One of the most beautiful – and inexplicable – aspects of economics is how its practitioners never seem to be wrong.
Indeed, nearly every school of economic thought, from John Maynard Keynes’s demand-side economics on the left to Arthur Laffer’s supply-side economics on the right, is filled with followers defending their leader’s theories. and often, though subtly, attacking their theological ideas. enemies.
One such brawl broke out, among other places, in the Feb. 28 editorial pages of The New York Times. In it, writer and editor David Dayen stripped down one of the most celebrated economists of the past 40 years, Lawrence Summers, for his role in building one of the most efficiency-centric economies, most unbalanced and most fragile in history.
“For decades, economists like Mr. Summers have advanced policies such as globalization, deregulation, and markets that prioritized efficiency over competition,” says Dayen. “They promised that these trends would lead to lower prices. And they did, for a while. But they also made the system vulnerable.
Vulnerable to what we see today – broken global supply chains incredibly slow to mend; a national economy that is somehow both rapidly growing and mired in inflation; and a consumer culture so valuable that we gladly trade regulation and competition for lower prices and higher economic growth.
It’s the manifestation of Nobel Prize-winning economist Milton Friedman’s “market economy,” Dayen explains. “(T)he only corporate social responsibility is to increase profits. Cut regulations, cut taxes and allow corporations to structure markets, people like Friedman argued, and watch the economy take off.
In short, markets are the most important, and government – regulation, taxes, antitrust – is much less important.
It has been a solidly bipartisan principle for 50 years. While Republican administrations – Reagan, Bush II and Trump – cut taxes and nearly eliminated antitrust, Democratic administrations, especially Carter and Clinton, deregulated trucking, airlines, railroads, banks and farming.
And most of these efforts were made in the early 2000s to lay the groundwork for globalization – ever larger free trade agreements; the rapid rise of unregulated financial derivative markets; easy access to cheap and abundant labour; and sophisticated just-in-time supply chain management.
A Summers sidekick, Dayen reports, once compared it to Walmart’s initial impact on the US economy: The giant retailer might not have been good for local communities or job markets. locals, but there’s ‘little dissent’ Walmart’s cutthroat business model has helped the other 120 million Americans not employed in local retail.
As such, “the trade-off was clear: sacrifice resilience, wage security, and community for the promise of a five-dollar pack of tube socks.”
We might not like the comparison, but we know that’s just because, damn it, a pack of tube socks for $5 – even though the socks were made by kids working 70 hour weeks in a polluted sweatshop – is still an easy and smart buy, isn’t it?
Until this year, when those socks – like our long-ordered television, our new dishwasher, or our car – were trapped somewhere in a global supply chain with too few manufacturers, too few shipping companies, too few ports, too few railways, too few driver trucks, too few retailers and too few solutions to fix all this bloody mess.
American farmers and ranchers know that feeling. Two years ago, a global pandemic, although predicted, clogged the food system because no one thought it could happen, so no one had plans for when it would.
And when it happened, what was our first instinctive reaction? Give market giants like meat exporters and packers even more market power; power it will take decades, if ever, to reclaim.
Today, war is ravaging integrated markets from Odessa to Omaha. No tax cuts, fewer environmental rules, more deregulation, or less antitrust enforcement will lower crude oil prices or reduce potash costs in the United States.
But none of this should be new because, as Dayen reminds us, “Failing systems increase costs much faster than resilient systems.”
Too few American farmers and ranchers, too many broken rural communities, and too much cheap food speaks to this indisputable economic fact.