"Invisible Hand" job

 

         "Invisible Hand"Job (with a nod to                         Adam Smith)

        There's a strange phenomenon that occurs in American politics. In general, it goes something like this: If the party in power before you were elected committed The US government to some action and new administration follows through with that commitment and things go wrong then it's the fault of the current administration for carrying out the previous administration’s committed actions.

        Two cases in point. In the first, George W. Bush committed the United States to troop withdrawal from Iraq. Barack Obama carried out those, previously agreed upon, initial troop withdrawals and there was some criticism of that from the Right. In the second case, Donald Trump agreed with the Taliban that the US would pull out of Afghanistan. This commitment, made while Trump was president, was carried out, as scheduled, by the Biden administration. Of course, Trump's ardent sycophant fanbase immediately jumped all over Biden when the Taliban re-seized control of the country.

        In the same vein and along the same lines, Donald Trump constantly bragged about his “record breaking economy” as if we were to believe that he actually knew anything about economics. This runaway growth was fueled in large part by incredibly high federal deficits during what Trump himself styled as a period of “great prosperity.” Trump’s response to one staffer who dared caution him re: deficits, was “We won’t be here!” It is contradictory to common sense, but not surprising, that much of this deficit was what fueled economic growth and so it was, in essence, as if Trump was using the nation's credit card to make himself look good. Of course, he once referred to himself as “The King of debt” in his personal business dealings.

        We are currently experiencing a period of high inflation even as Republicans in Congress have complained about the Biden administration's spending plan, which was actually aimed at improving infrastructure nationwide, creating jobs in the process. The inflation, and this is really the bottom line, has been driven to great extent by one global occurrence over which we have little control, that of course being the COVID pandemic.

        Some of the fallout of this has been that many Americans have not gone back to work or are not going back to work in their previous occupations. Among these are longshoremen, warehousemen, truck drivers and others involved in the process of getting imported goods to consumers. As any 11th grade high school student could tell you, shortage causes prices to increase, ergo inflation. As the global economy began rebounding from the pandemic, the price of crude oil also skyrocketed – also contributing to inflation. High gas prices are one of the most frustrating phenomena for any White House because they affect almost every American, but they are essentially immune from presidential action.

        No matter how many Republican brickbats are hurled at Joe Biden, the awkward fact is that inflation is the job of the Federal Reserve Board and even their ability is limited. Of course, people are upset about inflation, and they want the president to solve their problems, but the harsh reality is that it isn't his problem to solve, and his scope of possible actions is extremely limited, as it is with gas prices and the other things which constitute the economic inflationary scenario.

        The Federal Reserve Board is charged with maintaining price stability and the current period of elevated inflation is anything but stable. Even so, the Fed continues attempts to stimulate the economy, keeping interest rates at low levels. The head of JPMorgan summed it up thus: "We put all of this on the President. We put him on a pedestal and pretend he has this power that he doesn't have. This is the Federal Reserve's job."

        There is one move which could help relieve the stress the pandemic-related supply chain crisis is having on US companies: Lift tariffs imposed by former President Donald Trump. Trump put tariffs on roughly $350 billion of Chinese-made goods. US importers have paid more than $106 billion to cover the cost of those tariffs to date, and many of them are now also dealing with skyrocketing shipping costs. The nature of these tariffs is that they aren’t necessarily apparent to the consumer, but they have caused inflationary pricing for auto manufacturers, and even companies such as Black and Decker who use foreign components in most of their tools. When have you ever heard any Republican critique of these punitive tariffs? Me neither.

        The Biden administration has taken some actions within the current system aimed at inflation, but specific legislation would be necessary for major change. The President signed an executive order last September directing rulemaking at the Agriculture Department to boost competition and improve conditions for smaller farmers. The White House has also tasked the Federal Trade Commission to investigate potential price fixing in the energy sector.

The White House has said (correctly) that consolidation in the meat sector is part of what has driven up food prices. Some economists say more aggressively pushing antitrust laws could help ease inflation concerns.         Robert Reich, who was Labor Secretary under former President Bill Clinton, summed it up like this: "One of the big puzzles today is that corporate profits are at record highs and yet the corporations are passing on all these price increases to consumers."  He continued: "If they were really in a competitive market, if we were not dealing with monopolies or what we call oligopolies, these companies would not so easily just simply pass these prices on to consumers. They'd be worried about their competitors. But they're not and I think antitrust enforcement has got to go after these sources of huge market power, this corporate market power in the United States right now."

        One mantra of the Far Right is constant railing about “excessive” government regulation. This actually reflects the current political position of the Republican Party which is, to great extent dominated by two groups whose real situations could hardly be farther apart. On one hand, we have industrialists and corporations which, in reality, border on oligarchy in some key commodities, meat production and some agricultural products among them. (higher grocery bills?) These people benefit from a laissez-faire, or “hands off”, government attitude which says, in essence, “As long as you don't blatantly break the law, whatever you do is fine.” This includes price gouging, price fixing and market controls which benefit the corporation at the expense of the consumer. In the first decade of the 21st century it also meant bundling high risk mortgages and selling them as legitimate investment instruments. (And we all know how that worked out.) Of course, one of Donald Trump's first initiatives upon taking his seat in the White House was to gut the Obama administration's Dodd-Frank legislation which had tried to bring some regulation and assurance of legitimate operation to financial markets.

        One of the chief criticisms of laissez-faire theory is that capitalism as a system has moral ambiguities built into it (you think?) It does not inherently protect the weakest in society, nor is it even motivated to do so by any tangible means. While laissez-faire advocates argue that if individuals serve their own interests first, societal benefits will follow, modern society has not seen that altruism in action. This is why regulation “in the public interest” as Republican Theodore Roosevelt dubbed it, has evolved, primarily in the 20^th century.

        At the other extreme, we have the Red Hat wearing MAGA power base, motivated principally by carefully inculcated racial bias, who don't understand that those they support only care about their votes and could care less about their economic situation, One quick example and then we move on: As things stand right now, in the labor market, increased immigration could go a long way towards filling those jobs such as warehousemen and other labor related jobs that would get the supply chain moving again. This, of course, runs counter to the Trumpist propaganda, therefore they will continue railing at President Biden because of inflation while opposing actions which might help ease the situation.

        Adam Smith, the father of modern economics, referred to the vast and complex web of market pressures and influences as “the invisible hand,” a metaphor he coined to characterize the mechanisms through which beneficial social and economic outcomes may arise from the accumulated self-interested actions of individuals, none of whom may actually intend to bring about such outcomes. Even Adam Smith however, publishing in 1776, could not have predicted the impact of interdependent and interwoven international markets on individual national economies. He used the invisible hand metaphor to describe economics and markets in a far simpler world, without modern communications, labor unions, interlinked economies, and global markets.

        Smith’s “beneficial” social outcome assume some altruistic behavior, which is seldom seen these days. This does not mean Socialism is better, but it does imply that, for market capitalism to be sustainable for all citizens, some overarching authority elected by all the people should aspire to insure fair play for those voters. This is the “government regulation” so detested by Trump, Musk, and others.

        As it always has, inflation will level out, but in the modern scenario of linked world markets, affected as they are by events on other continents over which we have little or no real control, and dependent on resources unevenly distributed, it is far from a simple exercise in that most vague of the soft sciences, economics.