Killing Us: The Genius of Capitalism
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The title was a phrase that I believe emerged after the 2008 financial meltdown. There was also a book title about a hedge fund that effectively went belly-up but was saved by action of the Federal Reserve. The latter title was “When Genius Failed.” Failure is much in evidence now.

The most recent press conference atrocity had an interesting exchange between Trump and a reporter about the Defense Production Act. The president went on a riff about the shortcomings of nationalization. His basic example was the hypothetical of telling a company to produce ventilators, and “they have no idea what ventilator is.” This sort of stupidity is killing us, in real time.

Behind the scenes, it has been reported that the U.S. Chamber of Commerce has been lobbying against implementation of the DPA. So the Chamber is killing us too. Their members, not surprisingly, don’t want to be told what to do.

For his part, I imagine the president likes the idea of dickering with specific companies, which he imagines he is good at, trading favors. His idea is that business firms will volunteer to produce what is in short supply. In the fullness of time, they probably will. But that will be too late, and the cost will be needlessly high. Governor Andrew Cuomo of New York noted that face masks that used to cost 80 cents are now being hawked for $8.00. This is indeed the genius of capitalism.

Trump wants to apply the Department of Defense model to virus-related purchases. In that model, the “market” is reduced to a sole-source contract with soft constraints on cost overruns, guaranteed minimum returns for the company, and concealment of all details of the transaction on proprietary grounds.  

The point of nationalization, even if temporary, is to nail down specific production targets and fair prices. There are undoubtedly business firms in the U.S. that can produce anything that is in short supply. New York State seems to be doing it all by itself, if Governor Cuomo is to be believed.

When a bank fails, the government’s regulators march in after Friday close-of-business. The owners and top managers are dismissed. Shareholders and debtors are given haircuts or beheadings, depending on how bad things have gotten. Depositors are made whole, with capital infusions if necessary.

The Reconstruction Finance Corporation model is relevant here. A firm that fails to produce what is needed, when it is needed, can be propped up with loans or grants, or taken over if necessary.

What’s in question here is not planning versus “the market.” There is no market in any meaningful sense of the word for critical items. Failure to generate necessary supplies, relying on volunteers, is a plan in its own right. A very shitty plan. We can do better.

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