Bring on the Central Planners

Comment by Jim Campbell

April 8th, 2020

Although Hitler and Mussolini are credited with making the “Trains Run of Time,” through the use of dictatorial central planning they were both failures.

Today’s current crisis teaches us that excessive regulation and bureaucratic sloth can have deadly consequences.

Adolf Hitler (left) and Benito Mussolini in a car, saluting the crowd that gathered along the thoroughfare Corso Vittorio Emanuele in Rome, in May 1938.

April 6, 2020 by Dan Mitchell

Here’s John Stossel’s video with another lesson, explaining that we need more capitalism rather than more government.

This seems like a no-brainer, especially given the wretched economic performance of countries where the government owns or controls the means of production.

But not everyone agrees. The appropriately named Paris Marx wants government to have more power, making the case for nationalization of Amazon in an article for Jacobin.

The government needs to…respond to the needs of people across the country as the pandemic situation deteriorates.

The response should be to nationalize Amazon and integrate it with the USPS.

Nationalizing the company would also allow Amazon workers to get covered by the same union as postal workers.

Amazon isn’t just an online e-commerce marketplace. …Amazon Web Services (AWS) is a cloud computing platform…the cloud should be placed under public ownership.

Taking control of AWS would allow the government to ensure the cloud platform is serving the public good.

We have a rare opportunity to fundamentally alter the economy to serve the needs of people instead of private profit, and it’s time to seize it.

Call me crazy, but if the government takes over Amazon and merges it with the Postal Service, I’m guessing that what emerges will have the inefficiency of the latter rather than the nimbleness of the former.

Just imagine a giant Department of Motor Vehicles (or, on a related note, the government’s track record on teaching kids to drive).

Which is why the U.K.-based Economist warned back in 2017 about the dangers of government-run companies.

Expanded state ownership is a poor way to cure economic ailments.

For much of the 20th century, economists were open to a bit of dirigisme.

But in the 1970s economists came to see state ownership as a costly fix to such problems.

Owners of private firms benefit directly when innovation reduces costs and boosts profits; bureaucrats usually lack such a clear financial incentive to improve performance.

Firms with the backing of the state are less vulnerable to competition; as they lumber on they hoard resources that could be better used elsewhere.

Economists saw in the productivity slowdown of the 1970s evidence that an overreaching state was throttling economic dynamism.

State-owned firms pose risks beyond that to dynamism.

Government-run companies may prioritize swollen payrolls over customer satisfaction.

More worryingly, state firms can become vehicles for corruption, used to dole out the largesse of the state to favored backers or to funnel social wealth into the pockets of the powerful.

As state control over the economy grows, political connections become a surer route to business success than entrepreneurialism.

The good news is that very few politicians are supporting explicit nationalization.

The bad news is that there’s plenty of support for intermediate steps involving cronyism, industrial policy, and various types of direct and indirect subsidies.

Including in the legislation recently approved in Washington (not that anyone should be surprised).

Professor Amit Seru from Stanford and Professor Luigi Zingales from the University of Chicago warn, in a column for the Wall Street Journal, that the U.S. has taken a dangerous step on the road to central planning.

The need to help individuals and small firms has provided cover to the largest corporate subsidy program in U.S. history.

Under intense pressure from lobbyists, the Cares Act allocates $510 billion to support loans for large businesses.

A small chunk of this money ($56 billion) will be used directly by the Treasury to grant loans to airlines and other “strategic” firms (read: Boeing).

The Treasury will then confer the rest ($454 billion) to the Federal Reserve to absorb losses the Fed might incur in lending to firms in the private sector.

The expectation is that the central bank will leverage this money.

This is the largest step toward a centrally planned economy the U.S. has ever taken.

And it socializes only losses.

Profits, when they come, remain private.

The urgency of the moment facilitated a giveaway to vested interests.

Now that the Cares Act is the law, policymakers need to find ways to impose restrictions on how the money is deployed.

It isn’t only a question of fiscal prudence; the nature of American capitalism is at stake.

In other words, the U.S. is moving in the wrong direction on my “Industrial Policy Spectrum.”

The key unanswered question is whether the government’s new powers will be temporary or permanent.

There’s a legitimate argument for some form of intervention while the crisis in ongoing.

But what happens once things go back to normal? Will politicians allow the “creative destruction” of capitalism, or will they use their expanded power to permanently interfere with market forces?

If they choose the latter, there will be less long-run prosperity.

THE END

About JCscuba

I am firmly devoted to bringing you the truth and the stories that the mainstream media ignores. Together we can restore our constitutional republic to what the founding fathers envisioned and fight back against the progressive movement. Obama nearly destroyed our country economically, militarily coupled with his racism he set us further on the march to becoming a Socialist State. Now it's up to President Trump to restore America to prominence. Republicans who refuse to go along with most of his agenda RINOs must be forced to walk the plank, they are RINOs and little else.
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4 Responses to Bring on the Central Planners

  1. JAFC says:

    It’s always fun to follow “nationalization,” in which the direction of facilities, resources, and distribution ends up in the hands of the incompetent children of the socialist elites.

    Also revealing is the way socialists demand trade union control of labor, as mandatory union dues (money taken from its members) go to support the rich dinner tables of those socialist elites.

    Like

  2. gds44 says:

    Reblogged this on Gds44's Blog.

    Like

  3. Stop mthe Corruption! says:

    The search for the best balance between labor, management and owners has been the subject of many studies and theories. This dilemma has never been solved because of the human element.

    Ford and Levi are good examples of the fruits of your own labors and ideas. Both companies were very successful financially and were reasonable to their employees. Rockefeller, Morgan and a host of others were very corrupt and extremely greedy.

    The labor unions were a great idea at the beginning but then deteriorated into the corrupt sea of greed.

    The Anti-Trust laws were designed to place some reasonable controls on the accumulation of Capital. Great at the start but once again fell victim to corruption and greed.

    The balance between the public sector and the Government sector has always been a difficult path to navigate. Tolkien’s Trilogy of the Rings makes the story clear. Power corrupts and complete Power corrupts completely.

    America is now experiencing the attempt by President Trump to clean out the corruption in America’s government. Hopefully President Trump will succeed. Of course, the people now in power want to keep their power and rule the world. Also their life styles are very lavish! All parties to this puzzle are infected by corruption. Hollywood is corrupt. Government is corrupt. Business is corrupt. The common denominator is money, power and greed. The demands for ever greater sex and excitement is insatiable. Religion is not a solution and has just as much corruption. Can LUST ever be controlled? Doubtful.

    So, the question was and remains “How much is enough?” AND, of course, “Who gets to decide?”

    I do not see or envision an answer in the near future. I can state with absolute certainly that the current system is broken and needs to be fixed!

    Like

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