200 years of economics history in one editorial, which explains how we got into our current mess

(Cross-post from my other blog, Outrun Change.)

World War I generated most of the horrible disasters we’ve seen in the last 100 years.

With the possible exception of the decline of the Roman Empire, World War I was the greatest disaster in human history.

It contributed mightily to the Great Depression, which fed the Nazi revolution. That in turn led to WWII.

The war unleashed the totalitarian ideologies of communism, fascism and Naziism, which very nearly destroyed Western civilization. Their poisonous legacy lives on in radical Islamic extremism.

That is a brief summary connecting several dots of the last 100 years, from a column by Steve Forbes in Forbes magazine, Why Uncle Sam Became an Anti-Freedom Monster. In about 1,000 words, the article provides a great view of the last 200 years from the 30,000 foot level.

The 100 years or so before WWI produced an astounding increase in economic production, innovation, wealth, longevity, and standards of living. I’ve been looking at the economic expansion during the last half of the 19th century and have been amazed at the rapid growth in all areas.

That economic expansion was generated by innovation in the private sector allowed because of high levels of freedom and very favorable assistance from the government of England. That assistance included government restraint and high respect for property rights.

The article highlights that the devastation of the Great War destroyed people’s confidence in unbroken progress and, even worse for us floundering in the current economy, removed all restraints on the economic & coercive power of governments.

Instead, what Mr. Forbes calls the neomerchantilists took over:

The Depression broke away any remaining restraints, as Keynes and others successfully propagated a new mercantilism–a medieval ideology that had governments playing a suffocating role, regulating economic life in the name of increasing a nation’s wealth.

The neomerchantilists take it as a matter of faith that they can precisely and simultaneously control interest rates, inflation, GDP growth, and the level of unemployment merely by fine-tuning the levers of government power.

The disasters produced by that near-nonstop concentration of power in the government are the topics for further discussion.

Mr. Forbes has laid out the high-altitude view of how we got into this mess. For a fast tour of 200 years in the economics world, check out the full article.