Saturday, July 16, 2011

Ignorance Amidst Erudition

Tibor R. Machan

Stanley Kauffmann is the film reviewer of The New Republic and his work in this area is worth the time it takes to read it, at least for me. He is what I would consider an erudite film critic, drawing on a vast familiarity with the history of cinema. Indeed, while the magazine has been turning more and more statist--in it early days it was actually an interesting ideological hybrid, guided by old or classical as well as new or modern liberal values--most of its good stuff comes from the back of the book, namely, the reviews it publishes. And from Kauffmann’s comments on films.

So I was taken aback when in a recent review of the movie Too Big to Fail by Curtis Hanson translation of Andrew Ross Sorkin’s book on the recent financial fiasco, Kauffmann opines that “The economy requires radical political intervention and we ducked that.” Just goes to show you that being knowledgeable and smart about movies can go hand in hand with utter ignorance of economic theory and history.

One need not be what Paul Kurgmann and even President Obama likes to refer to, disdainfully, as a market fundamentalist--i.e., someone who holds that as a general policy it is better to rely on free market processes than to trust the bureaucrats--to see that Kauffmann is way out of his depth. For starters, political intervention has been part of the norm in the American economic system from the beginning, with but very few lulls in that approach. (I once ran across a book published in the 1840s in which the author severely criticizes government involvement in the American economy and for its thwarting of free trade on innumerable fronts!) Alexander Hamilton, one of the prominent founders, had supported many measures that run against the principles of a free market economy and involve extensive and “radical political invention” in the economy. What is it that Kauffmann refers to when he states that “we ducked” such intervention? Does he mean the country never did opt for out and out socialism? On that score he is correct but such a remark assumes that financial and other economic messes are avoidable under a socialist economy. Yeah? Tell that to the former Soviet Union and its colonies and to the many European near-socialist governments that have been struggling with such problems.

Of course, Kauffmann’s idea is rather routine among intellectuals who take their economic education from the likes of the late Paul Samuelson (whose introductory text, Principles of Economics, was the main source of readings in college economics course for decades). While there have been some free market economists whose influence has been felt throughout higher education--and this is true now as well--the majority of students who take econ courses get mostly lessons in the wisdom of the mixed economy, the kind we see in most of Europe, North America, New Zealand and Australia. Such systems are riddled with political intervention!

The idea that such intervention is what an economic system needs so as to be functional itself rests on the myth that some people--politicians and bureaucrats--have special talents for guiding the economic conduct of others. This is quite literally a fascist conviction! It is diluted by mixing in democratic and capitalist and other features in the system--that’s why it is called a mixed economy--and it seems Kauffmann does not hesitate to embrace it.

Now mind you, what is really off in Kauffmann’s remark is the association with political intervention with radicalism. In fact it is the free market system that has brought to the fore a radical economic idea given that political intervention has been around from time immemorial. Mercantilism, which was the dominant economic doctrine prior to Adam Smith’s writings, especially his The Wealth of Nations (1776), is a thoroughly politicized economic system! Feudalism and nearly all the economic ideas and policies of the old order were nothing if not completely political.

So it seems that Mr. Kauffmann, who must be at least as old as I am by now, needs to go back to night school and take a good course in economic history. He would then perhaps admit that his comments about what the economy needs could at least use serious revision.

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