In the course of discussion about the pros and cons of free enterprise, the subject inevitably seems to turn to the business cycle. Capitalism’s critics—and there are many—waste no time in decrying the alleged “instability” of the free economy, a system that they claim allows a few to garner great fortunes while leaving the masses to lurch from semi-poverty in good times to squalor in depressions.
Notes a business columnist of a major U.S. newspaper:
Unbridled supply-and-demand ideas led to great wealth, but also great poverty, in the late 1800s and early 1900s. There were also periods of great economic boom and bust, of which the Great Depression is the best example. The Western nations grew tired of waiting for supply and demand to work everything out, and along came Mr. Keynes and his ideas for them to grasp.
At this writing, the United States is suffering from its eighth recession since World War II, an economic phenomenon that is again leading persons to question the qualities of capitalism. Politicians, believing the nation can be taxed into prosperity, claim it is once again time for the government to “take over” the reins of the economy. As an influential U.S. economist has written:
We need an increased degree of government selection of priorities, channeling of funds in the direction of those priorities and a recognition of a need for some kind of planning by the federal government. Even some members of the corporate community now say that free markets, such as they are in the United States, are not doing the job.
Economists, journalists, intellectuals and politicians seem to agree that the free economy is indeed the source of boom and bust, of recession and depression. If the economy is left without the guiding hand of state direction, they believe, the forces of supply and demand will eventually self-destruct, leaving a wreckage of vanished fortunes and massive unemployment. And should the economy go into recession, they say, the central government should immediately launch programs of transfer payments, public works and business bailouts to stem the tide of the slump.
Liberals are not the only persons to advocate such centralized measures for dealing with economic downturns. Conservative economists all too often accept the business cycle as an inevitable price of capitalism’s success and look to the state as a source for minimizing the trauma caused by recession. The public understanding seems to be that the business cycle, in a capitalistic economy, is simply a fact of life that cannot be any more avoided than winter in New Hampshire. Discussion of the business cycle, then, centers not on preventing it, but, rather, as Keynes suggested, on using government monetary and fiscal policy to allow for a smooth transition from one end of the cycle to the other.
The Great Depression
When the causes of business cycles are discussed, the subject is usually what caused the Great Depression from 1929 to 1941 (although diehard believers in Franklin D. Roosevelt insist the depression ended in 1933 with FDR’s ascension to the Presidency). Yet, the Great Depression had similar characteristics to the so-called panics or crises that had occurred in the United States and abroad in the previous century: a period of boom—accompanied by inflation—then a sudden and violent bust with prices and wages dropping quickly and banks and other businesses going belly-up.
Because the boom-and-bust periods in American history have had such similar features, it would seem best to study the general causes of those economic phenomena rather than to concentrate on only the Great Depression. However, since it took far longer for the U.S. economy to work its way out of the slump in the 1930s than it had in previous bad times, this essay will also look at what set the Great Depression apart from its predecessors, along with examining the business cycle since World War II.
In examining the stated causes of the business cycle, one finds two explanations that stand out. The first is the traditional one—which includes socialist and Marxist variations—and the second is the Austrian Malinvestment Theory. There is also a third explanation, one that deals with the so-called “instability” of capitalism, that will also be examined.
American history textbooks are rife with explanations of 19th-Century recessions that center on “overexpansion” of the railroads or troubles on the farm. The idea, of course, is that a recession begins within a certain sector of the economy and snowballs into other areas, pulling them down as well.
In the industrial society, because of the unusual acceleration which takes place in durable goods, the results of individual freedom are more complicated and far reaching (italics mine). Assume that each year twenty million men’s coats are sold, produced by 210,000 machines, each of which can make only 100 coats a year . . . with a ten percent increase in the sale of coats, there is a one hundred percent increase that year in the machines needed . . . When the demand for a product drops, however, the snowballing effect begins . . . he lays off his workers, whose own buying power is now greatly reduced, thus affecting other businesses . . . and the downward cycle is accelerated.
While the above explanation of the business cycle may seem viable to publishers of history books, it, in reality, is wracked by fallacies, the first being the informal fallacy of converse accident or hasty generalization. The author assumes that because one particular industry goes bust, all the other industries will topple as well, a sort of business domino theory. However, the demise of one industry may only be signaling the rise of another. For example, to use the coats again, should there be a lessening of demand for a certain brand of coats, the change in consumer taste may be only because another brand of coats is less expensive or more attractive. Or, perhaps, the entire coat industry in an area has lost its market because the surrounding temperatures have permanently risen 30 degrees, which might mean a subsequent boom in the sun dress and bathing suit industries.
