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In a thorough analysis of America’s current macroeconomic state, Joseph T. Salerno exposes inflationism as an ideology, and calls for a renewal of the antiinflationist philosophy of Ludwig von Mises. As evidence for the successful implementation of antiinflationary policy in America, Salerno points to the efforts of President Dwight Eisenhower, writing:
In the United States during the Great Depression, the proinflationist ideology grew so powerful and irresistible that it also swept away the classical gold standard in one fell swoop. On April 5, 1933, the Roosevelt administration violated the rule of the US Constitution and the laws of property by confiscating all gold coins, gold bullion, and gold certificates owned by the American public under criminal penalty of a $10,000 fine, ten years in prison, or both.
Ironically, there is reason for optimism in the sudden destruction of the gold standard, for it indicates the possibility of a rapid development of a radical anti-inflationist ideology among enough economists, policymakers, media commentators, and ordinary citizens to force the abandonment of inflationary monetary policy, even under a fiat-money regime. If such an ideological movement becomes strong enough, it may even prepare the way for a return to a market-based money such as gold.
Such an ideological about-face is not just idle speculation but has a precedent in recent history. The abrupt reversal of the inflationist ideology of the Roosevelt and Truman administrations occurred shortly after World War II and was one of the factors that caused Dwight D. Eisenhower to win the presidential election in 1952. With the removal of wartime price controls, the inflation rate spiked during the immediate postwar years, reaching 14.4 percent in 1947, falling back during the mild recession of 1949–50, and then shooting back up again in 1951. With the American public anxious about the first peacetime inflation of this magnitude, Eisenhower adopted a strong anti-inflationist stance, even though he ran on a platform of Modern Republicanism, pledging not to undo New Deal welfare state programs and to actively intervene to prevent another catastrophic depression.
Once he took office, Eisenhower proved that his anti-inflationism was not empty campaign rhetoric. As the mainstream economic historian Kenneth Weiher vividly described:
“The consensus within the [Eisenhower] White House and the Congress listed inflation as economic public enemy No. 1. Indeed the decade of the 1950s was marked by a veritable obsession with inflation despite that the inflation rate never reached more than 3.6% after the Korean War. . . . Suffice it to say that Eisenhower’s inflation fears were pandemic.”
Eisenhower’s aversion to inflation ran deep. McClenahan and Becker point out that as early as the late 1940s, Eisenhower had “come to see inflation as one of the most serious problems of the time [and] was concerned about the potential destructiveness of increasing prices on government programs, ordinary citizens, and business.” Eisenhower’s “pandemic fear” of inflation was reflected in two aspects of his administration: first, his choice of economic advisers and policymakers and, second, the policies of his administration during the two recessions that occurred during his second term in office.
Salerno later concludes:
It is not my purpose to justify the macroeconomic policies of the Eisenhower administration or to argue that Austrian economists commend or recommend them. My intent is simply to demonstrate with a historical case study Mises’s point that inflationism is fundamentally an ideology and can only be defeated by the antithetical ideology of antiinflationism. Monetary policy rules that specify the conditions under which the money supply should be increased—and the purchasing power of money continually reduced—institutionalize the inflationist ideology and, therefore, promote rather than prevent cyclical fluctuations. Inflation will not be reversed until a change in public opinion brings forth politicians who viscerally as well as intellectually embrace the antiinflationist ideology. And public opinion will not change until the public pays heed to the message continually beamed out by the Mises Institute, the only consistently anti-inflationist educational organization in today’s world.
That said: I Like Ike.
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