Is Robert Reich becoming an Austrian Economist?

No sooner had I written my post below, Steve Jobs the World-Famous Slave, than I saw the American Spectator take Robert Reich to the woodshed for his economic heresy (or rather, false orthodoxy).

But in truth, it seems that Reich actually agrees with my defense of Steve Jobs! Reich acknowledges that the consumers are the sovereign decision makers and the CEOs are just servants to them. Sadly, the Reich piece requires registration, and I couldn’t get the free version to work right. But here’s the Spectator’s testimony:

America’s “insatiable consumers” have destroyed the economy and the “hubs of our communities” with their relentless pursuit of “great deals.”The”lure of the bargain,” suggests Reich, is a destructive force.

So it was not Jobs’ fault but those demanding consumers who wouldn’t put up with a scratched screen. Reich at least gets us past the blaming of “corporate greed.” It is consumer greed that forces prices down.

Reich blames Americans’ desire for lower prices, prosperity, and happiness for sending jobs “elsewhere.” But he ignores the fact that those lower prices mean we have more money available to buy other, costlier goods and services here in America. So rather than make snow globes and t-shirts, Americans develop advanced technology, manufacture airplanes and cars, and provide the world’s best financial, health, and education services. They use iPads that put enormous competitive pressures on laptop manufacturers and publishers to provide more creative services to people who want them.

It is enough to make on wonder whether Reich has ever read Schumpeter, who in 1942 pointed out:”The capitalist achievement does not typically consist in providing more silk stockings for queens but in bringing them within the reach of factory girls in return for steadily decreasing amounts of effort.” (Capitalism, Socialism, and Democracy, p. 67)

Trade freed Americans from the sweatshop and now it is freeing them from the factory floor. It will do the same for Asians and Africans. Yet Reich would end trade with poor countries, since their environmental and working conditions”offend common decency.” Does Reich truly believe these workers’ usual alternative, subsistence farming, can gain them a “decent” standard of living? Does he really believe he knows better than the poor in developing countries what is best for them? Not allowing those workers to decide for themselves would keep them in poverty. Meanwhile, middle-class Americans are made worse off by higher prices.

The article goes on to show how high prices are touted as the key to wealth by many in the establishment. Sadly, this is hardly a partisan problem. The Bush Administration used many of the same people and the same outlook for the economy.

The best place to go for a better understanding of how the economy works, coordinates needs, provides for the populace, and balances out, can be found at the website of the Ludwig von Mises Institute. In a later post I’ll make more specific recommendations for the two or three of my readers who aren’t already fans of that site.

Leave a Reply

Your email address will not be published. Required fields are marked *