One of my favorite moments during the 2012 Republican presidential contest came when Ron Paul, fresh from his strong showing in Iowa, triumphantly told his supporters: “We’re all Austrians now!”
I imagined many Americans scratching their heads and wondering: Why do we want to be Austrians? They live in a nice country with stunning mountains and all that, but aren’t we perfectly happy to be Americans?
Of course those in the know, particularly Paul’s enthusiasts, understood the libertarian presidential candidate’s reference: that Americans were rejecting the economic ideas of John Maynard Keynes that encouraged government intervention and provided intellectual ballast for the New Deal. Instead, they were coming around to the principles of the anti-government economics of Austrians Friedrich A. Hayek and Ludwig von Mises.
Hayek and Mises perceived little difference between democratic governments that used their power to plan against recessions and dictatorships that did the same thing. In this view, the policies of Franklin Roosevelt led down what Hayek called “The Road to Serfdom” and were thus objectively comparable to those of Hitler or Stalin.
At the time, Paul offered some context for his Austrian journey. He was quoting a supporter who had noted a line attributed to President Richard Nixon that “we’re all Keynesians now.” Paul observed that back then, even Republicans “accepted liberal economics.” Those days are gone.
Paul’s words are worth remembering not only because they are entertaining but also because he has a point. To a remarkable degree, our politics are haunted by the principles of Austrian economics and their sweeping hostility to any actions by government to keep downturns from becoming catastrophes or to promote greater economic fairness.
This is, indeed, an enormous change. When Nixon declared his allegiance to Keynesianism, he was reflecting an insight embraced across partisan lines. Government’s exertions, both during the New Deal and more completely during World War II, helped rescue the American economy from depression.