Not long ago Niall Ferguson, the flamboyant charlatan who has revolving gigs at Harvard, Oxford, and the Huntington Institute, protested to an interviewer that he was not just “cute,” he was “clever.” He had earned his way into the higher echelons of the higher education, he insisted, where he could write a book every six months on some ever larger topic, money and banking for a while there, and then on toward the sources—the very foundations—of western civilization as such. He hasn’t charmed his way to the top, no, he’s smart!
When our Great Recession was still metastasizing, in October 2008, Time Magazine let this well-educated twit announce that Milton Friedman had fully explained the Great Depression as a financial crisis made disastrous by the Fed’s mistakes. Here’s Niall’s initial foray into what ails us: “Yet the underlying cause of the Great Depression—as Milton Friedman and Anna Jacobson Schwartz argued in their seminal book A Monetary History of the United States, 1867-1960, published in 1963—was not the stock market crash but a ‘great contraction’ of credit due to an epidemic of bank failures.”
Right, and the bank failures had nothing to do with their enormous, unregulated investments in securities listed on that stock exchange, which collapsed in October 1929 when non-financial corporations, with about $9 billion at stake in their own lending, pulled out? And the fastest growth rates of the 20th century, between 1933 and 1937, can be explained by a “great expansion” of credit, right? Well, no, the banks failed because they bet on the bubble in the stock market, and the amazing recovery of the mid-1930s happened in their absence—they spent the decade hoarding their assets, parking their reserves with the Fed, buying government bonds, and increasing their loans and discounts to business all of 8 percent.
But Niall now brings news from the 18th century, courtesy of today’s Newsweek and The Daily Beast. Adam Smith has the cure for what ails us! We’re stagnating under the weight of “crazy red tape”—shorthand for the “sclerotic laws and institutions” that, as Smith observed, stifled ambition and enterprise in imperial China, and that, in modern bureaucratic forms, as Ferguson updates the observation, now threaten to quench all those animal spirits that once roamed freely in the US. It takes 65 days to get a Food Protection Certificate in New York City, he whines—how, he asks, can the public’s interest in not being poisoned by vendors be allowed to thwart the entrepreneurial drive to sell us whatever crap they have on hand? No wonder we’re stagnating.
It gets worse! Niall is so profoundly stupid, OK, I apologize, he is so ideologically deformed, that he ventures beyond the “deleveraging” explanation for the persistent doldrums of the world economy by saying that hoarding and debt reduction, private and public, can’t explain why we’re stuck—for once, he offers an original thought. Not a reasonable or verifiable thought, mind you, but original.
Here it is: People are shirking. I’m not making this up. “Yet more is going on here than deleveraging. Consider this: the U.S. economy has created 2.6 million jobs since June 2009. In the same period, 3.1 million workers have signed up for disability benefits. Back in 1992 there was one person on disability benefits for every 36 in employment. Now the ratio is 1 to 16. Unemployment is being concealed—and rendered permanent—in ways all to familiar to Europeans.”
Oh, and that stationary state is “literally stationary.” About 3 percent of American used to move to another state every year, but that rate has halved since the crisis, apparently because “people claim to be disabled” and therefore can’t move.
Hello? The rate of job creation can’t keep up with the growth of the (potential) labor force—it hasn’t since the 1920s. The population is aging rapidly, so disability applications will increase, and have increased, faster than the rate of job creation. When unemployment rises sharply and/or persists, people find ways to supplement their family incomes through the dole, whatever shape it takes. These facts aren’t self-evident, even to someone as obtuse as our Niall?
But thanks, Doctor Ferguson, for the diagnosis and this course of treatment: “More free trade, more encouragement for small business, less bureaucracy, and less crony capitalism: these were [Smith’s] prescriptions.” These are also the prescriptions of all politicians, Democrat or Republican, now running for office. They haven’t worked for a generation, what makes anybody think they’ll cure us? The alternative, of course, is the deus ex machina of every monkey trained by Thomas Friedman: “to escape stagnation through technological innovation.”
Is there someone out there who can persuade our Niall, our Fredo, to go fishing? It’s too late to send him to Vegas.