G20 meeting no-show: the case for growth(Read article summary)
G20 meeting showcased two sides of the Keynesian debate. What was missing was the case for real economic growth.
The debate over what to do about the economic mess we are in is raging among the parties in the G20 economic summit.
In one corner is the US. The world view from this camp is to move forward with expansion of a socialistic agenda with reckless abandon. To those now in power, the ends of transforming America from free market capitalism to government planned socialism justifies the means that, at best, will put us into years of economic doldrums and at worst could lead to economic ruin.
In the other corner are countries for which the bloom is off the rose when it comes to socialists policies. Much of Europe seems to be concerned that massive government spending to stimulate their economies has not worked. They are ready to cut costs to get their budgets under control to prevent economic collapse due to massive debt.
The American administration's side of this debate is centered around the premise that without continued massive government spending, a double-dip recession is sure to follow. The Europeans are not really disputing this, but fear a worse outcome will result from out-of-control deficits and government debt.
Both sides are clearly rooted in the neo-Keynesian assumption that only government spending can create real economic growth.
Even many of the entrepreneurship scholars from around the globe, who I spent the past few days with at the World Meeting of the International Council for Small Business meetings in Cincinnati, seemed to part of the Keynesian renewal.
There was scant discussion on what needs to happen to allow entrepreneurs to begin the process of stimulating long-term economic growth. Instead, many at the World Meeting were anxiously awaiting the next stop in Turkey for the Obama entrepreneurship world tour. Others were wringing their hands about the doom that would surely follow if the Europeans do take their foot off of the deficit spending accelerator.
As much of the world debates two neo-Keynesian world views, both based on the assumption that government is the engine of economic growth, I sit here on my back porch holding firm to a third world view.
Expansion of government will never lead to long-term economic prosperity -- only freeing entrepreneurs from the burdens of excessive government will lead us to sustainable growth. As Milton Friedman reminded us, "The Great Depression, like most other periods of severe unemployment, was produced by government mismanagement rather than by any inherent instability of the private economy."
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