I note with interest that Ron Paul attributes his dizzying recent fund-raising performance to his opposition to the Federal Reserve and support for the gold standard.
The dubious economic merits of a return to the gold standard have been discussed in detail elsewhere. Two facts are worth mentioning here. One: there’s not enough gold in the world anymore. With China and India expanding global wealth to levels never before seen, a relinking of money supply with existing gold stocks would require a massive global contraction of prices, severely retarding economic growth and development. Two: a gold standard system means workers have to accept periodic bouts of recession or deflation. The very reason most developed countries operate floating rates is that imposing such costs on labour became politically unfeasible in the latter half of the 20th century. Nothing suggests this has changed.
This notion of bearing costs leads us to the real problem with Ron Paul’s position. It’s statist and repressive. Libertarian philosophy tells us that the laissez-faire operation of the market (as would happen under a gold standard) is preferable to government intervention, because it preserves peoples’ natural freedom and keeps the state at arms length. Mr. Paul needs to pick up his Karl Polanyi; the association of laissez-faire with freedom is a myth. In its supposed heyday in the 19th century, laissez-faire was never so: it was a planned system designed to support a particular set of economic interests. And it involved significant statecraft to assert itself. Workers don’t enjoy sudden bouts of mass unemployment; farmers don’t relish the prospect of increased import competition; neither celebrates when entitlements to assistance are unilaterally cut. Making ordinary people bear the costs of the system requires repression; the state, far from giving people back their freedom, imposes its power over them even more.
If repression was needed to make 19th century workers – who had no labour representation, no unions, and no sympathetic ideology – adjust with the gold standard, what kind of state power would it take now? As far as I can see, Ron Paul’s libertarianism would mean the grossest intereference by the state in peoples’ lives. So no thanks Ron, I’ll keep my worthless piece of paper. And my freedom.