Party Like It's 1929

So it appears that John McCain will be the Republican nominee – as if I needed another reason to doubt the GOP’s commitment to free market principles. During the CNN Republican debate on January 30, 2008, McCain took several swipes at capitalism in an attempt to diminish Mitt Romney, his chief rival for the nomination.

• On the sub-prime mortgage crisis: “I think that there are some greedy people on Wall Street that perhaps need to be punished.”
• On employers who hire immigrants without national ID cards: “Unless an employer hires someone with those documents, that employer will be prosecuted to the fullest extent of the law.”
• On his own leadership in the government: “I led the largest squadron in the United States Navy, and I did it out of patriotism, not for profit.”
• On Romney’s leadership in the private sector: “I think he managed companies, and he bought and he sold, and sometimes people lost their jobs. That’s the nature of that business.”
  

Although I don’t believe that Mitt Romney has tremendous free-market bona fides either, I haven’t noticed the same disdain for capitalism in Romney’s comments that seems to permeate McCain’s speeches. When McCain speaks about economic matters, I hear echoes of FDR’s “economic royalists,” a term used by Roosevelt to denigrate the private sector back in the 1930s.

McCain’s lack of faith in the free market should be particularly troubling to voters, given the looming recession (depression) that decades of loose monetary policy have wrought. The Fed’s incessant inflation of the money supply has destroyed the value of the dollar, and its manipulation of interest rates has been the cause of the endless cycle of boom and bust that we have suffered ever since its creation in 1913. Indeed, there are a number of similarities between today’s economic situation and that of the years leading up to the Great Depression. McCain’s admitted ignorance of economics, his low opinion of capitalism and the private sector, and his apparent belief that the government should have an active role in manipulating the economy and shaping private contracts to fit his personal preferences makes me think that he may well indeed be the most dangerous man left in the presidential race now that John “Opie the Commie Redneck” Edwards has dropped out.

In America’s Great Depression, Murray Rothbard argues that the Fed’s inflationary monetary policy of the 1920s led to the stock market boom and its subsequent collapse. The problem was exacerbated by the protectionist Smoot-Hawley Tariff. But the Great Depression was longer and deeper than it might have been due in part to Roosevelt’s incessant attacks on the private sector and property rights. His contempt for capitalism and his attempts to introduce Mussolini-style fascist control of business through the New Deal injected a tremendous amount of uncertainty into the business community, which served to reduce investment in the economy until FDR was out of the picture and the government controls implemented during the New Deal had been relaxed somewhat.

Over the past few years, the Fed’s inflationary policies have driven bubbles in the tech industry and the housing market. Today the Democratic majority in Congress, aided and abetted by many Republicans, threatens China with protectionist tariff measures and looks to block any attempt to liberalize trade with other nations. And finally, we have a front-runner for the allegedly pro-free market Republican Party who sounds like FDR’s half-witted cousin.

I bet September 1929 felt a lot like February 2008. Buckle up.