Ok as far as it goes . . .
Peter Schiff’s How an Economy Grows and Why it Crashes offers a gently amusing introduction to his take on Austrian School economics by allegorically representing the United States as an island with an economy based on fish. While the book effectively presents his views and offers useful insights into the current economic morass, I want to mention two of its significant weaknesses. First are the inherent contradictions of Schiff’s biases and second are the enormous gaps left by realities not measured by economics.
“The Market” is Schiff’s demigod: its magic solves all problems and leads to the highest and best use of all resources. If Government would just get out of the way, The Market would take care of everything. Unfortunately, there are several problems with this view. Most obvious to many folks today is that the present Government is effectively a subsidiary of the businesses that comprise The Market. Look at the astonishing speed with which the Government decided to lend trillions to private banks with effectively zero oversight. Consider the revolving door between business and Government brought to new heights under Bush II and barely touched by Obama. It’s a complicated mess to be sure, but at this point in our history, Government primarily serves rather than hinders business (permits for Deep Water Horizon . . .). The massive debt problems of such great concern to Schiff expanded because The Market persuaded The Government to stop regulating just as Schiff would advocate. Sadly, reality doesn’t match the tidy absolutes of Schiff’s allegory.
But there is a deeper weakness to Schiff’s work and it starts at the beginning of his tale: Schiff’s island has an unlimited supply of fish. Ask a Canadian fisherman about the Grand Banks: resources deplete. Would Deep Water Horizon exist if there was an easier way to get the oil? Resource limits are absent from Schiff’s world, but not ours, alas.
Why an Economy Grows provides a pleasant introduction to aspects of economics, and a valid critique of our unsustainable financial ways, but ultimately, something smells fishy – and I hope some of the reasons are now a bit clearer.