I am a long-term optimist. The failures of central planning are there for all to see. Russians, East Europeans, Chinese, Indians, and perhaps some Latin Americans who stared into the socialist abyss know best. Yet we are blindly traveling down the same road they’re coming from, and delude ourselves that we’re cruising along the free market highway. Fortunately, we’re just 290 million lost souls against billions. (though you should add in Western Europe going down the same path.) To me that’s what’s exciting – we’re no longer the only game in town. There are perhaps a hundred individual experiments taking place, all looking for the capitalistic key. Once they discover not to adopt ALL of the American system (esp. a central bank and “democracy”) the upward push of progress will be unfathomable and unstoppable. Even the U.S. will have no other choice but to follow this model.
The biggest reason for optimism, in my humble opinion, is the intellectual climate. The seeds of socialism/fascism/interventionism were sown in the mid to late 1800s. The battle of ideas took place and the bad guys won. Edward Bellamy wrote the best selling (I believe in 1887) socialist utopia novel Looking Forward. (His cousin, Francis Bellamy, also a socialist, wrote the Pledge of Allegiance in 1892.) A lot of these ideas came from German universities, considered the best in the late 1800s, early 1900s. (The first modern welfare state was Bismarck’s Germany.) An intellectual shift towards socialism preceded the disastrous/murderous 20th century, laying the groundwork for the U.S. Progressive Era (income tax, central bank, end of neutrality in foreign affairs), Soviet socialism, Nazi socialism, etc., etc.
Fast forward the tape to today. Intellectually, socialism is dead from the neck up. Free market principles are much more embraced (though there is still much work to do), especially around the world. The more failures of central planning are revealed (is mortgage market socialism next?) the more this intellectual shift will accelerate. When the current wretched system inevitably fails, the hope is that at least some sound thinking will fill the void. You’re already starting to see this with the failures of Katrina – calls for spending cuts, pork busting on CNBC, defense of gas price gouging by the Cato boys, and even some calls for private roads.
~ Kevin Duffy, Bearing Asset Management, October 10, 2005