Written by Thomas Magstadt   

The libertarian ideal of a free market operating without state intervention or regulation is one of the most pernicious, pervasive, and persistent myths in contemporary American politics. And while libertarians have, oddly enough, utterly failed at launching a viable political party they have in a sense won a bigger prize.

Today even in the aftermath of the wild-assed, credit-crazed, derivative-driven, deliriously leveraged bubble economy that finally triggered the financial meltdown in 2008 – even after the near-collapse of the global economy and the Great Recession that followed (and still lingers), few Republican leaders dare to say a kind word about the need for state regulation or tax reform, and Democrats too often concede in practice what they dare not renounce in principle. In fact, there is not country in the world, never has been and never will be, where the economy operates in a political-administrative or legal vacuum. Which is to say, there is no such thing as a free market or a pure market economy.

Nothing even close. And while it's true that the state plays a smaller role in some economies than in others, the United States is in no sense exemplary except by one measure: hypocrisy.

For proof, we can turn to no less an authority than Niall Ferguson, a self-confessed true believer in Adam Smith's "invisible hand". Ferguson is a distinguished British historian whom I have long considered a) overrated; b) arrogant; and c) way more convinced than convincing when he waxes eloquent about current history, the West, and the miracle of the marketplace.

Until now.

Ferguson has just published a trenchant piece which appears to fly in the face of his own classical liberal worldview ("We're All State Capitalists Now," Foreign Policy, February 9, 2012).* He poses "a simple question that can be answered with empirical data: Where in the world is the role of the state greatest in economic life, and where is it smallest?"

His answer is more revealing than Dolly Parton's bikini. And one of the things it reveals is the hypocrisy of the Republican right, above all, the crown prince of creative destruction, Mitt Romney.

Romney and his ilk would have us believe that America is the shining city on a hill of Ronald Reagan's fantasies, and that Barack Obama wants to transform the country into a socialist dystopia – like the image of Europe he conjures, a Europe that doesn't really exist but fits into the fairytale that forms the scaffolding for the Great Republican Hypocrisy.

Ferguson:

"[In Communist] China…spending represents 23 percent of GDP, down from around 28 percent three decades ago. By this measure, China ranks 147th out of 183 countries for which data are available. Germany ranks 24th, with government spending accounting for 48 percent of GDP. The United States, meanwhile, is 44th with 44 percent of GDP. By this measure, state capitalism is a European, not an Asian, phenomenon: Austria, Belgium, Denmark, Finland, France, Greece, Hungary, Italy, the Netherlands, Portugal, and Sweden all have higher government spending relative to GDP than Germany. The Danish figure is 58 percent, more than twice that of the Chinese."

Ferguson presents a table comparing countries against 15 rule-of-law indicators. The table displays the results of a World Economic Forum (WEF) Executive Opinion Survey in 2011-2012. Here's what Ferguson gleans from the data:

"It is an astonishing yet scarcely acknowledged fact that on no fewer than 14 out of 15 issues relating to property rights and governance, the United States now fares markedly worse than Hong Kong. Even mainland China does better in two areas. Indeed, the United States makes the global top 20 in only one: investor protection, where it is tied for fifth. On every other count, its reputation is shockingly bad."

Shockingly bad, the man says.

Ferguson's conclusion:

"The real contest of our time is not between a state-capitalist China and a market-capitalist America, with Europe somewhere in the middle. It is a contest that goes on within all three regions as we all struggle to strike the right balance between the economic institutions that generate wealth and the political institutions that regulate and redistribute it."

Just so, I say.

Now for the hypocrisy – of Romney, not Ferguson. There's no better or more time-honored method of concealing crime, corruption, and all manner of misconduct than to say somebody else is doing it – underlings, rivals, opponents. That's precisely what Romney and Republican leaders in Congress are doing.

Rather than admit the truth – that the biggest recipients of state aid (what they call "welfare") in America are its richest citizens and corporations; that the redistribution of income in America in the past three decades has shifted wealth from the middle class to the super rich, leaving American society looking more like Venezuela than Sweden; and that one reason for this historic shift is a tax system that allows – nay, invites – the 1% to pay taxes at a rate far below the maximum and far below that of most middle-class taxpayers earning a tiny fraction as much.

It's a Machiavellian trick using misdirection and red herrings to camouflage the truth about the real America, especially about the economy – how it works, who or what is to blame when it isn't working, and why so many people in this country are out of work. Dishonesty is the real epidemic that is destroying the American economy. If we cannot be honest with ourselves and each other, cannot face the facts or embrace the truth, we are doomed.


*http://www.foreignpolicy.com/articles/2012/02/09/we_re_all_state_capitalists_now?page=0,2