Fact Checking Walker Bragman’s Economic Narrative

FDR Great Depression Line

Over at the Huffington Post, Walker Bragman has an article meant to rattle the notion that two reasonable alternatives exist in modern economic policy debates. I agree that there aren’t two sides; in fact, there are several more.

Bragman explains that the Great Depression was exacerbated by “unregulated markets.” Unregulated markets? There’s no supporting evidence given in the article, but I suppose we’re supposed to take it as an act of faith. In previous economic downturns, it’s true, the federal government tended to favor a hands-off approach.

But to take Herbert Hoover’s word for it, that changed with his administration. “We might have done nothing,” Hoover said during his 1932 acceptance speech at the Republican convention. “That would have been utter ruin. Instead we met the situation with proposals to private business and to Congress of the most gigantic program of economic defense and counterattack ever evolved in the history of the Republic.”

Just think what people like Bragman would say had the reverse been the case. Say for instance that previous economic downturns were quickly met with government intervention and the economy rebounded without much fuss. Imagine how Bragman would then have reacted to an instance where an economic slowdown was met with government indifference and the most painful and prolonged recovery in American history ensued. We would never hear the end of it.

Bragman also points to General Augusto Pinochet’s Chilean dictatorship as an example of free-market economics. It laughable, to even think about it. He not only failed to stand for election, but Pinochet held virtually unlimited power over the economy. In 1975, Milton Friedman denounced “the military juntas of Chile and Brazil,” he continued. “But I believe I can learn from observing them and that, insofar as my personal analysis of their economic situation enables them to improve their economic performance, that is likely to promote not retard a movement toward greater liberalism and freedom.” So even Friedman understood that Chile was at best at work in progress. In an unfree manner, the Chilean government arbitrarily fixed the price of the national currency to the US dollar, determined the issuance of credit and bailed out favored corporations. Combined with the market collapse in the early 1980s of copper, Chile’s largest export, Chile’s adoption of state-run capitalism almost certainly hindered economic progress and political reforms.

These alleged free-market policies in Chile consisted of torturing and arresting labor organizers, killed dissidents, enforcing abandoned property titles, giving former government utilities and infrastructures to political elites, and protecting favored industries from the rigors of open competition.

Bragman has a point that not all economic theories should be given equal weight, but he fails in his economic analysis by conflating an unhampered market system with state privilege. In practice, a genuine market system diminishes power differentials and expands people’s opportunities along with their sphere of autonomy.