The Fallacy of Composition
Whatever the reason for the demise of one industry, there is nothing in economics that suggests that the general economy will collapse because one sector loses its appeal to consumers. As economist Lawrence Reed has pointed out, to hold that what might be true for one individual is also true for all others is to commit the fallacy of composition. For example, lobbyists in the home building industry recently persuaded Congress to approve a $3 billion housing bail-out bill to prop up that recession-torn sector for another year (fortunately, President Reagan vetoed the bill). Construction lobbyists and their supporters argued that the general economy was sick because the housing market was slow, and, therefore, a general recovery could only be precipitated by giving an artificial boost, via inflation, to housing. Again, we were presented with the fallacies of converse accident and composition, this time in reverse.
The traditional explanations to the business cycle are more endemic in economic circles, with socialist and Marxist theories, it seems, being drawn from this area of thought. These arguments center around the idea that downturns in the business cycle result from a shortage of money. In pre-capitalist times, as Henry Hazlitt writes, “Whenever business was bad, the average merchant had two explanations at hand: the evil was caused by a scarcity of money’ and by general overproduction.”
This argument has since been refined by socialist and liberal critics of the marketplace, and, indeed, has become the standard fare when explanations for the business cycle are sought. In examining this argument, it is necessary to study not only the ideas of theorists in pre-capitalist times (and the disastrous results of their “solutions”), but also the socialist and Marxist notions and why they are fallacious.
Economic historians are all too aware of the problems of the French economy during the early years of the French Revolution. In 1789, business was slow. Merchants and politicians in the National Assembly demanded that the government solve the nation’s fiscal problems (which were due to a top-heavy government debt). In seeking a solution that fit with the economic thought of the times, the French Government floated massive amounts of paper money to give its citizens “purchasing power.” What resulted from this action, of course, was a wild hyperinflation that destroyed the French economy, helped bring about the famous “Reign of Terror” and ultimately led to the dictatorship of Napoleon. The French leaders in 1789—as well as most government officials since then—assumed the fallacy that money is wealth, a notion that was exploded by Adam Smith in The Wealth of Nations when he pointed out that wealth comes not from money but rather from the increase of desirable goods and services.
The Labor Theory
Socialists, beginning with Karl Rodbertus and Karl Marx in the mid-Nineteenth Century, have built many of their anti-capitalist arguments upon the fallacy of money being wealth. For example, in his famous Overproduction and Crisis, Rodbertus declared that production was solely for profit and that all production was simply a result of the efforts of labor or the workers.
This standard socialist doctrine, when joined with his beliefs on diminishing wage share, led him to a theory of crises. All wealth being a product of labor, the laborer with his declining wage share was unable to buy back the products he produced. Markets would be flooded with goods which would bring falling prices and unemployment and, finally, precipitate an economic crisis. To relieve the situation, Rodbertus proposed that the state take over.
This general crisis that Rodbertus predicted was the same sort of crisis Marx predicted for the advanced capitalistic West; he emphatically believed that, as production of goods and services increased, the profits of the “capitalists” would increase, wages would fall and the laborer would be unable to purchase those products that he had created with his own labor. Such would be the crisis that would ultimately lead to the workers revolting against their “masters” and leading the western world to communism.
The influence of Rodbertus and Marx is still felt strongly today, especially when leading writers and intellectuals explain their pet causes for the Great Depression. Declares Michael Harrington, who heads the Democratic Socialist Organizing Committee:
The Great Depression discredited Say’s Law (which, in short, declares that supply creates its own demand). During much of the 1930s, there was a glut of consumer goods because workers lacked the purchasing power [i.e., money] to buy back what they produced. That was why government began to play a role in the economy on behalf of middle-and-low income people during the period of Franklin Delano Roosevelt’s New Deal.”
Says Time magazine:
Economists debate to this day about what caused the Great Depression. A prevailing view, persuasively argued by John Kenneth Galbraith, is that the technological increases in productivity throughout the 1920s (up 43% per factory man-hour) were not matched by increases in wages and thus in the public’s capacity to consume (factory pay rose less than 20%). The collapse of the overinflated stock market therefore started a downward spiral in both demand and ability to pay. Conservative economists like Milton Friedman, on the other hand, blame the Federal Reserve System for failing to expand the money supply sufficiently in the wake of the stock market crash.
