Moral markets

Steve Forbes turned 65 last year, but with probably half a billion dollars at his disposal, is not dependent on Social Security. He inherited money and multiplied it as CEO of Forbes, Inc., and editor-in-chief of Forbes. He ran for president in 1996 and 2000, advocating establishment of a flat tax. In Freedom Manifesto: Why Free Markets Are Moral and Big Government Isn’t (Crown, 2012), Forbes criticizes socialism and applauds the Judeo-Christian emphasis on reason, progress, and entrepreneurialism.

The Beatles sang “Money Can’t Buy Me Love.” Were they wrong? They were not wrong—but you can buy a dog who will give you love, so in that sense the money can be well spent.

You went to Princeton and so did F. Scott Fitzgerald, who enrolled there 100 years ago. Later, he has one of his poorer fictional characters say the rich are “cynical, but we are trustful.” How do you avoid cynicism or suspicion about people who show “friendliness” because they want to get something from you? Fitzgerald, great writer that he was, didn’t get everything right. As for people being nice to you, my father said, “Take it at face value.” You’ll never get the ultimate answer in terms of being able to figure out somebody, and people change as circumstances change. Look at Lord Jim: a moment of moral cowardice, the spending a lifetime trying to redeem or overcome that.

I mention Fitzgerald and you mention Joseph Conrad, Lord Jim. Any novels you’d want to recommend to these Patrick Henry students? Oh, literature professors perhaps wouldn’t approve of my fiction reading. I like mysteries: Coban, Kellerman, Grafton, a whole bunch. Nonfiction—some economic books qualify as fiction.

Would you count as fiction much of what has guided conventional thinking about the role of government in our economy? How we view money, economics, and the role government plays in the economy is going to undergo a profound transformation. We’ll rediscover things we knew until the Great Depression in the 1930s. The Depression gave rise to the idea that free markets are inherently unstable. They’re not. It’s government that has caused every major economic crisis in modern times. Government’s not a stabilizer, it’s a destabilizer. The government says, oh, if we spend or print money, that will stimulate economic growth. No, it distorts the economy—and not all growth is equal. Example: Communist East Germany produced a car called a Trabant. Piece of junk, but that’s all you had. Western Germany produced cars like the BMW or Mercedes. On paper, both Trabant and Mercedes represented economic growth. In economist’s eyes, they’re the same. In the real world, not the same. There’s the good kind of growth and the kind that leads to distortions and a lower standard of living.

What did you take away from your attempts to win the GOP presidential nomination in 1996 and 2000? This will sound Pollyanna-ish, but for all the junk culture we have in this country, there is still an inherent bedrock of strength—it’s strong enough to overcome some of the nonsense we’re undergoing today, and ultimately will. You also learn that people have very different views of things, very different interests. What keeps this conglomeration together is a shared set of ideas and ideals. If those are shattered, this country will shatter from within, not from without.

In Freedom Manifesto you deal with the housing bubble and the financial quasi-collapse of 2008, but you differ from those who call all of that a problem of capitalism and yearn for more regulation. You say this was a government-caused problem. Yeah. This gets to the most boring subject in the world, which is monetary policy. If any of you are on a bad date and want out, talk about monetary policy and you’ll never see that person again. Believe me. But it’s all similar to an automobile: If you don’t have enough fuel, you stall. Too much fuel, you flood the engine. With monetary policy, strip away all the jargon. If the Federal Reserve does not create enough money to meet the needs of the marketplace, you stall the economy. Print too much money and you get the economic equivalent of flooding the engine. Ride it out, you can move forward. Starting in the early part of the last decade, the Fed created too much money. They thought that stimulated the economy. It didn’t stimulate the economy: It distorted it and nearly wrecked it.

You want a fixed value for money. Whenever you undermine the value of money as a fixed measure, some gain from it, but most people lose out. And that’s what we have today. If you’re a small or medium-sized business, it’s very dicey whether you can get access to a line of credit or whether you can get more credit to expand your business. So government makes out like a bandit. And they are robbing us now by what the Fed is doing. If you don’t understand the money part, we’re going to continue in this rut, and it’s going to be a very increasingly destabilizing and destructive rut.

You write about the importance of shale gas and fracking to the future of the United States. Why is that significant? Fracking is a short word for hydraulic fracturing, which is a form of getting natural gas out of shale, rock. Everyone’s known for a zillion years that kind of rock has natural gas, but there was never an economic way to get it out. The free market allows creativity and innovation, and some years ago George Mitchell in Texas put his own money into research, and ultimately the breakthrough came. We’re going to have cheap energy again, and in a few years we’ll be exporting energy in a major way, if the government doesn’t stop it. Having trucks on natural gas will be great for the environment, but it will change the geopolitics in the world.

Taking away Russia and the Middle East’s leverage? Western Europe’s dependent on natural gas and a big chunk of it comes from Russia: If natural gas is easy to get and cheap, there goes their leverage. Because of fracking, American households spent $12 billion dollars less on natural gas to heat their homes this winter than they would have if Mitchell and his engineers hadn’t come up with it. It’s just beginning: Creativity comes from free markets. They’re not perfect because people are not perfect.

Watch Marvin Olasky's complete interview with Steve Forbes:

More more from this interview, see "Steve Forbes remembers the Cold War."