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Steve Baker MP quotes von Mises in the Commons: “There is no means of avoiding the final collapse of a boom brought about by credit expansion …”

Yesterday, there was a mini-rebellion in Parliament, to be precise in one of its Committee Rooms. Britain’s (increased) IMF subscription was being discussed, and although it got through, there was a little flurry of excitement, as Guido reported:

Something very rare happened in what is usually the dullest of committees. A dozen or so Tory non-members of the committee came and spoke against affirming the instrument. Government whips cajoled the pliant Tory and LibDem members of the committee to vote to affirm the instrument while Tory MPs spoke from the floor against it. Promising new boy Steve Baker and backbench eurosceptic Douglas Carswell were among those who spoke against affirming the instrument.

You can now read what was said in Hansard.

When these kinds of things are argued about, everything depends on whether the contrariness on show is a genuine argument that we should switch to an alternative and better policy, or merely grumbling. If all that is happening is that people don’t like whatever it is, what with them not having created the problems (or so they say) with their decisions, and what with all the cuts they are having to put up with now, well, frankly, that doesn’t count for very much. If the powers that be are able to say: Well, what would you do that would be any better? – and if you don’t then have an answer, you might as well not have bothered. All you are saying is: This hurts. And all that the government has to say in reply is: Yes, we hear you, we feel your pain, but we are going to do it anyway, because despite all the pain, we remain convinced that this is the best thing to do.

Scroll down at Hansard and you can read, in particular, what Steve Baker MP had to say. The thing about Baker is that he really is arguing for a paradigm shift in economic policy thinking. He even quoted a chunk out of Human Action, which I think I will quote here, again:

The wavelike movement affecting the economic system, the recurrence of periods of boom which are followed by periods of depression, is the unavoidable outcome of the attempts, repeated again and again, to lower the gross market rate of interest by means of credit expansion.

There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.” (Human Action, p. 572)

Baker is not just saying: this is a crisis. Everyone knows that. He is also saying: and we need to have the crisis, now, all of it and get it over with as soon as we can.

Hayek also got a mention, as did Jesus Huerta de Soto, who gave the Hayek Memorial Lecture last October.

This is the kind of politicking that is capable of having actual impact. Not now, and certainly not right away, but … in the longer run. In the longer run, ideas can change.

LATER: The Cobden Centre blog now has a more user friendly version of Steve Baker’s words, here.

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5 comments to Steve Baker MP quotes von Mises in the Commons: “There is no means of avoiding the final collapse of a boom brought about by credit expansion …”

  • Steve Baker is top man, he doesn’t just take all this financial guff for granted – see his musings over at The Cobden Centre.

    Of course, as any fule kno, the way to prevent credit bubbles is to prevent asset price bubbles – the two go hand in hand, you can’t one without the other – and when I say “asset price” I mean land values, which could be best dampened with [continued page 94].

  • Roue le Jour

    I would have to ask, do governments follow Keynes because they genuinely believe it to be true, or because it is the theory that best suits their purposes?

    You are asking them to give up control of the money system in return for the warm satisfaction of having done the right thing. Government doesn’t work like that.

    But of course, hats off to Steve Baker for saying it.

  • Laird

    Roue, as to your question, I’m convinced that originally it was exclusively the second reason, but now that Keynsianism has been going on for so long, and taught in all the “best” schools as received wisdom, in many cases it has become the first.

  • Steven Groeneveld

    Politicians with economics are like physicians to illness. A physician cannot leave the body alone to heal itself (which in 90% of cases it would do), but has to intervene (often at the urging of their patients and/or malpractice lawyers) to be seen to do something, anything, so as to exhaust the armoury of everything possible they can try to cover their arses against any complaint that they could have done more to prevent a bad outcome, or to claim credit for a good outcome.

    Politicians like Keynesian economics for the same reason that it gives them an armoury of things to try, whereas Mises and Hayeck tell them not to touch. They cannot claim credit for a good outcome resulting from not touching.

    You can probably tell that I hold the medical profession in as much regard as I do the political class, but it at least has the potential to improve if the legal and political environment they operate in were to be liberated.

  • Paul Marks

    Steve Baker is a good thing.