

Though the US Federal Reserve’s first interest-rate hike of 2023 is smaller than those that preceded it, policymakers have signaled that more increases are on the way, despite slowing price growth. But there is good reason to doubt the utility – and fear the consequences – of continued rate hikes, on both sides of the Atlantic.
LOS ANGELES – Capitalism’s greatest strength has been its resiliency – its ability to survive the throes and challenges of crises and business cycles to fuel innovation and economic growth. Today, however, more than four years into a credit crisis, a conspicuous enigma calls this legacy into question.
Despite recent hopes of recovery in the US, including an inventory catch-up in the fourth quarter of 2011, real US GDP growth has remained persistently below trend. Moreover, although seasonally adjusted January employment data have brought the unemployment rate down to 8.3% (while total jobs were actually lost in January), the more realistic rate of “underemployment” remains over 15% and the labor-force participation rate is at a record 30-year low. And the US is clearly not alone in its malaise, with the eurozone fighting a far more urgent sovereign-debt crisis.
So, why is this time different? The answer lies in Ayn Rand’s rhetorical invocation of despair in her 1957 epic Atlas Shrugged: “Who is John Galt?” Simply put, when the state seizes the incentives and drivers of capital investment, owners of capital go on strike.
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