Bill Anderson is a professor of economics at Frostburg State University in Frostburg, Maryland. His Ph.D. in economics is from Auburn University, and he serves as an associate scholar with the Mises Institute. He has published numerous articles and papers on economics and political economy, including articles in The Independent Review, Reason Magazine, The Free Market, The Freeman, Public Choice, The American Journal of Economics and Sociology, Quarterly Journal of Austrian Economics, and others. He is also a frequent contributor to LewRockwell.com.
The Daily Bell: Let’s jump right in. What attracted you to Austrian economics?
Bill Anderson: A friend named William Peterson gave me some copies of The Freeman in 1980 and those publications introduced me to Austrian Economics. I went to the Austrian seminar at FEE in August 1981 and by then had a good sense of what Austrian thinking was about. I liked Austrian thinking because, one, it was logic-based and also is based upon solid assumptions, two, it appeals to people like me who are very intuitive in their thinking, and, three, it provides an excellent framework for looking both at what actually happens within an economy and why there are policy blunders.
The Daily Bell: Do you think the field is growing? It still seems to “blacked out” by the dominant Keynesian economic paradigm in academia.
Bill Anderson: Absolutely, it is growing. No, it does not have the ear of the mainstream, but keep in mind that, contra Paul Krugman, the only real arguments against it either are straw man arguments or the academics simply engage in power plays where they keep Austrian-leaning people off their faculties and out of their journals. It is funny that a truly awful paradigm like Keynesianism has so much sway even though it is thoroughly fraudulent.
The Daily Bell: Looking back at the past 10 years of Keynesian economics can you comment on how effective it’s been? For us, it simply doesn’t seem to work. The idea that printing money can stimulate the economy seems to have been disproven by events in the past decade.
Bill Anderson: Again, contra Krugman, the past 20 years have been a massive experiment in Keynesian economics, as the Federal Reserve System has been THE economic “experiment” run by the Clinton, Bush, and Obama administrations. What have we seen? We have seen two major bubbles, the stock bubble of the late 1990s and the infamous housing bubble that still affects us today. The eight years of the Barack Obama administration have been Keynesian years, including the suppression of interest rates, massive spending by government, a number of wars (to help promote “aggregate demand”) and other “stimulus” measures. Yet, we see the candidates of the Democratic Party running against the economy even though the sitting president is a Democrat. That should tell us SOMETHING about these Keynesian years.
The Daily Bell: Isn’t it true that printing causes asset bubbles and economic distortion? How could people ever think that printing money could somehow “stimulate” the industrial economy in a healthy way?
Bill Anderson: People will believe a lot of things that are not true. In our present situation, we have seen massive money creation done ostensibly to increase consumer spending, yet we see retail outfits going bankrupt, closing stores, and trying to survive. This follows the Austrian paradigm nicely. Austrians don’t see economic downturns as the result of a loss of “aggregate demand,” but rather the result of massive malivestments in capital going toward capital goods and projects that cannot be economically sustained. Interestingly, the last group that gets hit is the retail sector, and we are seeing signs of major upheaval there.
The Daily Bell: How is it possible that economics professors agree that printing money using government force is anything but price fixing – when price fixing is always an economic distortion?
Bill Anderson: Again, people believe lots of things that aren’t true. Keynesians believe that we have unemployment because aggregate demand is not enough to keep all resources employed, thus the “idle resources” that need continuous doses of new spending in order to become employed AND stay employed. They never ask why those resources became unemployed in the first place; they simply claim people stopped spending, and that an economy needs people constantly spending so that the inventories can be drawn down. After inventories are drawn down, there are more orders to fill the shelves, and then people repeat the process. As you can see, to Keynesians, an economy is a mechanistic activity in which people essentially dig a hole, fill it up, and then dig again, repeating the process into infinity.
The Daily Bell: It’s really insane. How does Keynesianism survive academically when it is a logical fallacy?
Bill Anderson: How do lots of things survive intellectually? As long as there is a constituency for Keynesian thinking, there will be Keynesianism. By the way, Keynesianism is not just popular with academics, but also, of course, with politicians, for they can be seen as heroes when, in fact, they are political spendthrifts. Think about it. Austrian economics says that in a downturn, more government spending increases economic burdens on most people and the best way to handle it is for politicians to stop or slow down their spending, permit resources to “line up” and be directed to their highest-valued uses, and to allow for the necessary readjustments to happen.
