Wednesday, April 10, 2013
Yes, How an Economy Grows is funny. Peter D. Schiff and his brother, Andrew J. (known mostly for his lament about how hard it is for a family to live in Brooklyn on $350,000 a year), explain free-market economics by means of an extended fairy tale enhanced with hilarious cartoon illustrations by Brendan Leach.
The story begins with three men, Able, Baker, and Charlie, who live alone on an island and stay alive on a diet of one fish per person per day. (If it occurs to you that the first man's name should be spelled "Abel," that could mean you're a proofreader, in which case this book will drive you nuts: it is littered with typos.) Many generations later, the island has a brisk fish-based economy, a strong manufacturing sector, and a booming trade with other islands. But then a monsoon hits, and the powers that be (especially Franky Deep) decide to issue Fish Reserve Notes to use in trade instead of actual fish, and Lindy B. funds the Great Society by issuing ever increasing numbers of Fish Reserve Notes (without keeping actual fish in reserve), and Slippery Dickson closes the bank's fish window to foreign depositors, and Roughy Redfin grossly outspends his revenues, and George W. Bass and Barry Ocuda bail out the banks--every one of these leaders egged on by villains such as Ally Greenfin and Ben Barnacle--until eventually the Sinopians, who by this time own most of Usonia, decide to cut bait and keep their fish for themselves.
On the positive side, the Schiffs managed to keep me awake while they explained their economic beliefs. I am impressed by the fact that Peter Schiff accurately predicted the recession of 2008 while many economists were still saying "Don't worry, be happy." As a parsimonious descendant of Puritans, I agree that savings are basic to economic health and that excess debt is perilous. Like the Schiffs, I think we're in trouble when the goods we consume are mostly produced elsewhere and our major export is dollars. I fear that the Schiffs may be right when they say (as David Stockman recently did in the New York Times) that we're in for a big crash in the near future.
But when I look at the kind of government the Schiffs would like to have, I see some really big theological problems. You don't have to be religious to see the problems, however: I suspect they are theological problems because they hurt people.
First, everything in this book's imagined universe is about money (well, fish), and how to get more of it. Oddly, the actual fish that sustain life in the early chapters become means of exchange and even storehouses of reserves in the later ones. Our daily bread (Matthew 6:9-13) transmutes into the rich fool's overstuffed granaries (Luke 12:13-21). People who are poor are barely mentioned in the Schiffs' tale: on their island, the poor do not exist. By contrast, in both the Hebrew Bible and the New Testament, the duty to care for the poor is one of the major themes. "Blessed are you who are poor," said Jesus, "for yours is the kingdom of God" (Luke 6:20). "You cannot serve both God and money" (Luke 16:13).
Obviously the poor are not well served by an economy that crashes, and perhaps the Schiffs would argue that their principles would be better for the poor than is our present precarious situation. Perhaps so, but that brings me to the second theological problem: the system the Schiffs describe might have worked very well before Adam and Eve developed a taste for apples, but in a world where everyone is infected with a touch of greed (see concupiscence), the Schiffs' system is as dangerous as any other system we might invent. They do a fine job of showing how the government can screw things up--and indeed it can--but they are silent about how businesses can do the same. In their story, "Franky Deep" established disastrous policies in response to a monsoon--a natural disaster. In the real world, the Great Depression happened after decades of industrial monopolies, inhumane labor practices, and wild stock-market speculation--all unrestrained by the government.
I have no illusions about government. On the depravity scale, big government may be just as depraved as big business (though it's getting hard to distinguish between the two, since one buys the other and then uses it to accomplish its purposes). Ideally the two would form some sort of reciprocal deterrence system, checking each other's excesses, though that's not easy to accomplish in our multinational economy. But I think I know enough about greed to suggest that if businesses were left entirely to their own devices, the world's economy would soon consist of an interlocking network of immensely powerful monopolies that would "grind the faces of the poor" to an extent undreamed of by the prophet Isaiah (3:15). Heck, it's happening already.
So what's the answer to our economic woes? Well, if we--as individuals and as a nation--could somehow manage to understand that we need to pay (now, not during the next administration) for what we want, we could probably come up with something, especially if what we want includes concrete ways to lift people out of poverty. And yes, there are politicians (like Bill Clinton) and CEOs (like Bill Gates) who are devoting a lot of time and money to meeting human need.
But most businesses turn a goodly percentage of their profits into marketing whose aim is to persuade us that we always need more now; and most politicians spend vast sums trying to persuade us that if we elect them, we can have something for nothing; and most self-help books tells us that we really need to take care of ourselves better... and the beat goes on, and will go on, until one day it turns into the loudest crash yet, followed by ominous silence.
The Schiffs' ideas will not stave off the evil day, because the Schiffs do not take human nature into account. Politicians who follow their libertarian approach most likely have something other than ideas to sell. As do the Schiffs, for that matter, and they make no secret of it. Peter Schiff owns the brokerage firm Euro Pacific Capital, "an SEC registered investment advisor and full service broker/dealer that seeks to help American investors prepare for a global economy that may no longer be dominated by the U.S. dollar." His brother Andrew--the financially struggling one--is its director of communications and marketing. Peter is also CEO of Euro Pacific Precious Metals: that is, he sells gold.
Their father, Irwin Schiff, whose ideas they develop in this book, is serving a 13-year prison term for tax evasion. His lawyer's contention that he "had been diagnosed with a chronic, severe delusional disorder relating to his beliefs about the federal income tax system" did not sway the judge.