- New Thinking in Political Economy series
Chapter 8: The Free Market and the Interventionist State: The Political Economy of Public Policy
CHAPTER 8 9/4/03 1:21 PM Page 1 8. The free market and the interventionist state: the political economy of public policy In 1926, Austrian economist Ludwig von Mises visited the United States on a lecture tour. Upon his return to Austria, he delivered a talk on ‘Changes in American Economic Policy’ at a meeting of the Vienna Industrial Club. He explained: The United States has become great and rich under the power of an economic system that has set no limits on the free pursuit of the individual, and has thereby made room for the development of the country’s productive power. America’s unprecedented economic prosperity is not the result of the richness of the American land, but rather of the economic policy that understood how best to take advantage of the opportunities that the land offers. American economic policy has always rejected - and still rejects today - any protection for inferiority and uncompetitiveness over efficiency and competitiveness. The success of this policy has been so great that one would believe the Americans would never change it.1 But Mises went on to tell his Viennese audience that new voices were being heard in America, voices that claimed that America’s economic system was not ‘rational’ enough, that it was not democratic enough, because the voters did not have it in their immediate power to influence the direction of industrial development. Governmental controls were being introduced, not to nationalize private enterprise, but to direct it though various regulatory methods. In comparison...
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