The Failure and Fallacy of Central Planning

 

The Failure and Fallacy of Central Planning

By Jacob G. Hornberger

The Future of Freedom Foundation

January 15, 2025

 

Ironically, two seemingly unrelated articles in today’s New York Times reflect much of what is wrong with the United States, at least in an economic sense. One op-ed, titled “The Tragedy of Joe Biden,” is by Peter Coy, a regular columnist for the Times. The other one, titled “A Big Idea to Solve America’s Immigration Mess” is a Times editorial.

In his article, Coy expresses sympathy for Joe Biden. He says that Biden just didn’t get the credit he deserved for what he did in managing the economy. He laments, “He had some remarkable achievements when it comes to the economy, but he couldn’t shape the narrative around his own record.” Coy writes about Biden’s pride in having created more than 16 million new jobs and his success against inflation.  The War on Populism: C... Hopkins, C. J. Buy New $10.99 (as of 05:41 UTC - Details)

What’s wrong with Coy’s point? Like so many other people, he doesn’t question the notion that in the United States, like in other countries, it’s the job of a president to manage the economy. A presidentially managed economy is now just taken as a given. No one questions it. And if a president does a good job at managing an economy, he gets reelected. If he doesn’t, the voters reject him. As the adage goes, “It’s the economy, stupid.”

At the same time, most everyone is convinced, thanks to the indoctrination received in America’s government-managed educational system, that Americans live under an economic system known as “free enterprise.” But in a free-enterprise system — a genuine free-enterprise system — economic activity is free of governmental regulation, control, and management.

So, how does one reconcile the principle of a presidentially managed economy with a genuine free-enterprise system? One doesn’t. They are opposites. By its very terms, a presidentially managed economy violates the principle of economic activity that is free of governmental regulation, control, and management.

Where Coy and Biden and most other Americans go wrong is in judging the principle of a presidentially managed economy within a relatively short time period — say, the last four years. Actually, the better measure is the last 100 years or so, stretching all the way back to the Franklin Roosevelt regime, when the principle of central planning, along with what is called a welfare state, was adopted by the U.S. government.

Consider, for example, the value of the dollar. Since the time that FDR foisted a paper-money system on the American people, there has been a downward trend in the value of the paper dollar. Sure, there have been periodic upswings in value along the way, which were proclaimed as a great success for the presidents who were in office during such upswings, but the overall trend has been down, down, down. Take a look at this graph.

Consider the $36 trillion in federal debt that now hangs over the American people. That amounts to around $323,000 per taxpayer. Take a look at this website. That debt continues to climb, incessantly.

Moreover, that debt doesn’t include the so-called unfunded liabilities, such as Social Security and Medicare. That’s even more money that has to be paid by the American people in the years ahead.

And then there are the periodic booms and busts caused by the Federal Reserve System, the entity responsible for managing the paper-money system that FDR foisted on America. An incessant cycle of raising and lowering interest-rate rates as well as managing the supply of paper money in the system, which has brought decades of of cyclical recessions and fake prosperity.

The welfare state and the centrally managed economy were supposed to bring an economic paradise to America. They did the opposite. They brought economic chaos and crisis. Let’s not forget the countless Americans who are now living from paycheck to paycheck, with barely any savings. It’s also worth mentioning the many young people who, because of financial straits, are still living with parents into their 20s and 30s. Millions of American hopelessly dependent on federal taxpayer-funded largess. Not exactly an economic paradise. The economist Ludwig von Mises put it best when he pointed out that centrally planning produces “planned chaos.”

Few better examples of this phenomenon can be found than in immigrtion, the topic of the Times’ editorial. But the good news is that the Times has a plan — what it calls a “big idea” — to finally resolve the decades-old, ongoing, never-ending, perpetual “immigration mess.” Isn’t that exciting? It’s a three-pronged plan consisting of the following:

1. “The government must make every reasonable effort to prevent people from living and working illegally in the United States.”

Wow! That’s ingenious! Why didn’t anyone, including U.S. presidents and their advisers, think of that before now?

2. “Congress should legislate an orderly expansion of legal immigration.”

Wow! Another ingenious idea! Darn, if only someone had thought about that before today.

3. “The nation also needs to deal humanely with the estimated population of 11 million illegal immigrants who already live here.”

Again, wow! This is absolutely brilliant. Why couldn’t anyone think of this before now. Disintegration: Indica... Martyanov, Andrei Buy New $28.95 (as of 05:08 UTC - Details)

There you have it — the perfect plan for the federal government to finally — finally! — bring an end to the ongoing, never-ending, perpetual immigration crisis.

But there is at least one big problem with it. It won’t work. That’s because central planning doesn’t work. Contrary to what the Times’s editorial states in its opening sentence, America’s immigration-control system is not “broken,” as everyone loves to maintain. Instead, it is inherently defective because central planning is inherently defective. Something that is broken can potentially be fixed. Something that is inherently defective cannot be fixed.

It would be difficult to find a better example of central planning than America’s immigration-control system. It would also be difficult to find a better example of “planned chaos.” What the Times fails to realize — what most Americans fail to realize — is that the chaos and crisis they lament in immigration is rooted in the very system they support. Keep the system, even in a newly reformed way, and you keep the chaos. Dismantle the system and you end the chaos.

Alas, unfortunately the notion of a presidentially or centrally managed economy is too deeply set within the minds of the American people. One of these days, however, there will be a rediscovery of the principles of a genuine free-market economy — one in which there is no central planning, mandatory charity or welfare, governmental regulation, or presidential management — and people will then be able to enjoy the benefits of freedom, prosperity, and harmony.

Reprinted with permission from The Future of Freedom Foundation.

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