In the final analysis, what the Austrians offer past anti-war, anti-government hollow sloganeering is nothing more than the free market religion, couched in platitudes like “sound money” and “liberty”. When we have companies like Google with more cash reserves than sovereign nations such as Venezuela for example, when the annual profits of companies like Apple are sufficient to pay the entire debt of Cyprus in one fell swoop, when the total revenues of US corporations could zero our entire national debt in about 7 months of income, apparently none of this gives rise to any concern as to something being wrong with the free market calculus.
For the first time in our nation’s history, transnational companies are now de facto nation states, at least in terms of economic power- and now actively expanding into military power. We see congruence between the growing surveillance state, military operations, loss of personal liberties, and the profit motives and the interests of transnational corporation. The Austrians do not see a connection? Further they propose that what is needed is MORE free market deregulation and abolishment of any vestiges of dysfunctional government remaining that might bring into check such unmitigated economic and social power?
Sure, it’s fair to say the Keynesians are wrong- so what. More appropriately, what you can also say is the Austrians are wrong too, but they are substantially more wrong than the Keynesians. The Rothbard/Austrian predicted hyperinflation did not happen. And is not going to happen. Simply put, the dollar is the least wrinkled shirt in the hamper, a result that should have been very easy to predict.
Schumpeter and Hayek made some admirable advances to the theory of business cycles in the ‘30’s, notably with the concept of “creative destruction” advanced by Schumpeter. Not much has happened since then in Austrian thinking of any consequence. In fact, modern Austrian think tanks such as the Cato Institute are co-opted, owned lock, stock and barrel by the Koch Brothers-nullifying any semblance of non-partisan claims. “Creative destruction” however, has been embedded into free market thought as the answer to all questions, no matter the circumstance, you simply let the market self correct dangerous anomalies (which of course were created by government intervention in the first place<sarc>) and prohibit outside intervention of any kind, and voila, any conceivable market based problem is instantly solved by the invisible hand of Adam Smith.
In a major intellectual blunder (one of many it turns out), Austrians fail to acknowledge that not all capitalist destruction is “creative”. In fact, in contemporary times, not much of it is. There is a profound difference between companies going out for business because of their inability to remain competitive (which I support), through technology or otherwise (think of Kodak as an example) and the type of dangerous and damaging capitalist destruction of the kind that Minsky introduced with his theory of financial instability. Financial instruments can and are regularly created that have destructive repercussions that affect market non-participants. Further, these capitalist instruments are created solely by free market actors without government influence. Think $600 trillion derivatives as an example. The destruction that these instruments can create, impacts even people with no involvement in financial markets.
Individuals and corporations pursuing their own profits, en masse , regardless of societal impact in an environment of wholesale declining profit margins sets up a violation of normative social justice that cannot be reconciled by Austrian thinking. In short, these unregulated free market solutions in fact result in fewer freedoms, less liberty, and ultimately totalitarian, repressive nation/states governed by corporations.
As an example, in the current NSA security state scandal “free market” contractor Booze Allen pulls down a hefty $5.8 billion in annual revenue, much of it selling security and surveillance services. And not just to the US government. As reported in today’s NY Times, Booze Allen has sold to United Arab Emigrates in effect a replication of the entire NSA security apparatus, replete with spy software and everything one might want to create a surveillance state. There are hundreds of firms like Booze Allen, all creating free market “products” and services that satiate the demand from not just governments, but from corporations or anyone that wishes to “maintain security”, now a euphemism for exportable totalitarian police states.
As to an argument that the government instigates these software based arms wars, consider the intrinsic signature element of the coercive laws of competition, e.g. if a free market actor creates a surveillance state product of it’s own accord, on speculation, (quite common it turns out) if it is effective, and the US government declines to buy it, some other government (or corporation) may then step in, placing the US at a disadvantage. So they are then coerced into buying it to maintain parity, and the downward spiral continues. We saw this phenomenon with the nuclear arms race, and in fact international regulation was necessary -exactly the opposite tact than the free market advocates prescribe.
Both Keynesian and Austrian economics are based on bogus neoclassical economic theories tracing back to such elementary errors as belief in theory of marginal utility, theory of the rational consumer, and price/preference curves scaling from micro to macro- which they don’t. This is like studying astrophysics and discovering the associative theorem you learned in 5th grade algebra was wrong. The whole house of cards collapses. Any conclusions the Austrians draw from their supposed understanding of economics as applied to capitalism is flawed at first principles.
If you don’t understand the intrinsic instabilities in a capitalist free market economy of course you don’t need (or want) government regulation. If you do not understand the role debt plays in supplying the growth imperative in capitalism of course you don’t need a Federal Reserve Bank. If you do not recognize that the fiat dollar was created explicitly to support and advance free market capitalism, in fact specifically designed, tested, and optimized for this express purpose, than of course you advocate “sound money”. And debt, why, who needs that either? This is like walking into a room full of aerospace engineers and upbraiding them for designing wings that allow heaver than air flight- what knuckleheads, who ever heard of gravity?
In the end, the Austrians will be (and currently are being) sent back to back the conspiracy theory peanut galleries, of mumbling, dust bowl era edentulous farmers, talking to themselves, cussing and swearing at the gubymint. Just like in the ’30’s when Hayek and company were sent packing into the bush leagues by the likes of Sraffa and Keynes, banished from economics and forced into political philosophy where there is less need for the “maths”. In the meantime the Koch bothers just keep smiling.
So it's always a non-starter. Can we have it both ways, unlimited individual liberty/free market for an ever increasing population AND limited resources?