Butter and Markets

Butter and Markets

I am just finishing reading 48 essays on Free Markets for my ethics class. The assignment I gave was to discuss the pros and cons of free markets in the context of being a asylum-seeking immigrant from Central America. It has proven to be a fascinating exercise (at least for me, but I also think for the students) because it has forced them to consider the libertarian value of free market capitalism ala Adam Smith and Milton Friedman as well as the downside of the societal cost and barriers established by markets that are too free and lack the Keynesian overlay of regulation and fiscal modification for the good of societal goals and economic egalitarianism. An immigrant wants the good life that the American free market approach has generally offered (in addition to the spurring of innovation and all the other good things that come from raw capitalism). But an immigrant also finds that without capital, adequate education and the privilege and informational and connectivity advantages of the established reigning class, it is hard to access the benefits of raw capitalism in the same way that it is hard to drink from a raging firehose without getting your head ripped off.

I find it interesting, especially because it forces students to declare whether they want more unbridled opportunity or more economic access and controlled capitalism. The Republican playbook these days is to declare that anything Democrats do or want is Socialism. Socialism is the hobgoblin of feeble economic thinking. It’s easy to scare people by calling things Socialistic because the whole world knows how badly the big experiments in extreme Socialism failed in the first half of the Twentieth Century. But next week’s ethics class (the final class) is about saving capitalism from the capitalists. It is my way (and I didn’t invent this line of thinking by any means) of forcing the class to consider how human nature (namely the tendency towards greed and dominance in all its forms) can take a good thing and turn it bad if it is not properly controlled.

My most conservative friends are always going on and on about how bad government regulation is and really how government can do nothing good. That is an extreme view to say the least. We all know that government can look and feel stupid and lazy at times, even often times. We also know that greed is not solely evident in the absence of government, but is very often found in the very heart of government where corruption trending towards outright kleptocracy is an age-old problem that has plagued every form of government since the history of mankind. In fact, governments are best gauged by some combination of their effectiveness in fostering prosperity and the concomitant level of kleptocracy they exhibit. It is always easiest to steal from people who are some combination of stupid and unaware, so naturally the shrewd and unscrupulous dominate and overwhelm the weak or simple-minded. That is undoubtedly what is behind my red friend always calling me and those like me, libtards, as a play on liberal retards in the most unpolitically-correct, most un-woke vernacular possible. If I let shrewd people take advantage of me or if I am so naive as to not do what I can to gain the upper hand in terms of economic power or control, then I am a libtard by their reckoning.

But the truth is that world history has proven to us that excess in any direction leads to radical correction, and as Pearl Buck so eloquently said in her Pulitzer Prize winning The Good Earth, “when the rich get too rich and the poor get too poor, things are going to change…” And, indeed, history shows us that that has happened time and again. The only salvation to radical overthrow of the status quo (be it is Czarist Russia or Louis XIV’s court) is for the dominant class to recognize that they are better served in the long run by saving capitalism for themselves and others by consciously leveling the playing field just enough to give everyone, or at least enough of the people, something to lose, a piece of the pie, a chip in the game. Besides the benefits of quelling dissent, the wisest of capitalists (Henry Ford would be a great example) understand that there is also a great consumer-driven opportunity imbedded in promoting a thriving middle class. Remember that for there to be a chicken in every pot, someone has to raise and sell the chicken and manufacture the pot, and those capitalists can probably make considerable coin doing just that. I love a solution that has something in it for everyone. Unfortunately, the temptation for the less bright among the capitalists is to execute the golden goose and see if they can extract the gold from inside it, failing to realize that the magic happens in letting the goose prosper rather than killing it.

Yesterday the employment numbers came out and unemployment is down to 3.4% overall in America, an impressive and positive economic indicator by any historical standard. Of course, the flip side of that economic coin is always inflation and while it is clearly abating from its highs, it still is too high by economic standards at 4.98%, off its highs last year at 8.54% but still above the long-term average of 3.28%. The Wall Street Journal, that Murdoch-owned bastion of conservative economic thought published an article this week about how a key component of current inflation is the direct result of corporate profit gouging. Corporate margins are booming because companies are able to price their goods and services up under the cover that we are in an inflationary cycle thanks to too much fiscal stimulus and bad monetary policy by the Fed (who is still, by the way, raising interest rates…those that seems to be grinding to a halt). The truth is that in many cycles, companies use market movements and factors like an inflationary backdrop to raise prices or drapes their feet on price reductions as costs decline. Some of this is normal good business practice in a free market economy, but like everything, it can be taken to excess and the WSJ has called out corporations for contributing to the problem rather than being victims of the problem as they may have been during the supply chain disruptions during COVID. I would not call for any action (like something as extreme as price capping), but would certainly advocate transparency so that consumers and other corporate stakeholders can voice their pleasure or displeasure with the corporate policies being undertaken.

What I do think is important is to call bullshit on the political rhetoric which is normal in an election cycle where economic mudslinging takes place against the party in power and uninformed or intentional misrepresentation takes place to the public for political reasons. In the study of economics we learn that the tradeoffs are always there. Guns versus butter is one. Free markets versus regulation is another. Right now we are in a moment where butter versus markets might be the real juxtapositioning we are seeing.

Jobs – 3.4% 4.7% black, 4.4% Hispanic, 2.8% Asian. BN NON-COMPETES 30MM better jobs and $300B benefit