Mitt Romney’s Economic Philosophy
One of Mitt Romney’s top economic advisors is Greg Mankiw, Harvard professor of economics. Mankiw is a much esteemed and accomplished New Keynesian Economist. The new kind of Keynesianism is probably better than the old kind which thinks government spending is the answer to everything whether it be sluggish growth or unemployment or deflation. That’s not enough to make New Keynesianism much better than plain old Keynesianism because this new brand still blames every malady in the economy to “imperfect competition” and “market failure.” It still offers that same old tired prescription for “stimulating” the economy with government spending. The suggestion that economic messes might be a creation of government failure that is over-intrusive into the private sector is not of any concern, or at least not enough concern, to the New Keynesians.
This is the sort of economic advice that led Mitt Romney to make the mistake of Romneycare in Massachusetts and why he cannot be trusted, should he become president, to do anything about the terrible consequences that Obamacare will inflict on the American economy, not to mention that it will destroy the quality and availability of health care.
Following the advice of the New Keynesians Romney will resort to fiscal policy and monetary policy in an attempt to fix every perceivable economic problem, the very same tools that were deployed by previous presidents and that have brought and are bringing the American economy to its knees. Romney never learned anything from Warren G. Harding and Calvin Coolidge, who took a brilliant and successful approach to the Panic of 1921 (“Panics” are now called recessions). Their strategy was both smart and simple: they did nothing. It worked. The economy picked up within about 18 months and remained good throughout the roaring twenties, until government under Herbert Hoover over-reacted to Black Friday in 1929 and started deploying fiscal policy of raising taxes, increased government spending and enacting the Smoot-Hawley tariff, and monetary policy in the form of tightening the money supply. After 1932 FDR piled on with the New Deal, and America got a full blown depression out of all that government intervention.
No politician these days wants to sit back, do nothing, and let a free-market economy show off its own self-correcting mechanisms and get the country back on its feet. How do you take credit for doing nothing, even when doing nothing is the absolutely best thing you can do?
Too bad that is the conventional wisdom because Sir John Cowperthwaite, governor of Hong Kong in the 1960’s, perfected the art of resistance to pressure from Keynesians old or new to “do something” at every hint of economic decline. Sir John’s steadfastness in doing nothing was the wisdom that built Hong Kong’s properity. Cowperthwaite did not refer to his economic philosophy as “doing nothing,” however. To the contrary, he made an important distinction between doing nothing and what he called “positive nonintervention.” He said that while doing nothing is easy, positive nonintervention is constant hard labor — to resist the temptation to “do something” under pressure by unrelenting critics convinced they know how to spend public money better than the public does, and preferably without the public’s permission.
Today those unrelenting critics are called New Keynesians, and they hold the key to understanding Mitt Romney’s economic philosophy. A philosophy that will spell disaster for a Romney presidency, and for the country.
Keynesianism will always be popular with politicians because, unlike Hayekian economic philosophy, it gives cover to politicians for spending more and more of the people’s money in ways that will benefit them and their cronies. So when the whole idea of Keynesianism began to be understood as a massive failure, it was time to shine up a completely new and improved brand in order to keep the carnival of deception going. Romney fell for it. I hope the American people don’t.