Harry C. Veryser - It Didnt Have to Be This Way: Why Boom and Bust Is Unnecessary—and How the Austrian School of Economics Breaks the Cycle

It Didn't Have to Be This Way

This book is an effort to tell the story of the modern economic condition, which began about 150 years ago. Like most good stories, it will be almost completely new to most readers. It has fascinating plots and subplots, heroes and antiheroes, bizarre and unforeseen crises, wars, poverty and prosperity, virtue and vice, ideas and expectations.

As the story rolls on, there are amazing turning pointsoften unforeseen and apparent only in retrospectthat present opportunities for new thoughts and theories that open new vistas, new policies, new life (or death) for many. New leaders arrive on the scene and change the course of events. Sometimes their contributions are remembered for generations; sometimes, despite their awesome power, they are not even historical footnotes. Does anyone know who came up with the formula that determined how many soybeans millions of American farmers were allowed to plant, for decades, with far-reaching consequences for the hungry in far-distant lands? Or who came up with the idea that it was best not to give federal money to poor families when the father lived in the same home as his wife and children?

Political upheaval and revolution are part of the drama, as ideologies too often replace religion, resulting, like adoration of false gods, in tremendous distress. As the story unfolds, we see that the differing perspectives of a socialist or a free-market political leader can shape the lives of tens of millions of people for decades.

The global economic meltdown that began in 2007 has brought suffering to countless millions. We have all witnessedand in many cases experiencedthe devastation: The bursting of the housing bubble. Foreclosures. The collapse of whole industries. The worst unemployment in a quarter century. Life savings wiped out as mutual funds, pension funds, and 401(k)s plummeted in value. The litany of woes goes on and on.

But it didn't have to be this way. This kind of financial devastation has been predicted again and againdecade after decadeby proponents of the Austrian School of economics. Ludwig von Mises, one of the most prominent Austrian economists, summed up the perennial crisis in the title of one of his many books, Planned Chaos (1947). Mises, especially in The Theory of Money and Credit (1912) and Human Action (1949), maintained that the boom-and-bust cycle that has afflicted modern economies is both unnatural and unnecessary. It worsens living conditions for just about everyone. Since the publication of his books, abundant scholarly studies have validated the Austrian view. Yet few peopleeven among those teaching economics in colleges and universities worldwideknow or understand the Austrian School. This book is an effort to solve that problem.

If there is a bright spot in the recent economic crisis, it is this: people everywhere are giving much more serious thought to foundational questions about the economy. What caused our woes, and more important, how can we prevent future calamities?

To answer those questions, we need to understand the Austrian School of economics. I have intended to write this book, or something like it, for well over twenty years. I feel particularly able to tell the story because, in my forty years as both a professional economist and businessman, I have been fortunate to have a front-row seat to watch the development of modern American economics, banking, and business. For me, economics is not an abstraction or the dismal science, as it is so often dismissed. Rather, it is a vibrant and fascinating process of unleashing human potential and thereby liberating whole nations from misery, poverty, and war, and ushering them into prosperity and peace.

My earliest exposure to economics came when I was a young child. My father lived through the Great Depression, served three years in the U.S. Navy during World War II, and participated in the invasions of North Africa, Sicily, Anzio, and Normandy, winning three Bronze Stars for bravery.He then founded a tool and die shop in suburban Detroit that supplied the auto industry for a half century. I worked in that shop in my youth, watching it become a direct supplier for General Motors. Eventually, in 1978, my brothers and I took over the business. At the company's height we had nearly sixty employees and two locations, one in Texas and one near Detroit, and we embarked on a joint venture with a German firm.

In addition to teaching me how to run a manufacturing facility, my father taught me much more. For decades at family gatherings, the men would gather around and talk about the Great Depression. Some of them suffered the worst of it as child laborers, while their parents were unable to find work. My father believed he was caught in a maelstrom that he did not understand, and none of them had a sophisticated understanding of what happened. These conversations sparked my intellectual curiosity. I wondered how the international economic order could fall apart so badly that even in a land as great as the United States, children were forced to work while their parents were destitute.

My curiosity about the Great Depression, the Great War, and the interplay between financial affairs and international relations led me to major in economics as an undergraduate at the University of Detroit in the 1960s. There I came under the influence of a much-learned professor, H. Theodore Hoffman, who introduced me to the Austrian School. For the past three decades I have had a richly rewarding career teaching economicsfirst at Northwood University (then Institute); then Walsh College, where I was chairman of the Economics and Finance Department for two decades; and now at the University of Detroit Mercy.