When all the institutions of public policy remain committed to Keynesian economic fallacy, what hope have we that we will have real recovery?  I’ve written before about my despair that public discussion of inflation/deflation is almost completely backwards, with inflation now a good thing and deflation something that will be very harmful.  The reality is that both are symptoms of something else, not the root cause of any problem, and further that most deflations in history were benign while almost all inflations are harmful.  But there is a flip side to this coin of inflation/deflation debate.  In a speech scheduled today at the Arab Fiscal Forum, the head of the International Monetary Fund, Christine LaGarde will say that going forward,

that successful 21st century economies had to be able to both generate “robust government revenue” and “higher and more reliable revenue.”

For government policymakers, the key is always Keynesian demand management.  It is an article of faith that governments must stabilize an unstable economy–government spending is the essential variable to keep a healthy economy going.  So its crucial that government be able to generate revenue; a high priority is ensuring that we have “robust” revenue, as the problems of today require a correspondingly “robust” government.  With an effective government spending program, reallocating $$ from the idle rich to those more able to consume, the economy can thrive.  When confronted with the fact that consumption historically falls little in comparison to investment, and investment recovers much more slowly than consumption, the Keynesian public policy maker will say simply that businesses will not invest because they don’t see the consumption there to support it.  So we must use government spending to “prime the pump.”  Well, in the U.S. we’re rapidly approaching the $20T pump priming mark.  How’s that working out?

Maybe its time for a different approach.  Maybe we should focus on incentives to produce, so that as additional production comes on line, those producers have something to trade with.  Maybe instead of a robust government spending program, which continues to leave cities, commonwealths and nations in ultimate ruin, we should try a robust private sector?  But this is not Ms. LaGarde’s focus.  Rather the Arab nations should

“…strengthen their fiscal frameworks and reengineer their tax systems—by reducing their heavy reliance on oil revenues and by boosting non-hydrocarbon sources of revenues,” she will state. “This would help bolster growth and job creation and, at the same time, help to maintain debt sustainability and strengthen resilience. It also provides a unique opportunity to design tax systems that emphasize fairness, simplicity, and efficiency.”

In one sense, who can argue with that logic?  But the bigger issue is always ignored–how do we encourage private entrepreneurship to create the alternate production needed for a balanced economy?  I can’t help but think that what is good for an individual is good for an economy (Eph 4:28):

Let him who stole steal no longer, but rather let him labor, working with his hands what is good, that he may have something to give him who has need.