Friedman vs. Galbraith
Although Milton Friedman and John Kenneth Galbraith lead schools of economic opinion that vastly differ with each other, one cannot help but note at least some similarity between the two men’s reasons for the coming of the Great Depression. Galbraith believes—as do most modern historians and intellectuals—that Ricardo and especially Rodbertus were correct: production growth outstripped wages, which meant the laborers’ wealth diminished while the capitalists’ or owners’ profits increased. Or, to put it in more familiar terms, the rich got richer and the poor got poorer. To rephrase Harrington, the workers were drained of purchasing power, which was siphoned off by their bosses.
While Friedman certainly is no advocate of the above theories, his explanation of the Great Depression ultimately implies that the Federal Reserve System did not inflate enough (i.e., put “purchasing power” into the economy) from 1929 to 1933. So, viewing the causes of the Great Depression from the angle of the major schools of economic history, it can be said that the economic downturn happened because the printing presses of the federal government did not turn fast enough to enable people to hold enough “money” in their hands to “buy back” enough of the products that they had created.
Of course, Galbraith and Harrington—unlike Friedman—have argued that in addition to inflating, it is the duty of government also to heavily tax those in upper income brackets and give the revenues to those in lower brackets to insure that people “on the bottom” would have enough “purchasing power” to consume, thus avoiding “a glut of consumer goods.”
Implied in the traditional and socialist interpretations of the business cycle, of course, are the notions of overproduction and underconsumption, fallacies that have remained with us to the present time. But whatever the line of interpretation, be it lack of “purchasing power,” overproduction or underconsumption, the theories still abound with fallacies and false assumptions of the economic system.
“Money Is Wealth”
The first fallacy, as I have already stated, is that money is wealth. When Galbraith and Harrington dolefully observe the rate of production outstripping the growth of money wages, they have immediately jumped to the conclusion that buying power has diminished. Nothing could be farther from the truth. Such a view suggests that wealth causes poverty, or, in other words, a society becomes poorer as it produces more wealth.
The vast increase in production in the 1920s—and, indeed, through most of the industrial age in our nation’s history—served to bring down prices as goods and services became more abundant and thereby more accessible to the masses. For example, the automobile, once a plaything available only to wealthy Americans, became a staple in households with the advent of mass production. In the past decade, we have seen electronic marvels such as the pocket calculator evolve from extremely expensive but inefficient solvers of mathematics problems to the $10 models that are far superior to their predecessors (and this improvement in quality and decrease in price has come in the face of the galloping inflation of the past 10 years).
The socialist viewpoint fails to recognize that wealth is a variable of production of goods and services, not of production of money. Any government on the earth can quickly crank out a vast increase in the supply of its designated means of exchange (provided that means is paper money or base-metal coins, not valuable commodities) and many governments, including our own, have done just that. But the sad lesson is, though few politicians and intellectuals have realized it, that inflation does not bring increased wealth, but rather chaos and, in the end, more poverty.
Burdening the Poor
Another important criticism of the socialist notion that the increase in production “makes the rich richer and the poor poorer” is that history has shown this view to be utterly false. Even one historian whose text is laced with anti-free market rhetoric concedes that standards of living for ordinary workers rose during the 19th Century, the time when Rodbertus was claiming that the opposite was true.
In order for the socialist argument to be true, the lot of the average person today would have to be far worse than the lot of the average worker before the Industrial Revolution When most people spent about 90 per cent of their income on food. Even the claims of Galbraith and Harrington of the deterioration of purchasing power during the 1920s are based on the false assumption that the lot of the average person worsened during that decade.
Yet, as historians admit, the lot of the common worker rose dramatically during the 1920s. When President Herbert Hoover in his innauguration speech of 1929 trumpeted to the world that the “eradication of poverty” in the United States was in sight, few persons saw fit to disagree with him. In fact, the other pre-1929 depressions in the United States usually followed periods of increases in the standard of living for most people. There is simply no historical evidence that shows that Americans have become gradually poorer since the beginning of the Industrial Revolution. The socialist claim that capitalism enriches the few at the expense of the many simply has no logical base.
