Matthew Kaminski interviewed a Polish intellectual recently, a man who has few peers. His name is Leszek Balcerowicz (pronounced Lay-zek Bal-zero-witz). What he has to say is significant for it points the way toward recognizing how Keynesian thought is a form of Statism, synonyms with Socialism. Its intrinsic relation to authoritarianism masks the un-liberal affinity the left has toward coercion.
Today, Poland has the highest growth rate in Europe. As Poland’s Central Banker he knows the significance that free market principles have on Poland’s immediate future. His interview with the Wall St. Journal’s editorial board Matthew Kaminski reveals just how empty the governing majority of the United States is.
According to Balcerowicz the vast majority of any countries problems are the direct result of bad politics. For in a democracy, you’ve got all kinds of groups pressuring the State to expand at the expense of liberty. Without real leadership, the governing majority will seek a dominance at odds with the purpose of American life. He admonishes anyone who will listen that America’s governing majority has dangerously moved towards Statism ushering in both stagnation and ultimately a mortal crisis of American identity.
For anyone with a modicum of education in finance recognizes that the American Central Bank, in pursuing to monetize the debt, will suffer from a liquidity trap. An unvirtuous cycle of limited rage of policy options. All to the detriment of the American citizen; with rising militant challenges abroad. Dangerous precedents are being set in a age where benevolent hegemony is needed.
How do we get out of it?
We must rethink the philosophical foundation that underwrites Keynesian thought, especially its understanding of the relation between easy money and growth.
To begin with, monetarists implicitly understand that higher inflation alone is not the immediate trouble but the increasing political difficulty of remedying structural reform fiscally. As of this writing, the American government can sustain massive deficits if only because the interest rates are extremely low. This incentivizes the preference for ‘stimulus spending’, even though the last three attempts didn’t work, liberalism is immune to empirical realities. Politically, it means that low yield curves permit American politicians the ability to thwart difficult decisions. But not for long.
At the end of the day all we’re doing is killing the dollar to finance bad policy. Ditto for the Eurozone. Brussels will avoid having a showdown with Grecian politico’s in favor of bailing out member states. According to Balcerozicz, the Eurozone bond buying scheme violates EU treaties. He also thinks that Brussels has violated Eurozone principles for engaging in regional policy. Where does this end?
Ideologically loaded Central Bankers believe that they’re above the markets! As do the politico’s who support them. Such arrogance has its progeny in the insufferable ideological convictions of Marxists, those idealists who thought they were above the laws of history!
The best euphemism is PIGS vs. BELLS. Portugal, Italy, Greece, Spain versus Bulgaria, Estonia, Latvia, Lithuania. My monies on BELLS if only from their familiarity with Socialism.
Why? Because the Euro should be thought of as a gold standard. Absent fiscal reform tied to flexible labor markets, neither PIGS nor BELLS can win.
Although citizens often personalize reforms, we should study great Statesman to affirm that Republics are stronger than their leaders. How? Reformers must fight for their ideals, they must make politicos aware of the cost of not reforming.
By far the most debilitating effect of any economic crisis is intellectual. We suffer from intellectual confusion. The markets didn’t fail, but were instead distorted by bad policy. ‘To big to fail, Fannie, Freddie, easy money QE, a Housing Boom underwritten by Congress” all have lead to where we’re at today. Why pursue hard explanation when you’ve got cheap moralizing.
Perhaps the single most significant error is thinking that only government can smooth out business cycles. This central tenant of Keynesian thinking has no precedent prior to World War II. The idea that markets fall into self-perpetuating crisis that only wise governments can save is to peddle an idea at odds with human nature. That there are two kinds of human beings: normal people who operate in markets, and better people who work for the State.”
Balcerowicz admonishes anyone willing to listen that you needn’t believe the mythical authority of centralizers. Reading Hume, Smith, Hayek or Tocqueville can sustain any reformer as he/she grapples with Keynes and the mythical authority of the State in the life of man.
Leszek Balcerowicz: Adam Smith meets Karol Wojtyla.