Meltdown author Thomas Woods Jr writes a long but informed and informative take-down of a Huffington Post article by Thom Hartmann on the economic crisis. Woods is one smart cookie, and he starts off with an honest admission:

After eight years of watching conservatives blow trillions of dollars and comport themselves like anti-intellectual, jingoistic blockheads, I found myself ashamed to admit that the Left seemed to have all the genuine intellectuals—people who seemed to possess real curiosity, who refused to accept whatever official line the government was shelling out, and who sought genuine understanding instead of name-calling and pointless vitriol.

He then takes apart Hartmann’s argument, starting with the spelling mistakes. Picayune, say you? Perhaps, but Woods suspects the spelling mistakes point to a deeper ignorance on Hartmann’s part:

Let’s start with the economists whose ideas, according to Hartmann, led us to the current crisis.  Why, they’re “Ludwig Von Mises, Freidrich [sic] Von Hayeck [sic], Milton Friedman, Alan Greenspan, Tom Freidman [sic], Robert Rubin, Larry Summers, and Ayn Rand.”  Now I’m sporting enough to look past the fact that Hartmann makes two spelling errors in a single economist’s name.  Still, color me skeptical that Hartmann knows a blessed thing about the work of F.A. Hayek.  (I assume he thinks these people are more or less interchangeable, that Mises = Friedman = Summers = Rubin, that Mises wouldn’t have denounced at least several of these figures, and that the differences between them are probably just trivial and not worth mentioning.)

Woods offers Hartmann a challenge:

Quiz time, Thom!  Name one book on economic theory (so The Road to Serfdom, if you happen to have heard of it, doesn’t count) Hayek wrote that you’ve read, flipped through, held in your hand, or even heard of.  Stumped?  How about one article?  Stumped again?  Then why not do the decent and honorable thing and shut up until you can speak from authority rather than prejudice and ignorance?  Sound fair?

Actually, Thom, I’ll be even more sporting. You can start condemning them again once you can at least competently summarize what someone who has read them tells you they say. How’s that?

Woods then fillets like a skilled chef:

Um, Thom, Mises and Hayek opposed central banking altogether, arguing that it was not only a superfluous intervention into the market economy but also that it was destabilizing and the source of the boom-bust cycle. These men are supposed to be similar to Greenspan how, exactly?…
It goes without saying that a government central bank’s intervention into the market to push interest rates lower than the free market would have set them cannot, by definition, be the fault of the free market.  The problems Hartmann identifies in his article, as well as the ones he neglects or doesn’t know about, are mere symptoms of a more fundamental cause, namely the creation of cheap credit by the Fed. Whatever happened to leftists’ interest in “root causes”?…
Then comes the inevitable post hoc ergo propter hoc fallacy: the American economy was strong back when the top income tax rate was 90 percent, so therefore high marginal income tax rates are great for the economy! How does Hartmann know that American prosperity didn’t occur in spite of, rather than because of, those high rates?  Without the help of economic theory, which Hartmann seems allergic to, how can we decide which of these possibilities is correct?I genuinely wonder how someone like Hartmann thinks wealth is created. Nothing I can see indicates he’s given the matter much thought. The average person’s standard of living, he seems certain, occurs because we loot and shackle the wealthy, who are mere parasites on the backs of working people, the real engines of the economy.

Leaving aside the odd view that only manual laborers engage in “work,” all the brawn in the world could never have produced a steam engine or a Pentium processor.  Only when informed by the knowledge of inventors and supplied with the capital saved by capitalists can the average laborer produce the tiniest fraction of what he is today accustomed to producing. The central ingredient in a laborer’s physical productivity is the equipment and machinery at his disposal. There is nothing natural or inevitable about the availability of this productivity-enhancing capital equipment.  It comes from the wicked capitalists’ abstention from consumption, and the allocation of the unconsumed resources in capital investment.  This process is the only way the general standard of living can possibly rise.  Hartmann thinks it’s just swell to tax it.

The “accepted wisdom” today is over-simplified Keynesianism. This is what we read in the mainstream press, and hear on the television. If these are where you get your economic information from, reading Woods’ article might be the start of a de-toxification program. This is high-quality intellectual debate: the kind that informs without being devoid of humour.

Tags: economic theory, economics, financial crisis