There is, however, some truth to the idea of overproduction and underconsumption in times of recession. After all, many businesses in the late 1920s did expand greatly, only to find no markets for their goods. There was an abundance of farm products in the early years of the Great Depression that, for some reason, could not be sold. As one political cartoonist noted in a sketch, there was “too much oil, too much wheat and too much poverty.”
It does no good, however, to only state the conditions. One must investigate the causes of such a calamity. There was a reason why wheat in America’s heartland was in abundance but families went hungry. There was a reason that factory inventories were choked with goods that no one seemed able to buy. To simply claim that farmers grew too much wheat or factories produced too many widgets and those actions brought about the Great Depression or any other depression is to commit the fallacy of false cause. Most economic historians, however, have done just that. They have seen the results of the problem and have concluded the results were in reality the cause.
Periods of Boom and Bust Preceded by Inflation
If we are to solve the riddle of the business cycle, it is necessary to first look for common characteristics of the periods of boom and bust. And, as pointed out earlier in this paper, inflation seems to have been present in most of the boom periods. For example, in the years after Andrew Jackson killed the Bank of the United States and before he issued his famous Specie Circular in 1836, irresponsible state-chartered banks created vast amounts of paper money, much of which went to speculation on public lands, finding its way ultimately into the Federal treasury. As the supply of partially-backed money increased, Jackson became alarmed and ordered that public lands be paid for in silver and gold rather than paper. As noteholders rushed to convert their paper into specie, many banks, unable to meet any sort of reserve requirement, went under. In 1837, a panic began which brought hardships to many Americans and guaranteed President Martin Van Buren only one term of office.
In the violent but short-lived Panic of 1893, one finds the roots in the Sherman Silver Purchase Act of 1890 which required the U.S. Treasury to purchase overvalued silver with gold certificates, thus creating a run on the treasury’s gold reserves. The resulting monetary crisis forced President Grover Cleveland to call a special session of Congress in 1893 to repeal the Sherman Act, thus halting the silver inflation. A deep recession began that year, an event that led to Coxey’s Army (which wanted the federal government to print money to pay for public works programs, a plan Cleveland wisely refused) and the 1896 free-silver Presidential candidate William Jennings Bryan.
During depression periods, businesses held goods they could not sell, farmers had crops, that despite low prices, no one could seem to afford. People lost their jobs; wage earners could not support their families; businesses could not expand despite the availability of cheap materials and cheap labor.
At this point one might ask: Was there any correlation between the monetary problems in the boom-bust periods and the business down-turns? Were these phenomena related or was their simultaneous appearance just coincidence?
There are other questions to be answered as well. The overexpansion of one business or even a few businesses has an easy explanation: investors and entrepreneurs do misinterpret the market at times. For example, when the World’s Fair recently was held in nearby Knoxville, many entrepreneurs invested in campsites, mobile homes and quickly-built motels, hoping to cash in on the expected horde of tourists. However, the flow of fair visitors, though heavy, did not fall into the preconceived patterns of some investors, which means, in the vernacular, they took a bath. There were other investors, however, who accurately read the coming markets and, indeed, did strike their fortunes.
But to take the specific, that is, the probability that some investors will misread the market, and place it in the general, or that most investors will misread the market at the same time—under normal business conditions—is to commit fallacies of converse accident and composition. What is true for one person may not be true for everyone; to assume otherwise is fallacious, but that is precisely what most economic historians have done.
Why the Cluster of Errors?
Yet, as one can tell by the unsold bumper crops, the glut of goods and the dashed plans of expansion that have characterized the down-side of the business cycle, those who look upon overproduction or underconsumption as the prime causes seem to be right. But, we must ask, why the cluster of errors? Why did so many investors and producers commit the same general errors at the same time, especially during the late 1920s? Few economists have sought to answer that question. Liberal historians blame the disastrous stock market speculation and subsequent crash on the Coolidge-Mellon tax cuts, which slashed the top rates from 63 per cent to 24 per cent, claiming that the rich had too much money with which to speculate (which implies, of course, that government officials spend other peoples’ money more wisely than the people spend their own funds).
But tax cuts or low tax rates had never been responsible for faulty speculation or malinvestment before 1929, which makes it difficult to believe that investors, from the very wealthy to lower-class savers, had suddenly in concert thrown much of their hard-earned money into a bottomless pit. All of which leads back to the original question: Why the cluster of errors?