What self-respecting politician can accept that? Do nothing? That sounds like a non-response. People are hurting, so politicians must direct resources toward those people. They spend the money, are better off, and the politicians can take credit for making people well off again. What isn’t said is that such actions actually will delay the economic recovery and when it occurs, will not be as effective as it would have been had the government backed off. This is the classic situation of what Frederic Bastiat called “the seen and the unseen.”
The Daily Bell: You’ve looked at a lot of politicians in this upcoming presidential race to determine their economics. Can you comment on some of them? You know a lot about Sanders for instance – you wrote an article on him.
Bill Anderson: There is not much to say. Republicans believe they can cut tax rates and cut domestic spending while simultaneously expanding the wartime powers of the state. They make government bigger and more expansive and powerful all the while speaking out against “big government.” Democrats, on the other hand, believe they can make it unprofitable for entrepreneurs and business firms to invest in capital, force up real business costs, and out of this will come a cornucopia of new wealth. The Democrats also seem to believe that one can tax capital and wealthy people into near oblivion, but investors, owners of capital, and business owners will not change anything they do even while government is confiscating most of their assets. This isn’t economic policy; it is delusion.
The Daily Bell: How about Hillary? Does she have a coherent economic philosophy?
Bill Anderson: Hillary Clinton probably understands the real issues as well as anyone else running, but she has to mollify the hard left in her party. Furthermore, she is much more comfortable in an authoritarian role, and she seems to believe (like Donald Trump) that government can coerce the economy into long-term prosperity. The issues are quite simple. Have sound money so that the value of money can be stable over time, which is vital to trade, keep taxes low (or, better yet, nonexistent), and give entrepreneurs and business owners the opportunities to invest in capital goods and direct economic activity in the proper direction of consumers. Yet, not one Democrat is advocating anything close to this.
The Daily Bell: Let’s look at Republicans. Are Republicans Keynesian as well? Do they understand the simplest element of free-markets, which is that government interference is price fixing?
Bill Anderson: Yes, the Republicans have embraced Keynesian. Bush was a Keynesian, and certainly these newcomers into the party believe that government spending over time will boost the overall economy. With so many Republicans running against free trade and espousing economic nationalism, their economic views pretty much coincide with those on the other side of the aisle.
The Daily Bell: This is a fundamental point. How can government be justified economically?
Bill Anderson: You have hit on a dirty secret of government. There is no such thing as “neutral” government, and governments either engage in outright price fixing or indirect price fixing, but they definitely engage in massive price fixing. The governments we have now in the long run hinder the economy, and in a big way.
The Daily Bell: OK, more bad news: How would you characterize Obama’s economics?
Bill Anderson: Obama’s economics are based upon directing investments toward equities, suppressing real savings, and forcing up business costs. Policies based on artificially forcing up equity prices will benefit people in line to receive the returns to equity, but the diversion of resources away from more productive uses will suppress the incomes of lower-income people who depend upon a productive economy for employment. Raising business costs also suppresses economic opportunities.
Understand, this is a win-win proposition for Obama and the Democrats. They can practice Keynesianism but then express outrage that “free markets” are making the rich richer and the poor poorer. This is a bottomless well for Democrats, and they exploit their self-created opportunities very well.
The Daily Bell: How can Republicans support legislative solutions when they inevitably lead to price fixing, which in turn to leads to economic displacement, inter-mediation, wastefulness and ultimately economic disasters?
Bill Anderson: They shouldn’t, but they do. I will say that Republicans get more negative press when the economy goes bad than do Democrats. That is because most mainstream journalists are Progressives and the vast majority of them identify with Democrats, so they are going to feel safer and more comfortable with a Democrat in power. However, when Republicans either promote or back unsound policies, they really do deserve to be called out for it.
The Daily Bell: Let’s look at some specific Republicans and their policies How about Rubio? Is he economic literate? Does he want less government interference? Where is he best and worst?
Bill Anderson: First of all, I’m more familiar with the Democrats and their policies, having written on both Hillary Clinton and Bernie Sanders. That being said, no one left in this election seems to be economically literate. I mean that.
The Daily Bell: How about Cruz?
