The Freeman 1972 - The Ludwig von Mises Institute

672 THE FREEMAN Novemberwhich afforded less· stability thanthe gold-bullion standard, whichin turn was less stable than theclassical gold-coin standard. It istrue, the default in gold paymentsdid stop the runs on banks; noone in his right senses would wantto run for paper money the supplyof which is potentially unlimited.But the fiat standard does notmake us independent of the vagariesof foreign influence. It hasmade the international money marketmore vulnerable than ever before.The U.S. dollar is stumblingfrom crisis to crisis, with gravedangers to international trade andcooperation and, ultimately, to thestability of the American economyitself.It is not alone the new monetarystructure that affords some economistsso much confidence in thelasting stability of the Americaneconomy. There is also the fiscalstructure. "There can be no disagreement,"Professor Friedmanasserts, "that the fiscal structureis now an exceedingly importantand' powerful 'built-in stabilizer'."8Government expenditures, bothnational and local, now amount tomore than one-third of the nationalincome. Although the relativegrowth of government casts somberprospects for political free-­dam, it is argued that the changein the character of both expendi-8 Ibid., p. 86.tures and receipts has stabilizingeffects on the business cycle. Abroad program of social security,unemployment insurance, and afarm program that supports productprices, all tend to increasegovernment expenditures in depressionand to reduce them inprosperity. The same contra-cyclicaleffects are derived from personaland corporation income taxation,which in boom or recessionautomatically creates budget surplusesor deficits and thereby offsetsfrom 30 to 40 per cent of anynational income change. So goestheir theory.Loaded for StabilityThis doctrine of the built-in stabilizerscalls to mind the story ofthe farmer who, before leavingfor the market in town, loaded hispack mule with an exceptionallyheavy load of potatoes. When hisneighbor inquired about the reasonfor the heavy load the farmerretorted with a gesture of greatlearning: "On the muddy road totown the beast needs stability. Theheavier the load the greater the. stability!"A bit of plain horse sense oughtto tell us that the growing costs ofgovernment do. not afford stability;on the contrary, they aremaking the "private sector" that'is carrying the growing burden ofthe "public sector" ever ~ore ane-