The answer can be given in one word: inflation. But to understand why inflation has been responsible for misleading large numbers of investors and producers at the same time, one must first comprehend the role of saving and spending in the economy.
Concerning the Role of Saving and Investment
As classical economists since Adam Smith have pointed out, the creation of wealth originates with capita], which is a product of entrepreneurial perception and action financed by savings. The basis for the productive economy—despite what politicians, journalists and liberal economists tell us—is not spending but rather saving. Consumer spending acting in concert with a free, unhampered price system serves as a guide or a rudder to the economic process. Consumers, by voting with their dollars, decide which investors are to be winners and which will lose. Spending does not create wealth; it only decides what, in the final analysis, will be considered to be wealth and what will not.
It seems logical, then, that the greater a community’s or nation’s pool of savings, the more opportunities to create wealth exist. But what happens when government, by injecting credit into the market via the purchase of government debt and a blip on a computer, expands the available pool of money beyond what has been saved by individuals? Free market economist Hans F. Sennholz clearly spells out the results:
The creation of credit by monetary authorities causes interest rates in the loan market to fall below the natural rate of interest. This natural rate, or unhampered market rate, reflects the people’s choices as to spending and saving, and is responsible for the relative proportions • of production for the present and the future, that is, consumers’ goods and producers’ goods. A rising rate of saving, for instance, causes producers’ goods industries to expand as more economic resources become available for expansion and modernization. If, without such new savings, monetary authorities arbitrarily expand credit, interest rates tend to fall, which then misleads business men to invest more funds in the capital goods industries (italics mine). Thus misled by artificially lower interest rates, they embark upon countless expansion projects that are unsupported by genuine savings. They engage in business activity that causes maladjustments and distortions.
In other words, inflation misleads investors who mistake fiat rates of interest as being real or genuine rates. However, as numerous adherents to the “New Economics” have held, why can’t the Federal monetary authorities continue their creation of new credit indefinitely, thus giving the economy a permanent boost?
The answer lies in the nature of inflation itself. Inflation is, as aptly said by Friedrich von Hayek, a “tiger by the tail.” Continued doses of inflation to stimulate an economy soon take on a life of their own. As the amounts of fiat money are injected into the economic mainstream, prices rise—despite efforts of government officials to control them with price controls—profit margins diminish, lending authorities are forced to raise real levels of interest, thus forcing a slowdown of business activity, and the market processes continually become more and more distorted. And, as the inflation continues to drive prices beyond the reach of more and more citizens, a public outcry grows from a frightened people who demand an immediate end to the calamity.
The Rate of Saving Declines
During the inflationary’ period, another sinister development besides rising prices and business slowdowns occurs: the diminishing of savings rates. While inflation rages, the continuing debasing of the currency causes savings to lose their value, thus changing the engine of the economy from savings and investment to accumulation of debt. And once authorities stop the inflation, the reversal of debt-accumulation trends brings severe contractions to the economy. Without an adequate savings pool to keep interest rates at former low levels, debtors who prospered during inflation now face financial hardships.
As for the producers’ goods industries that expanded during the inflation, Sennholz writes:
The credit expansion misleads businessmen into costly errors of expansion and modernization for which there is no consumer demand. The fiscal deficits that are to stimulate economic recovery and full employment bolster some industries while depressing others.
The end result, which occurs no matter if governments halt the inflation or not, is recession and unemployment. Victims of inflation may have more money in their hands, but their real purchasing power, because the troubled economy is producing less, has shrunk. That phenomenon is clearly seen at this present time with many European nations, including Ireland and England, along with our neighbor Canada, suffering from both high inflation and high unemployment. The United States, on the other hand, having brought its recent double digit inflation rates to near five per cent, now is paying for its previous fiscal foolishness with unemployment.
A Depressed Housing Industry
A clear example of the course of inflation can be seen in our nation’s housing construction industry. In the 1970s, while the federal government subsidized the industry with below-market interest rates, housing boomed, along with the related industries such as carpet-making, lumber and large home appliances. However, once inflation had finally driven the low rates far beyond the reach of the average buyer, along with pushing construction costs to record levels, the industry, along with companion producers, slipped into depression. And without a large savings pool to help finance new construction (government spending presently takes nearly 80 per cent of savings), the outlook for the housing industry, at least in the near future, is bleak.
