Wednesday, October 31, 2018

Is the Austrian School of Economics Fascist Economics?

Michael Hudson, confusion beyond Keynes
Larry Rice emails:
What do you make of Michael Hudson's mention of Austrian Econ being fascist?
My reply:

The entire interview with Hudson is quite fascinating, It appears that he can sure stick a lot of facts in his head and occasionally make an interesting point, But that accumulation of facts is, in general, a disassembled mush with little in the way of sound theory or even based on reality.

He states:
People do not have enough money to buy goods and services anymore.
This means he fails to understand basic supply and demand economics and that markets clear. He doesn't get Say's Law, which I discuss in detail in this video: How to Explain Say's Law On a Napkin.

He states:
One of the good things that President Obama did after he created the debt depression was to at least begin running a modest deficit to spend money into the economy.
This means he is cheering on classical Keynesianism which was completely destroyed as sound theory by Henry Hazlitt in his 1959 book, The Failure of the New Economics.

Hudson goes on:
I’ve written quite a bit on tariff policy and protectionism. America got rich by protectionist policy. My book America’s Protectionist Takeoff: 1815-1914 is all about that, and my Trade, Development and Foreign Debt is all about that... I think every country should produce its own food supply and its own means of support. 
I have discussed the errors in protectionist trade thinking in the video, Why Donald Trump Never Washed the Windows at Trump Tower.

He states:
The Eurozone was designed by rightwing politicians. It was basically a fascist plan, fascist as in the 1930s, fascist as in the Austrian School. 
This is just nuts. Fascism is about government control of industry. The Austrian school teachings show why the best way to increase economic prosperity is to keep government out of any influence over the economy.

Austrian school economists tend to be in favor of a gold standard (or Hayekian competing currencies) not some managed super-state money.

He states:
The solution to the economic problem, the Eurozone said, is people are living too well. We have to cut their living standards by 5, 10, 20% so that all the money goes to the wealth creators, namely the financial sector.
This plan is evil. It is the libertarian, Austrian economic plan that underlay the Eurozone from the beginning. The result is what you have in Greece, where the unemployment rate is near 30%. 
Again, this has little to do with reality. Austrians (when they suggest policy), and libertarians, are against squeezing citizens to pay government debt owned by banksters. They hail default of such government debt.

Lew Rockwell, founder of the current cornerstone of Austrian school thinking, the Ludwig von Mises Institute,  has said:
Default is a wonderful thing. The people who are going to have to pay for these debts are not the ones who contracted for them. They shouldn’t have to pay. And another great thing that happens when Greece defaults: nobody’s going to lend the government any more money. That is exactly what Greece needs. They need a government that would shrink, so the people can be enlarged in their role…
Bottom line: It is one thing to be captured by the mass hypnosis of Keynes. It is prevalent in much of economics but to call Austrians fascist and to think they support the squeezing of citizens to bailout banksters is beyond even Keynesian confusion.

Robert Wenzel is Editor & Publisher of


  1. We should cut the guy some slack. I can see how easy it is to confuse central planning in Europe with libertarianism. I trip up over this daily.

  2. I've been studying the MMTers since 2011. They think of the Eurozone as like the horrible libertarian "gold standard" because each individual country lacks the ability to inflate away its debt. The horror.

    Former Reaganaut, the quite confused Paul Craig Roberts, loves Hudson.

    Readers ask me how they can learn economics, what books to read, what university economics departments to trust. I receive so many requests that it is impossible to reply individually. Here is my answer. There is only one way to learn economics, and that is to read Michael Hudson’s books.

    1. That's just messed up. I like how his quite-statist mindset sets it up as a dichotomy on how gun-enforced coercion (by the state) should be learned:

      "An economic rent is unearned income that accrues to an owner from an increase in value that he did nothing to produce. For example, a new road is built at public expense that opens land to development and raises its value, or a transportation system is constructed in a city that raises the value of nearby properties. These increases in values are economic rents. Classical economists would tax away the increase in values in order to pay for the road or transportation system."

      Yea, he did nothing to earn that value because the "public" paid for the road ...

      I am aware that others find a lot of value in his writings, but that linked piece above is just too much.

      "Since the financial collapse caused by the repeal of Glass-Steagall and by financial deregulation, the Federal Reserve has robbed tens of millions of American savers by driving real interest rates down to zero for the sole purpose of saving the “banks too big to fail” that financial deregulation created. ........ In effect, unleashed Capitalism has destroyed America."