widgets, I won’t be able to sell them and they’ll just gather dust in my warehouse. That is the fallacy of the economic plan.
Now you may say, but if we had PURE capitalism this would now be the case. Unfortunately we live in the real world. If one desires a real world example of the failure of Austrian economics, look at the period in American history they like to hold up as a shining example, the 1870s. While a boom time for Industialists and their ilk it was hardly anything utopian for the great masses who suffered. High rates of unemployment, unregulated business interests led to teriibly destructive monopolies, atricious working conditions, hours, pay, child labor, ect.ect. while this could be taken as a great benefit for the few, today's working persons would not desire to return to such a time.
