mck@ratex.UUCP (Daniel Kian Mc Kiernan) (02/09/85)
Mr Sevener claims that 'Herbert Hoover and the Republican adminstrators
consistently pronounced against government intervention in the economy and
acted in the same vein'; he's half right. Hoover et alii certainly did
PRONOUNCE against government intervention, but they most certainly did not
ACT in the same vein. The incredible 62% expansion of the money-supply from
21 to 29 is hardly laissez faire policy (by the way, the Austrian analysis
of business cycles, which highlights the responsibility of monetary policy,
was first put forth in 1912 in *The Theory of Money and Credit* by Mises;
it does NOT represent an attempt to explain the Depression after the fact);
the enormous Republican tariffs (like the Smoot-Hawley Tariff) is hardly a
policy of free trade; the attempts to keep nominal wages from declining,
the big tax-increases -- none of it is consistent with laissez faire. I
earlier referred readers to *America's Great Depression*, in which all of
this is catalogued; if readers would rather deal with a shorter work, they
can reader Rothbard's 'The Myth of Hoover' in the New-Left collection *For
a New America*.
Sevener thinks that 'massive government expenditures' brought 'the
country out of a Depression that had been languishing for years'. This is
what comes from reading tertiary and quaternary sources. The Depression
languished for years during massive government spending -- because of
massive government spending, which is why it lasted far longer than the
previous depression (where either inertia or good sense led Harding to
avoid intervention -- despite the urgings of Herbert Hoover). When the
government spends, there is always, in an economic sense, a corresponding
tax. The government may use an explicit tax, or it may use monetized
deficits which devalue cash balances, or it may use unmonetized deficits
which drive up the interest rate. Income must generally correspond to
MVP (marginal value product); when it doesn't, resources are diverted away
from production, and the economy experiences a crisis. It is quite true
that there were distortions in the correspondence at the time of the
Depression (this is, in fact, one of the reasons that the Depression
began), but by redirecting resources, the government only prolonged and
added to the distortions. The Depression of 20-21 lasted several months;
the Great Depression visibly continued until WWII. And even here there are
problems; during WWII, GNP grew, but the correspondence between GNP and
actual economic well-being was distorted by military production and
rationing.
Mr Sevener recognizes that 'unions and minimum wage laws' create
monopoly power (he mislables it 'monopsony'; monopsony refers to a
condition when there is only one buyer), but then asks 'But does Danny
Mck. or any other naive apologists for the people who know control our
economy admit to any distortion of free markets by *monopoly* power or the
increasing dominance of the economy by big corporations and
conglomerates?'. Sevener errs in calling me naive or an apologist for the
current state of affairs; as he knows, I have repeatedly pointed-out that
the current market concentrations were coercively obtained (via Left-Wing
reform) and could not be sustained in a Free Economy. And he obviously
doesn't have any background in the economics of conglomerates, which, per
se, do not have monopoly power.
'And the "coercion" of unions?' asks Sevener. 'Unions''must be
approved by a 70% vote of the workers' and 'contracts are approved or
disapproved by a vote of the membership'. He fails to see that the
principle worker-victims of unions are those who are not hired in the
future, because they are coercively forbidden to bid-down the wage-rate.
The 70-or-more % of the present workers who vote in the union may indeed
benefit economically from the union.
Sevener notes that 'Union leaders are elected by the membership' and
asks 'Who elected the company president or the managers?'. Apparently
Sevener confuses democracy with liberty; thus, in the days before the
Civil War, Negroes were free (a plurality approved of slavery), and would
have lost their freedom had the minority Abolitionists had their way?!?
Sevener returns to the theme of the Depression and its high
unemployment rates. The high unemployment rates were caused by government
policies which kept wage-rates above supply-and-demand equilibrium. In a
very real sense, the unemployed were not free -- not free to offer their
labor at competitive rates.
Back later,
Daniel Kian Mc Kiernan
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