Recently I decided to go back to my old lecture notes and college books to refresh my memory about the Austrian School of Economics, Fredrich Hayek, John Maynard Keynes, and all of these other buzz words and names that tend to be quickly dismissed on TV.
It seems many Republican candidates, Congressman Ron Paul in particular, are out praising the merits of the Austrian School of Economics or quoting from Hayek in an attempt to solidify their small government anti-Keynes stance. I truly wonder if they've done their research, since these are very academic kind of subjects. While refreshing my memory, I realized that the political Right in our country, especially around election time, seems hell-bent on being Darwinian about economics, and continues to push a Chicken Little 'the-sky-is-falling' argument.
It's interesting that those same candidates who denounce evolution will praise social darwinism. For them, one dollar going into the public sector signifies the beginning of authoritarianism or social engineering: not only an unsupported slippery-slope argument, but also fear-mongering. They seem to forget that schools, hospitals, and a public infrastructure are necessary to support any healthy business environment.
The reason Keynes and Hayek are all of the sudden back on the minds of politicos is simply that they offer alternatives to the model that lead to economic crises starting in 2007. Claiming, as the Right has done, that we've been in a Keynesian system all along and that this is the sole reason for the current economic woes is simply not true. Saying that we've been under the economic paradigm formulated by the likes of Milton Friedman and the Chicago School of Economics would be a more appropriate characterization. In reality there are a mix of economic policies at play any given moment because that's probably what works best. A complete devotion to one economic model or another is closed-minded.
On both the Left and Right we agree that something needs to be done about our indebtedness and other economic issues. But the Austrian School misses something about human nature and quite frankly, about reality. What those in the Hayek (Austrian) Camp are calling for is wrong and irresponsible.
Austrian Economics says that we don't have the means to know what the economy will do, and it should be allowed to reorganize on its own, no matter how long it takes. Right now this means 'Everybody stop spending, start cutting, and save everything. Governments shouldn't interfere with the market, so workers may be unemployed for a long time.'
Keynesian Economics, on the other hand, says that we can stabilize the economy by using certain monetary policies and central banks, which require public spending. Right now this means: 'Sorry that X and Y businesses made bad investments or decisions, but you - the worker - shouldn't be punished by being indefinitely unemployed for those mistakes. While this gets sorted out, we will invest in the country so that you can continue to provide for yourself and your family.'
Keynes' point was simply that when everyone - households, firms, and governments - simultaneously starts attempting to increase their savings, they leave no mechanism to slow down or stop the economic downturn and we all end up too poor to save.
Austrian Economics is also highly individualistic, which isn't true to our human nature. As a species, we wouldn't have come so far had we not started to be more collectivist and thought not just about the individual but about the entire community. Just like our species, economic theory and economic action should also continue to change and evolve depending on the situation at hand, and should not be based on a one-size-fits-all economic model. We should adhere to a paradigm that benefits not only our paychecks and profits, but our community as well. To claim, as the Austrian school does, that science, math and economic models can tell us nothing nor contribute to what we do about our future is plain silly. The goals of profits - which inevitably lead to businesses' booms and busts - should not be more important than equal rights. Since instability and uncertainty lead to inequality we can alleviate economic woes by investing in social capital (people!) during times of economic downturn.
The world, business, and the public sector are more interconnected than those in the Austrian camp acknowledge. Austrian Economics advocates would say that we can get rid of central banks and that we have no obligation to our neighbors. Sorry, but it's too late to get rid of the central banks that are so intertwined in a nation's economy. And it's morally bankrupt to say we have no obligation to our neighbors. To go backwards and let things fail because that is what they claim to be "natural," would be both bad for the country and morally wrong.
For the Right, those self-proclaimed patriots, it seems very hypocritical to advocate for these sorts of policies because the number of lives that would be affected would be catastrophic economically, socially and politically. Yes, there are problems (like the Euro crisis), but strengthening and refining the tools of macroeconomic management are a better answer to these issues than what Hayekians advocate: indifference.
Isabel Otero holds a degree in International Affairs from the University of Georgia, works as a paralegal and is shaping a career in public service. This is her first piece for OfftheBus.