Judge Glock favorably reviews, in the Wall Street Journal, George Selgin’s remarkable new book, False Dawn. Two slices:
In 1932 Franklin Delano Roosevelt won the presidency with the promise to restore prosperity. But he and his advisers had no clear explanation for the collapse and his subsequent New Deal would amount to a series of experiments. FDR admitted to the nation that some of his proposals took the nation down “a new and untrod path.” If they failed to “produce the hoped-for results, I shall be the first to acknowledge it.”
George Selgin’s “False Dawn” asks if the New Deal’s varied experiments produced the promised recovery. In dispassionate, careful and finally devastating detail, “False Dawn” shows that, with a few exceptions, FDR’s experiments did not work. And he did not acknowledge it.
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Using decades of economic research, “False Dawn” should long remain the definitive word on the New Deal’s effectiveness. Mr. Selgin wisely avoids discussing the value of the New Deal’s long-term reforms, such as social security and wage-and-hour regulations. These emerged as responses to the bad times, but their effects were not felt until later. Paradoxically, the failure to spur recovery led to more of these reforms and thus made the New Deal’s influence on American life more lasting and substantial.
That its leaders subjected the country to so many bizarre experiments, and for so many years, still astounds. Even the liberal economist John Maynard Keynes noted in 1934 that the administration’s wild swings in policy kept investors on edge. “The important but intangible state of mind, which we call business confidence,” Keynes wrote, “is signally lacking.” But Roosevelt had a method to his machinations. As he told one of his advisers, “to maintain a firm hold on the public I have to do something startling every once in a while. I mustn’t let them take me for granted.” It was no way to run an economy.
Gene Healy asks if U.S. presidents have “grown too powerful to be removed from office.” A slice:
An inert president may sound like a libertarian dream. Alas, it’s not as if nothing gets done while he’s checked out. The New York Times calls concerns about heavy use of the autopen a “conspiracy theory.” But if reports from the Heritage Foundation’s Oversight Project are accurate, it’s at least interesting that, from mid-July 2022 on, most executive orders issued by the administration were signed remotely, even when Biden was in Washington.
Hayek’s fatal conceit is that “man is able to shape the world around him according to his wishes.” It’s a hearty defense of free markets — of classical liberalism. My colleague Matthew Hennessey got taken to task by the vice president for defending free markets on these pages. In 2025!
Hayek pounds home the point that markets are about price discovery. Wealth creation “is determined not by objective physical facts known to any one mind but by the separate, differing, information of millions, which is precipitated in prices that serve to guide further decisions.”
Catch that? By buying and selling in free markets to determine prices, you and I, and “millions who are connected only by signals resulting from long and infinitely ramified chains of trade,” drive the economy. We do it better than the self-selecting know-it-all-but-really-know-nothing blowhard intelligentsia.
Hayek writes, “One’s initial surprise at finding that intelligent people tend to be socialists diminishes when one realizes that, of course, intelligent people will tend to overvalue intelligence.” Hayek rips these government meddlers: “The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.”
Planners are ill-informed. “To the naive mind that can conceive of order only as the product of deliberate arrangement, it might seem absurd” that order and economic growth “can be achieved more effectively by decentralizing decisions.” Hayek notes the fallacy because “decentralization actually leads to more information being taken into account.”
Still, liberals and conservatives alike insist on bending the economy to their whims. These buttinskis can control markets no more than King Canute can control tides. But they all want to be economic kings. Central planners gotta central plan. Waste years of grad school for a Ph.D. in economics just to let markets do all the work? No way. So they meddle, and never for the better. This was Hayek’s warning. Among the recent bipartisan meddlers Hall of Shame: Peter Navarro, Jake Sullivan, Robert Lighthizer, Austan Goolsbee, Joseph Stiglitz.
It isn’t that markets are anti-intelligence, it’s that they are best when run on their own, without interference, collecting all our price decisions. Natural collectivism, you might say, without anyone in charge. Markets know more. Did central planners tell engineers to invent microprocessors? No. Internet browsers? Netflix? GLP-1 drugs? Large language models? A thousand times no. Yet we have industrial policy mimicking Soviet five-year plans.
Anything that interferes with markets and price discovery is dangerous. Unions distort prices. Student loans — and the policy of forgiving them—distort prices. So do quotas, subsidies, green policies and ethanol requirements. Even lockdowns and stimulus checks. Taxes, especially capital-gains taxes, distort the cost of capital. Redistribution is the ultimate market manipulation. And tariffs, which are taxes, distort prices, jobs and currencies.
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Mr. Milei is often characterized as “staunchly libertarian,” as if that were a crime. Under his reforms, including cutting the size of government and eliminating price controls, Argentina has seen both its inflation and poverty rates plummet—though there’s more to go.
Argentina is proof that, as badly as they are treated, free markets are resilient. Remove the boot from their neck, and they’ll sing. My advice for those in charge: Set and enforce rules of the sandbox, let markets flourish, and then get out of the way. Maybe with an American pope’s blessing, we can try that here.
Jack Nicastro keeps us up-to-date on the on going trade negotiations between the U.S. government and Beijing. Two slices:
The United States finalized a trade deal with China on Thursday that will see tariffs on Chinese imports fall to 55 percent (from 145 percent) and Chinese duties on American imports drop to 10 percent (from 125 percent). Though a reduction in tariffs is worth celebrating, the retention of American export controls on Chinese-bound semiconductors and China’s maintenance of licensing for American-bound rare earth elements suggest that the struggle between the two nations is far from over.
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While 55 percent tariffs on Chinese goods is “better than the worst-case scenario we saw in April … it’s still not good for importers in the United States,” argues Scott Lincicome, vice president of general economics at the Cato Institute. Meanwhile, businesses and consumers have suffered from input-price volatility and higher prices, respectively. “The liberalization of China’s export restrictions on rare earths…only lasts for six months,” explains Lincicome. Ryan Young, an economist at the Competitive Enterprise Institute, argues that instead of trying to secure REEs through trade deals that could be easily renegotiated, lawmakers should remove self-imposed regulatory obstacles “like the conflict minerals provision of the Dodd-Frank Act.” (That law imposes a range of requirements on American companies sourcing certain minerals from abroad.)
American tariffs on Chinese exports are still more than double what they were before Trump took office, according to data compiled by the Peterson Institute for International Economics. While Chinese tariffs on American exports have been successfully reduced to half of the levels seen under the Biden administration, Americans should expect China to leverage its dominance over rare earth elements to extract concessions from the U.S. in the future.
Scott Lincicome tweets this sad and maddening truth:
US Steel has effectively been nationalized (by the political party supposedly fighting American socialism)
Mark Jamison nails it: “The gig economy benefits freelance workers — until regulation steps in.”
Ian Rowe and Nique Fajors talk with my Mercatus Center colleague Ben Klutsey.
