12 Jul The “Smart” State: Progressivism, Part II
Modern Progressives love the term “smart” to describe their approach to everything from zoning to energy. For them, attempts to expand the role of the State are smart, which means free markets must be “stupid.”
By the late nineteenth century, Progressives believed that scientific knowledge was so advanced that “experts” could govern American society better than corrupt politicians and business owners. Well-intentioned experts could direct economic activity in a “rational” way.
Although many Progressives did not openly embrace socialism, they believed that a market economy left to its own devices would lead to chaos and monopoly. To combat this problem they did not call for outright State ownership of most production, but rather regulation by federal commissions and bureaus.
Modern historians usually portray entities like the Interstate Commerce Commission, Federal Trade Commission, and Food and Drug Administration as historical “progress.” They especially praise the establishment of the Federal Reserve System in 1914, which was supposed to end financial “panics” and do away with booms and busts in the economy.
Progressivism permeated all levels of government from local city councils to the White House. The first openly Progressive president was Theodore Roosevelt, who publicly despised the U.S. Constitution with its checks and balances and hated the legacy of Thomas Jefferson. Roosevelt believed that the president should have the power to do whatever seems necessary and that experts in powerful federal agencies should be authorized to carry out mandates to solve the various social and economic problems.
What They Left Out
However, Progressives left out the most important elements in planning: human nature and economic calculation. The rule of experts has not resulted in Nirvana. For example, the current “top economists” of the federal government, from Lawrence Summers to Ben Bernanke, have doctorates from some of the most prestigious institutions in the world, yet they have created an utter mess.
Why? “Experts” might have advanced learning, but that knowledge cannot replace what people need to make complex economic decisions. Many government economic experts are Keynesians, or at least apply Keynesian-style policies, and no matter how many complex mathematical models they might use to “solve” economic problems, their models are worthless because Keynesian analysis simply treats an economy as a homogeneous mass that suffers downturns occurs because spending is inadequate.
Many government-oriented experts seem almost incapable of understanding an economic argument. For example, the government pays them to find ways to make alcohol-based fuel from switch grass, yet just because they can produce this fuel does not mean it is economically feasible. Government planners tout it as a “fuel of the future,” yet it is vastly inferior to petroleum-based fuels in performance and in resources required to create and distribute it.
“Smart” policies have unforeseen consequences. For example, “smart growth” has resulted in forcing up housing prices to astronomical levels, with “Progressives” then demanding that government subsidize housing to make it “affordable.”
Furthermore, as experts become entrenched in powerful bureaucracies, they act like, well, bureaucrats focused on preserving their own jobs. Although Progressives believed that an expert-led government would bypass political behavior, that never has been the case. Government is inherently political, and government agents can be expected to act in their own political best interests.
Moreover, F. A. Hayek and Ludwig von Mises pointed out fatal flaws in any kind of government planning. In his classic “The Use of Knowledge in Society,” Hayek noted that general knowledge cannot replace the specific knowledge that government economic planners would need to “run” an economy, and the failure of the socialists states eloquently proves his point. Likewise, Mises noted that without prices, private ownership, and free markets, economic calculation was impossible, leading to “planned chaos.” Their wisdom contrasts with the destructive foolishness we see coming from Washington and elsewhere.