Steve Horwitz’s recent lecture at Western Kentucky University may have directly concerned failures of the Federal Reserve System, but the nationally known economist’s presentation also offered crucial reminders of how central planning in any sector is a failure.
Proponents of a command-and-control society like to claim that it’s free-market policies that have been tried and found wanting. This nonsense has been crammed down the throats of Kentuckians for so long that the idea of a truly free marketplace for industries like banking, health care or education is dismissed as radically unworkable.
Why, exactly, do we need a central bank like the Federal Reserve to assert monopoly control over our nation’s money supply when the competition of the marketplace works effectively in countless other industries?
WKU student Raymond Shears, a 21-year-old junior business major from London who attended the Horwitz event, told Bowling Green Daily News reporter Chuck Mason that while “it was good to hear an opposite viewpoint on the Fed,” he nevertheless believed that “we need to keep the Fed because of the economy.”
Apparently for Shears and others who think like him, the idea of banks operating according to free-market principles may be philosophically interesting, but it’s theory best left in the lecture hall.
“Actually allowing freedom through competition among money issuers and choices for bank customers? Oh heavens, no. That would never work. We must have a government-run system to ensure our safety and security.”
But where does this gut reaction come from?
“America has never had a free market system in banking,” Horwitz said.
The history books confirm Horwitz’s claim, and similar patterns can be seen in public education and health care.
“Actually letting parents decide where their children attend school with their tax dollars to follow, or allowing Kentuckians to purchase health insurance across state lines? Oh heavens, no. That would never work. We must have state-run schools to ensure that our kids get educated with a one-size-fits-all curriculum, and bureaucrats to keep a watchful eye over those pillaging insurance companies.”
When the Fed was created, Americans were told that it would protect them from the financial yo-yos of the market, which are self-corrections best left alone by government entities that have no earthly idea what they are doing.
Yet it hasn’t worked. Beginning with the Great Depression of the 1930s through the recessions of the 1970s and 2000s, the Fed has failed us over and over again.
What’s worse, the downturns which occurred under the Fed’s watch were significantly longer and more widespread than those which occurred in our admittedly smaller economy prior to the creation of America’s central bank.
Even those less severe pre-Fed financial panics of the latter 19th and early 20th centuries, had their roots in central planning gone awry. Legitimate problems were misdiagnosed when far too many people looked to government for solutions – the very entity from whence the trouble first came.
The pattern continues today.
What did central planning’s cheerleaders say when the Fed failed to live up to its charter after the Great Depression?
“It’s obvious,” they’d exclaim. “The Fed just wasn’t given enough power.”
Their spirit remains with us today as we hear big-government types blaming the ineffectiveness of recent big government spending programs on the fact that “the stimulus just wasn’t big enough?”
History will show that central-planning debacles like Obamacare resulted from severely misdiagnosing America’s health-care challenges by attributing higher costs and less coverage to too much freedom in the marketplace when, in fact, those issues grew out of a regulatory system that discouraged competition and innovation.
Of course, the central-planning apologists will always be there to blame our problems on too little power.
The truth is, we just don’t have enough liberty.
Jim Waters is president of the Bluegrass Institute, Kentucky’s free-market think tank. Reach him at firstname.lastname@example.org. Read previously published columns at www.freedomkentucky.org/bluegrassbeacon.