I said the government can’t affirmatively stimulate the economy, but it can encourage productive activity. How? By not discouraging it. Here is where some free-market economists fall short in shaping the public debate. Too much of what they say is along these lines: “The economy is fundamentally healthy. Recessions are a necessary correction of errors. So just let the economy work through its current problems. The government need do nothing.”
That message should make advocates of individual liberty squirm because it implies that the market today is essentially as free as it needs to be.
But—I say again— we have no free market.
What we have—and have had for a long time—is corporatism, an interventionist system shot through with government-granted privileges mostly for the well-connected–who tend to be rich businesspeople. This system is maintained in a variety of ways: through taxes, subsidies, cartelizing regulations, intellectual “property” protections, trade restrictions, government-bank collusion, the military-industrial complex, land close-offs, zoning, building codes, restrictions on workers, and more.
Given the corporatist nature of the economy, it is a mistake—as well as strategically foolish—to say the government should do nothing when a recession might be coming on or when recovery is disappointingly sluggish. There’s much it should do—or rather undo.