As mentioned earlier, however, home building lobbyists have convinced the Congress to push through an ill-advised inflationary bail-out bill. But such action—which could only aggravate inflation—is to seek a cure by taking in another dose of the disease.
But, with business bankruptcies increasing and unemployment rates reaching near 10 per cent, what should government do to alleviate the problem? The answer, which may seem heartless to liberal historians, economists and intellectuals (not to mention the millions of persons out of work) is to do nothing that would add to the burden of government. As we have shown, government is the cause of boom and bust, the inflationary boom coming first when the original doses of credit spur ill-advised economic expansion, and the bust coming when the forces of sup ply and demand take their natural course. Politicians cannot repeal the law of supply and demand. Therefore, it is best for government officials to admit their inflationary mistakes and then step back as the economy goes through the painful but-usually-brief period of readjusting itself in line with market prices and wages and real consumer demand.
In fact, before the Great Depression, the policy of the federal government, once its ill-advised actions had led to boom and bust, was laissez-faire. The depressions, though often turbulent, were mercifully brief.
However, when the stock market crashed in the fall of 1929, following nearly a decade of an inflationary boom engineered by the Federal Reserve System, the federal government, first under the leadership of Herbert Hoover and then Franklin Delano Roosevelt, intervened at almost every level. The Hoover administration, for example, doubled the income tax rate, pushed tariff rates to ruinous levels, attempted to cartel both industries and the agricultural sector and sought to keep both prices and wages far above market levels. Any one of those actions following the stock market crash would have seriously impaired a business recovery; together they acted in concert to bring the economy to its knees, and, in the process, throw nearly a quarter of the American work force off the job.
Nor can it be said that the Roosevelt Administration acted with any more soundness. During the FDR years, the federal government assaulted property rights, inflated, stymied agricultural production, raised taxes and took ever-increasing bites from the nation’s production of wealth. By acting in concert with labor union leaders in attempting to unionize much of the U.S. labor force, the government helped drive wage rates above market levels, thus touching off the ruinous depression of 1937-38. It is clear that the “humanitarian” attempts by both the Hoover and Roosevelt administrations to slow the forces of supply and demand as the nation lurched into depression in the long run only served to increase the human suffering so starkly depicted in the grim, austere photographs that record the anxious years of the 1930s.
The governments of the so-called capitalist West have learned little since the disasters of the 1920s, ‘30s and ‘40s. Politicians still see inflation as the best weapon to fight unemployment even while the record shows their actions to be foolish. The business cycle is still seen by many as the natural result of “unbridled” laissez-faire.
But there is much we can learn by examining the business cycles. By carefully studying historical economic developments, we can easily see that inflation is not the cure but rather the culprit. Inflation may, in its early days, give people an illusion of wealth; when it has run its course, however, it has borne not riches but rather poverty.
How does a nation avoid the roller-coaster of the business cycle? The words of Ludwig von Mises seem to be wise counsel:
If the policies of nonintervention prevailed—free trade, freely fluctuating wage rates, no form of social insurance, etc.—there would be no acute unemployment. Private charity would suffice to prevent the absolute destitution of the very restricted hard core of unemployables.
7. Rodbertus accepted Ricardo’s “Iron Law of Wages” that claimed that laborers would always make no more than subsistence wages because any real increase in pay would only serve to make the laborers’ families larger. Ricardo’s so-called “Iron Law” has historically been shown to be made of paper.
When there is relative stagnation in business, and unemployment, it is usually because an unbalanced and unworkable relationship has developed between prices at which goods can be sold and their costs of production. The main difficulty, usually, is that wage-rates are too high in relation to prices. This could be cured by a readjustment of specific wage-rates, by more flexible wages and prices, by permitting competition to work. The first effect of a new injection of bank credit or paper money into the system is, indeed, an apparent increase of that “purchasing power” which is so much wanted. It enables “surplus” goods to be sold at their existing prices. It enables prices of other goods to be raised to levels at which existing wage-rates can be paid and a full complement of workers hired. So it tends to restore that “full employment” so cherished, at any cost, by the modern reformer. This goal is achieved under inflation by raising prices enough to validate the existing level of wages. But what is forgotten is that the adjustment could have been made not only just as well, but much better, by a realignment of the particular wages that had got out of line.
—from Henry Hazlitt’s Introduction
to Andrew D. White’s Fiat Money Inflation in France