Volume 8, Issue 16
The aggregate debate misses one key element of critical principle. If the supply chain breaks, America slips into a depression. If history is our teacher, a depression will last for years.
For an economy to hit on all cylinders, those who produce the raw feedstock of production, whether it is food, oil, strategic minerals, or systems software, have little contact with the end use or user of the product. A farmer grows potatoes. He has a contract and a direct relationship with the person or company to whom he delivers his harvest. That second entity in the supply chain, often a co-op, facilitates the next entity in the chain. That may be a processor or a distributor. Ultimately, the potato ends up as French fries at McDonald’s or Idaho potatoes at Whole Foods. The final end user, the consumer, makes his or her choice on how to consume the potato. In this case, the farmer’s only direct relationship is with the co-op.
Mega corporations with vertical, wholly-owned subsidiaries may perform and control more than one segment of the supply chain. On a national basis, other than locally owned organic (farm-to-table) restaurants, no corporation operates from dirt to the table. There is no single contract binding all elements of the supply chain. What holds the chain together is an unenforceable trust that the market exists and the system to serve it is sound.
Once the supply chain is broken, reestablishing it is like metaphorically putting several marbles on a table top that moves left-to-right, top-to-bottom and diagonally on a single point of pivot. The challenge then becomes to move the surface as the marbles independently roll around, trying to get them all to align into a straight line for a period of time. In reality, this is very difficult if not impossible for government policy to achieve.
This is what happened in the 1930s. Yes, there were many factors that caused the table top to destabilize. The stock market crash of 1929 was the result of an overheated capital equity market. Measures taken in 1933, in particular the Glass-Steagall Act, arguably exacerbated the situation. The actual depths of the Depression were 1932 and 1933. The supply chain was broken. The trust in the system was destroyed. The United States did not come out of the Depression until after World War II.
In 1945, 80% of the world’s manufacturing capacity was located in the U.S. Through the Marshall Plan, America financed the rebuilding of Europe while Europe purchased what we manufactured to aid in their recovery. By 1974, the world’s global economy was reestablished and competitive.
This recovery did not occur by careful government planning unless one would argue from a macabre point of view that, by causing or allowing World War II to happen, the government provided a beginning for a solution to get the world out of depression. This is, of course, ridiculous. Governments reacted to geopolitical events incompetently. World War II is a horrific chapter of world history that we never want to repeat.
Some argue that more government control of the economy is necessary to rescue America from the pandemic economic crisis. Progressives believe that a government managed economic system is the answer to avoiding future crises, even if it leads to democratized socialism. Again, this theory omits one key critical element.
China is looming.
China has instituted economically what progressives desire, total government control of the economy. The Chinese system is yet another example that totalitarian states cannot compete with democratic free enterprise nations. In the last four years, China’s economy has not grown as a percent of the world GDP in competition with the United States. Any gains they have made have been at the expense of Europe more than North America.
There is one situation where China would enjoy an economic edge over the United States. If the U.S. economic system devolved into socialism, as a nation state culturally they are better positioned in that their society is conditioned to accept command economies, be satisfied with limited choices, and obey government dictates. Democracy in and of itself is not enough to lift a country economically. Free enterprise is required as the mainspring of the economic system. Multiple choices allowing the public the freedom to make their own choices is the simple formula for economic prosperity. Socialized democracy can fail to compete against a nation state with the size, resources and population of China. One only has to look at the European economic system to confirm this finding.
Providing government services in the near future to stabilize American families will require enormous government deficit spending. This is acceptable if we keep in mind as a nation that our goal and objective is to maintain and rebuild the economic system that made America the envy of the world. Amity Shlaes concluded in her book Coolidge that many of the programs instigated under President Franklin Roosevelt’s New Deal may have, in fact, prolonged the Depression. Just like forces of nature, all government actions have an equal and opposite reaction.
What’s important to keep in mind is to never drive government into the quicksand of socialism under the aegis of saving the public. The quicksand is a quagmire that destroys the individual’s pursuit of happiness.
The question is not whether to reopen the economy to save jobs at an increased risk of losing lives. All lives are precious and must be protected. The question is, is there a way to reopen the economy exercising strict disciplines that ensures the public’s safety to protect lives? We have already determined that certain essential businesses must remain open for the good of society. Ultimately equal in the analysis of essential is maintaining the supply chain. The urgency rests on the analysis of cracks in the economic foundation. The sinews that bind the invisible trust of the components of the supply chain must be measured for their elasticity. Once broken, the quality of life becomes a major factor for consideration of objective.
Democratic free enterprise is proven to enrich the quality of life. Communistic totalitarian enterprise controls one’s life but distorts the trajectory of individual destiny. In navigating the precarious balance of pandemic government policy, it is paramount that we keep the objective of our country’s founding purpose in clear sight. By declaring independence in 1776, the United States committed to the truth that birth is not destiny . . .
With every breath that we take, we must commit to each other never to return to destiny determined by government.
My name is Marc Nuttle and this is what I believe.
What do you believe?