Letter to the Editor

BY DI READERS | MAY 09, 2011 7:20 AM

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Limited gov’t, financial growth connection is tenuous at best

Does The Daily Iowan really have to publish every press release submitted by employees of the Public Interest Institute, Mount Pleasant’s small-government and free-market think tank? The evidence-free ramblings of John Hendrickson, in particular — seen most recently in his May 5 column (“The need for economy in government”) — add nothing of value to the debate over the role of government in the economy.

For someone with an M.A. in history, Hendrickson demonstrates a remarkable lack of interest in historical evidence. To take just one example, consider his claim that “Historically, following limited-government policies that promote economic growth leads to periods of economic prosperity, as the 1920s (and the 1980s under President Ronald Reagan) demonstrate.”

This rosy picture is undermined by the historical evidence. For one thing, both periods were also marked by a depression in the agricultural sector, increased personal and corporate debt, and increased dependence on financial speculation rather than productive investment as the main engine of economic growth. The recovery of the 1980s was also fueled in part by a massive increase in governmental deficit spending in the form of military Keynesianism, not the “limited-government policies” that Hendrickson would have us believe occurred under Reagan.

Another key point somehow overlooked by Hendrickson is that both periods ended badly — the 1929 stock market crash and ensuing Depression in one case and the 1987 stock market crash and S&L crisis of the late 1980s in the other. In both cases, society would have benefited from more, rather than less, governmental regulation of the financial markets, a lesson we as a nation still have not fully learned. Yet in Hendrickson’s consequence-free world, the deregulated 1920s and 1980s were periods to emulate. Based on the actual lessons of history, I can only hope his vision of society doesn’t come to pass.

Richard Carlson
UI staff

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