essays and articles by david g allen


Grants, Central Planning No Cure For Economic Woes

 

If you suffer from the delusion that central planning and grants are the recipes for economic development, then do as you have done in the past and ignore the following sentiments.

The statesman who should attempt to direct private people in what manner they ought to employ their capitals, would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted to no council and senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it.

ADAM SMITH

Friedrich Hayek chose Adam Smith’s words to introduce "Planning and Democracy", the fifth chapter of his 1944 book, The Road to Serfdom. Hayek won the Nobel Prize in Economics in 1974, a long overdue recognition of his philosophy.

I first read The Road to Serfdom in 1970 while majoring in Economics. Hayek’s treatise was offered as the opposing argument when Congress broadened the Hill-Burton Act to make direct loans and loan subsidies for hospital construction. At that time, the new sutures being sewn by Hill-Burton’s surgeons were so tight that they brought screams of agony from the medical industry.

My, how times have changed.

The Road to Serfdom accurately tells us why West Virginia’s economy has foundered. Ours is an economy that is anchored by central planning. So well anchored, in fact, that even a rising tide cannot raise our boat. And as Hayek predicted in detail, central planners keep making the problems worse. Yes, it is all there—the ailment and the cure—all written in one book should anyone care to read it.

Lech Walesa did. (He borrowed Margaret Thatcher’s copy.) Thus, a question: If a Polish trade unionist can see the writing on the wall, then why can’t West Virginians?

This state’s modern problems began fifty years ago when the ‘pop tax’ was levied to build WVU’s hospital. A noble social cause is the pavement on the road to serfdom and the paltry, dedicated tax paints the white lines. Sad to say, but the original hospital, its annual budget controlled by state government, closed after some 25 years of operation. Furnace vents blew soot into the operating rooms and patient staph infections had become commonplace.

The pop tax, however, lives on. As does the Staff infection it engendered!

Even with this clear example of failure, the state has marched on, redoubling its efforts in central planning. And as we fast-forward to today, we learn that fixing the Capitol’s roof leaks has been anointed as an economic development project and worthy of a grant. Another noble social cause, this gold-plated monument is. And what better tax to dedicate than the one that a paltry bettor voluntarily pays?

Government management cannot even budget roof repairs out of current revenue. In the long term, we owe $4 billion to the pension plan. The Comp debt, by law a debt of employers, but in reality a social welfare program, still mushrooms, perhaps at a slower rate now that "reforms have been enacted." Yet the state wants to grow its other insurance business. And enlarge Tamarack, build a ballpark, and so on.

There will be more icebergs beyond the horizon. A clipper ship in full sail could navigate the coming ice floe. But what chance does an anchored boat have?

Which brings me to this. Whether West Virginia borrows the money or levies new taxes to pay its considerable debts, more aptly classified as the costs of central planning, the result will be the same. See Chapter 16, "Conclusion." Yes, The Road to Serfdom does have an ending.

The 20th Century will be recalled as the battleground of economic theories. The East opted for Marx. The West opted for Keynes. In the end, it was Hayek who triumphed, for he understood that central planning always fails.

David G. Allen, Clarksburg, WV

This article originally appeared in the July 18, 2003 edition of the West Virginia State Journal.  "Grants, Central Planning No Cure for Economic Woes" is part 1 of a continuing series based on The Road to Serfdom by F. A. Hayek (1944).

 

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Copyright 1990-2005  David G. Allen