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A LIBERTARIAN RESPONSE TO "NOSTALGIANOMICS"

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The Montréal Review, June 2009

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In an article entitled "Nostalgianomics" published in the Reason Magazine Brink Lindsey, the vice-president for research at the Cato Institute, criticizes Paul Krugman's understanding of the economic crisis in America as it was expressed in his latest book The Conscience of a Liberal. In this book as well as in many articles published in the recent years Krugman insists that the American government, following the neoliberal ideas in economy, abandoned the middle-class ideals of wartime generation and has built an unequal (and unjust) society.

Lindsey says that Krugman's anxiety about the widening gap in the incomes and standard of living of the Americans is reasonable. Economists and social activists have been warning for long time about the growing inequality in American society. Many of them explain this phenomenon with the structural changes in economy, demographic changes, and the growth of the so-called "economy of knowledge." But Krugman's argumentation adds something new to this interpretation that Lindsey does not like. Krugman insists that the structure of economy and demographics are not the only culprits for inequality, actually the main perpetrator is the neo-conservative economic policy that was formed during the 1970s after the "social" revolutions of the 60s. According to Krugman this politics deserted postwar welfare state philosophy and brought America back to the concepts existing before the Great Depression when small government was accepted as normal and the existence of narrow group of rich people controlling the national wealth natural.

Brink Lindsey, who is a libertarian, calls Krugman's nostalgia to the era of "Detroit Treaty" (the post-war time and the treaty signed between General Motors and the United Auto Workers) "nostalgianomics." He does not think that the present economic crisis can be cured with the medicine of the 1950s and 1960s as Krugman suggests. Lindsey argues that mid-century's America was a limited, conformist society, where racism and sexism co-existed with the government supported monopoles, mighty industrial unions, restrictions on immigration and heavy progressive taxation that punished success and annihilated the entrepreneurial spirit. It is not coincidence that in the end of this period in the late-1960s anti-government feelings and social movements exploded. The "Washington consensus," or the beginning of the neoliberal era, was actually a part of the general desire for freedom. People wanted not only social liberty, but economic freedom as well.

Lindsey is not apologetic to Krugman's belief that the free competition between free individuals, living in a free from governmental interventions environment, creates more evils than benefits for society.

Lindsey writes: "Paul Krugman may long for the return of selfdenying corporate workers who declined to seek better opportunities out of organizational loyalty, and thus kept wages artificially suppressed, but these are creatures of a bygone ethos-an ethos that also included uncritical acceptance of racist and sexist traditions and often brutish intolerance of deviations from mainstream lifestyles and sensibilities.

The rise in income inequality does raise issues of legitimate public concern. And reasonable people disagree hotly about what ought to be done to ensure that our prosperity is widely shared. But the caricature of postwar history put forward by Krugman and other purveyors of nostalgianomics won't lead us anywhere. Reactionary fantasies never do."

In recent years, both parties, progressive economists and free-market libertarians, are mutually accusing for retrogressive thinking. The debate between Lindsey and Krugman is more than dispute about which world is better - this of "Detroit Treaty," or those of the "Washington consensus", it is actually the last speck of the eternal dispute on what is better - freedom or order. Freedom often leads to progress in the price of severe destruction and crises, while the order often leads to stability, security, but also stagnation.

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