It is fitting that we are pausing to remember President Ronald Wilson Reagan on the centennial anniversary of his birth this February, a month that also includes Presidents Day. There continue to be many poignant remembrances and fitting tributes to our 40th president. Indeed, the Gipper accomplished much, and we, his countrymen, are grateful.
One of Reagan’s greatest accomplishments was engineering our victory in the Cold War. And one of the key factors that made this victory possible was Reagan’s deep understanding of economics. He knew that the Soviet economy was brittle, weak, moribund. He knew that it couldn’t hold up in an arms race against our vibrant free-market economy.
In hindsight, the decrepitude of the Soviet Union’s centrally planned socialist economy is obvious, but it was by no means so in the 1980s. Believing the Iron Curtain’s propaganda lies and a Potemkin village appearance of prosperity, many intellectuals, experts, and Sovietologists believed that socialism was the wave of the future. In the 1980s, the CIA reported to Reagan that the Soviet economy was vigorous and thriving. The Nobel prize-winning economist, Paul Samuelson, confidently wrote that the Soviet economy was booming and quickly catching up to the United States.
How could Reagan be so sure that he was right when most of the experts were saying that he was wrong?
The answer lies in the fact that Ronald Reagan understood economics better than any other American president. As my colleague Lee Wishing wrote last week, Reagan was influenced by the economic writings of Grove City College professor Hans F. Sennholz. He also read The Freeman, the monthly publication of the Foundation for Economic Education (it still exists today). This means that Reagan was familiar with the Austrian school of economics—the only school that has supplied a logical proof of why socialist economies are inherently self-destructive and doomed to fail.
The Austrian economist Ludwig von Mises, in his 1922 masterpiece, Socialism: An Economic and Sociological Analysis, had demonstrated logically the impossibility of rational economic calculation under central planning. Anyone who grasped that theory would know, as Reagan did, that the Soviets’ centrally planned economy was programmed for stagnation and decrepitude—that it was a paper tiger, and all we had to do to prevail against the Soviet challenge was to stand firm and keep our government from crippling our economy the way the Soviet government had crippled theirs.
This points to a scandal, perhaps a tragedy, today. As we commemorate the life of a great president whose understanding of the superiority of the private-property order over socialism contributed so much to freedom and prosperity, both at home and abroad, in the aftermath of the Cold War—the economic understanding that was one of the key pillars of Reagan’s philosophy and policies remains largely unknown today. The Austrian analysis of socialism—one of the greatest advances in economic science and one of the keys to understanding the 20th century—remains untaught except at Grove City College and on a few other campuses. As a result, Americans elected a president who is doing his best to take us in a socialistic direction—the direction of economic suicide.
As we pay tribute to Ronald Reagan, we look back at an era when people around the world voted with their feet for capitalism over socialism. Refugees fled from East Germany to West Germany, North Korea to South Korea, and mainland China to Hong Kong—always away from less freedom and prosperity toward greater freedom and prosperity.
Human beings still have the same preference and make the same choice today. Sadly, though, today businesses and individuals are leaving the United States in favor of less economically oppressive locations.
Demagogues on the left denounce these people as traitors for rescuing their property from governments redistributive plans. The rest of us should regard this phenomenon as a warning sign that, for the first time in American history, a significant number of people are leaving America so that they can be economically freer?
If we really wish to honor Reagan’s memory in a meaningful way, then let us reverse the Big-Government policies that are driving productive citizens out of our country. Let us remember Reagan’s lesson that government is the problem—not the solution—to our economic challenges. Let us re-establish America as the land of liberty, the favored destination of those who love liberty. Ronald Reagan would be honored to be honored in that way.
- Raise the Corporate Tax Rate? Economic Obtuseness in High Places - May 12, 2021
- Washington’s Bi-Partisan Fiscal Folly - May 6, 2021
- The Problem with Hedge Funds - April 13, 2021
- Wall Street Outsiders Versus Hedge Funds - February 1, 2021
- The Problematical COVID-19 Relief Legislation - January 14, 2021
- Giving Thanks to Society’s Economic Benefactors - November 19, 2020
- Why Fracking is a Big Issue - October 30, 2020
- The Paradox of Prosperity - September 23, 2020
- Jimmy Lai, The Billionaire Freedom Fighter - August 21, 2020
- The Problem with Inheritance Taxes - August 12, 2020