Bill Anderson: I don’t know much about him, to be honest. I think he is promoting some good ideas like regulatory reform, sound money, and lower taxes, but there seems to be a huge gulf between Republican promises and Republican governance. And whatever wartime foreign policy initiatives Cruz would bring about would all-but-negate any positive things his administration might do on the economy.
The Daily Bell: OK, how about Trump? Is Trump in any sense laissez faire?
Bill Anderson: I have no idea what Trump is at the present time. He does campaign as an economic nationalist, which is troubling to me. He also promotes an aggressive foreign policy that would be hugely expensive.
The Daily Bell: Like most businessmen, Trump always seemed to be willing to use whatever was available to achieve his goals. He wasn’t much motivated by theoretical considerations. Do you think he will make a good president? He reminds us of Mussolini.
Bill Anderson: Yeah, and Mussolini didn’t even make the trains run on time. Americans seem to believe that if only they could have the government being “run” by a successful or at least semi-successful businessman, that he would be able to get things done and to make the government operate efficiently. This is a pipe dream because governments are not about profit-and-loss, as are Mr. Trump’s organizations. Furthermore, Americans seem to believe that a “successful” businessman would simply use coercion or naked force to make people do what is necessary to make the government “great again.”
The Daily Bell: This presidential election is a mess. The candidates are so bad and the process so maladroit that we think this might be the last time it’s possible to seriously project this kind of system. Your thoughts?
Bill Anderson: It is a mess. I’m afraid we are going to have to muddle through and hope that no one gives us the government we supposedly choose through our votes.
The Daily Bell: If the idea of regulatory democracy is no longer believed in by the electorate, where does the US go from here?
Bill Anderson: That is a good question. How long before we see street fighting like what occurred in post-World War I Germany and Austria, or see pro-government militia and regular soldiers go house to house and shoot people like what we now see in Venezuela? This is not an idle question. It CAN happen here.
The Daily Bell: We think there are similar problems with central banks. People don’t believe in the system anymore. Without belief or support, systems rupture and fail. Where do we go from here? Where does our economics go from here?
Bill Anderson: People may say they are angry at the Fed, but most cannot articulate WHY they are angry. Most of my colleagues support the Fed, as they believe economic downturns are a natural consequence of free markets, and that we need to Fed to serve as a backstop against the “excesses” of capitalism. So, they may believe that the Fed is being “mismanaged,” but they also cling to the belief that the Fed can be reformed. Americans are terribly misinformed about the Fed and the real damage it does.
Part of this intellectual disconnect is that Americans have been taught all of their lives that in the late 1800s, the USA was on its way to perdition — and then the Progressives entered the scene. They produced reform after reform, gave us the income tax, created the Federal Reserve System, empowered labor unions, and generally made life better for all. This is what all of the American History books teach, it is what they read in the media, and are told on television. Americans are NOT taught that the Progressives hated individual rights and wanted to repeal the Bill of Rights, or at least neuter the rights of Americans. The Federal Reserve System was set up to bail out banks that engaged in questionable activities or overreached with their loan portfolios. Progressives gave us the Jim Crow laws, Prohibition, and forced sterilization of so-called idiots. They were True Believers in the pseudo-science of Eugenics and backed off only after Hitler made Eugenics a bad word.
The Progressives also promoted America’s entry into World War I and enthusiastically backed all of the economic controls that were imposed so that the USA could direct its entire economy toward the war effort. This was not “progress” by any stretch of the imagination; it was a huge backward step into despotism. The sad thing is that most Americans are convinced that if government were not regulating nearly every aspect of their lives and if the Fed were not creating money by the fistfuls, their lives would be a living hell. It is illogical thinking, to be sure, but that is where we are.
The Daily Bell: Should people pitch in to “fix” the system or is what’s going on so large and unstoppable that people ought to look out for themselves and their family’s first and foremost?
Bill Anderson: Entrepreneurs still need to do what they always do, and at least they will help negate some of the damage that government is doing. Likewise, people need to live their own lives as best they can and not look to the government to save them. Granted, many people cannot do that or they find that while they may want nothing to do with the state and its powers, the government always seems to find them.
The Daily Bell: Good points, thanks. Any other issues you want to mention?
Bill Anderson: Thanks for the opportunity. I hope your readers enjoy the interview.
The Daily Bell: Some great information. They should.
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