The candidates of both parties finally have realized that the defining issue of the 2012 presidential election will be job creation. President Barack Obama leads with a proposal that commentator Larry Kudlow calls, persuasively, a straight jacket rather than a jobs creator. The Wall Street Journal loves the plan put forth by the fast-fading Huntsman and slams the first-tier Romney plan. Meanwhile, a credible key to explosive jobs growth begins to come to the fore: a credible monetary policy prescription for a seriously stable dollar.
A sure signal of a rising policy vector? The Washington Post sends forth a top gunslinger to attack it — “it” being the gold standard and the GOP candidates for considering it. The Washington Post‘s Pulitzer-winning business and economics columnist Steven Pearlstein writes in his Sept. 10 column, “The magical world of voodoo ‘economists’“:
If you came up with a bumper sticker that pulls together the platform of this year’s crop of Republican presidential candidates, it would have to be:
Repeal the 20th century. Vote GOP.
They reject as thoroughly discredited all of Keynesian economics….
They also reject the efficacy of monetary stimulus to fight recession, and give the strong impression they wouldn’t mind abolishing the Federal Reserve and putting the country back on the gold standard.
… Rick Perry stands up and declares that “Keynesian policy and Keynesian theory is now done,” not one candidate is willing to speak up for the most important economic thinker of the 20th century….
I realize economics isn’t a science the way biology and physics are sciences, but it’s close enough to one that there are ideas, principles and insights from experience that economists generally agree upon. Listening to the Republicans talk about the economy and economic policy, however, is like entering into an alternative reality.
Too facile and too glib, Steve.
To call Keynes “the most important economic thinker of the 20th century” is, well, just weird. Ten years ago no less than The New Yorker’s John Cassidy wrote an extensive column, The Price Prophet, explaining why Hayek, not Keynes, was the most important economic thinker of the 20th century. Cassidy is no right winger. Pearlstein, do at least try to keep up.
Hayek, speaking about the “Pretense of Knowledge” upon his acceptance of the Nobel Prize in Economics (kooky, Steve?), talked about the very “ ideas, principles and insights from experience that economists generally agree upon” on which Pearlstein’s confidence depends:
The credit which the apparent conformity with recognized scientific standards can gain for seemingly simple but false theories may, as the present instance shows, have grave consequences.
In fact, in the case discussed, the very measures which the dominant “macroeconomic” theory has recommended as a remedy for unemployment — namely, the increase of aggregate demand — have become a cause of a very extensive misallocation of resources which is likely to make later large-scale unemployment inevitable.
With unemployment stuck at brutally high rates— grave consequences indeed — perhaps some humility is called for. As Don Boudreaux writes at Café Hayek, “Keynes was – without any intention of slurring him – an opportunist and an operator….” Keynes was a humanitarian pragmatist, not a dogmatist. It is unlikely, were he alive today, to find him with the “Keynesians” standing athwart history — or at least federal spending — shouting More!
But it would be naïve to expect humility from the elites, however abysmal their performance. The economic policy foot soldiers of the Reagan Revolution took The Washington Post‘s ridicule much the same way that the Revolutionary War soldiers took the ridicule of the Redcoats who considered us rabble and called the Americans Yankee Doodle Dandies — meaning dilettantes.
It’s ever thus. Elites ridiculed the 1970s Supply Side as “Voodoo Economics” precisely as Pearlstein does today. Candidate, then President, Reagan, derided as “an amiable dunce” by establishment Brahmin Clark Clifford, opened up a can of whoopass, beat his era’s ridiculing elitists, and engaged policies that, built upon by his successor Bill Clinton propelled the Dow from under 1,000 to, now, around 12,000.
Free markets weren’t voodoo. They were mojo. They still are.
Reagan’s unfinished symphony was, of course, the gold standard. Reagan supported gold, but gold got sidetracked by the hell-for-leather campaign to reduce the top marginal tax rate from 70% to 28%. Reagan and his successors enjoyed “the great moderation” of stable money that ensued but which, inevitably, ended. Now, in the low employment being wrought by monetary anarchy, is the right time for taking up the gold standard.
Fed Chairman Ben Bernanke was recently described by Forbes’ Opinions and RealClearMarkets.com editor John Tamny as “easily the worst Fed Chairman in history.” In 2005 Tamny, almost or entirely alone, argued against Bernanke’s appointment in The Scary Side of Ben Bernanke, which concludes: “For his views on money, Bernanke has the potential to be very dangerous.” The Post‘s position“in the tank with Ben Bernanke” fails to give GOP presidential hopefuls credit for a desire to replace Bernanke. The Post thereby forfeits another opportunity for a substantive discussion.
There is something more than a little disorienting at seeing one of the soldiers of the Washington Post, red as its coats have grown, conclude his column with a triumphant embrace of the president whose downfall his predecessors at the Post brought about:
“It took a while, but even Richard Nixon came around to declaring himself a Keynesian. Maybe there is still hope for Perry and the gang.”
Hope? This seems to say that it is Pearlstein’s hope that GOP candidates like Rick Perry (and the “gang”) will … measure up to … the personal integrity? … the wonderful stagflation? … of Richard Nixon. Yet … Pearlstein writes that “Listening to the Republicanstalk about economic policy … is like entering into an alternative reality.” Discuss.
Saul Alinsky memorably teaches us (Rule 4!) that “Ridicule is man’s most potent weapon.” The left does it well and Pearlstein adds his handsome face to a rapidly lengthening parade of left-leaning policy advocates astonished at the resurgence of the gold standard. Pearlstein joins Paul Krugman, Barry Eichengreen, Thomas Frank, Mike Konczal, ThinkProgress‘s Matt Yglesias and Marie Diamond, The Washington Monthly‘s Steve Benen and Michael O’Hare, among others, in ridiculing the GOP for its interest in gold as a jobs generator.
With due respect to Rule 4 — how much more productive and interesting this conversation might become if the left would add to its ridicule even a soupçon of facts or a half-hearted effort to engage with the evidence that the gold standard is the most promising way to get robust job generation going.
As this writer has said before:
Monetary policy is the most recondite yet most pervasive and powerful of economic forces. Keynes, in The Economic Consequences of the Peace, wrote, “There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.” The converse also is true. Restoring real monetary integrity engages all the hidden forces of economic law on the side of prosperity. And forces for monetary reform are very much in motion within the GOP.
A serious Republican/Democratic dialogue about reopening the gold window, about how best to use the gold standard to exorcise the specter of unemployment that is haunting America and Europe, is overdue. Publisher and former presidential candidate Steve Forbes has called for the discussion to move from “whether” to “which” gold standard. Ridicule from The Washington Post shows that gold’s moment rapidly draws closer.
Onward to gold.
Originally published September 12, 2011 http://www.forbes.com/sites/ralphbenko/2011/09/12/the-defining-issue-of-the-2012-elections-jobs-through-gold/