Internally coherent and fundamentally flawed
We do not, apparently, have supply chain shortages or inflation. That’s according to John Tamny at Forbes:
“Media members, ‘experts,’ economists, and politicians don’t even disappoint anymore. To say they do would be to flatter them.
“Either they think we have inflation, shortages, or a combination of both. Wrong on all counts. Really, who was talking about supply-chain shortages or the impossibility that is demand-driven inflation in early 2020? Very few were, and that’s because the U.S. economy was largely free then. At which point politicians panicked. And in panicking, they imposed a rather draconian form of command-and-control on the U.S. economy.
“Some were free to work, some weren’t, and more still were free to work and operate their businesses within strict political limits. From freedom to central planning in a very small amount of time.”
Shortages are not – in and of themselves – evidence of inflation:
“A rise in one price due to lack of supply implies a fall in other prices. Yes, we have a central planning problem. Were he around today, Adam Smith could diagnose this in seconds.”
Within its own terms, this is undoubtedly correct. As Tamny explains, the economy is made up of a web of trillions – indeed, this is probably an underestimate – of voluntary economic transactions which evolve spontaneously, day-in, day-out. It was wishful thinking to believe that entire regions of the global economy could be shut down without having major economic ramifications. And it is wishful thinking that even more state interference is going to solve the problem… but not for the reasons Tamny suggests.
The fundamental flaw here is that Tamny sees the economy as a financial system. As a result, he sees the reasons for inflation in politicians trying to buck the market, and central bankers printing too much currency:
“Devaluation was a routine problem in the 1970s, it ceased to be in the 80s and 90s, but it reared its ugly head once again during the George W. Bush administration in the early 2000s.”
The dates here are instructive when we understand that the economy is an energy system. 1970 was, of course, the year that cheap oil ended with the US peak. The brief period of debt-based prosperity from the mid-1980s through the 1990s, was the result of new oil deposits in Alaska, the North Sea and the Gulf of Mexico holding prices lower. The early 2000s marking the point that conventional oil extraction reached its peak.
The rising energy cost of energy since the 1990s halted real (non-financial) economic growth in the developed states; but allowed one last gasp of growth in developing, coal-powered economies like China and India. By 2019, even that had come to an end. And so, the ills which Tamny blames on central pandemic planning actually predated the pandemic… although government actions have undoubtedly worsened and accelerated them.
It goes without saying that governments and central bankers will also worsen and accelerate the unfolding crisis; because they are also clueless about the central role of surplus energy in powering the economy.
This political system isn’t working
Democracy may be “the worst political system… except for all the others.” But even within the broad umbrella of democracy there are a host of different systems; each with its own benefits and drawbacks. And just as night follows day, you can be sure that the losers under one system will seek an alternative which appears to give them a better chance of victory next time.
So it is that Wales’ First Minister has raised the banner of electoral reform:
“I’ve already put on record my own views on electoral reform, and the way in which it would make the case for the United Kingdom. In Scotland, in December 2019, the Liberal Democrats took 9% of the vote and won four seats. Labour took 19% of the vote and won just a single seat. Nearly two out of every ten votes cast leads to one out of 59 seats won.
“I have every sort of democratic quarrel with such a system, but for today I feel certain that its continuation will only feed further the fissures which threaten to prise the United Kingdom apart.”
As always, the problem is how we get there from here. Throughout the Thatcher years and again after Cameron and Osborne took over, sections of the Labour Party and the smaller parties have rallied behind electoral reform. But the Labour Party has always – and will continue – to rule out the kind of electoral pact which would be the first step on the road to a different system. And on the three occasions when Labour managed to win under the current system – 1997, 2001 and 2005 – they saw no reason to change it because they were fooled into believing it worked for them.
Ironically, it was a Tory-Liberal coalition which produced the one, lukewarm offer of electoral reform. Then, in true Liberal fashion, they managed to conjure up a spectacular defeat. And the manner in which the establishment media and all of the organs of cultural reproduction rallied in support of the status quo, highlights the second obstacle that any coalition for electoral reform is going to encounter. It will take time – years if not decades – and energy, to build sufficient public support to counter the inevitable attacks from the vested interests that benefit from the existing arrangements.
The hard truth is that the electoral system is least among the reasons why Labour has been losing elections since 2010. Indeed, the third problem with electoral reform is that if, given current politics, the alternative is truly proportional, we are more likely to end up with a right-wing populist government than the desired progressive coalition… be careful what you wish for!
As you made it to the end…
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