Despite this increased cronyism, the American economy has managed to increase the standard of living for the average American by leaps and bounds, contrary to what American Compass would have you believe. The handbook paints a bleak picture of American society and claims that “over the past 50 years, corporate profits rose by 185% [and] wages rose by 1%,” implying that Americans’ standard of living has barely increased. That claim could not be farther from the truth. This particular wage statistic does not describe all workers but only a subset of US workers, specifically production and nonsupervisory employees, who make up roughly 65% of the labor force. The real average hourly earnings of all private employees in the past 16 years rose by 65%, and the real hourly earnings for manufacturing employees in the past 50 years rose by 614%.
To accurately capture income’s impact on standard of living, one must focus on consumption measures of well-being instead of exclusively focusing on income measures. The Time Well Spent report, published by the Federal Reserve Bank of Dallas, details the “minutes of work” it takes to purchase various products. Due to increases in worker productivity and cost-saving innovations, Americans now need to work fewer minutes to purchase nearly everything. For example, since 1920, the time it takes to work for a square foot of housing has decreased by over 28%, a three-pound bag of tomatoes has decreased by over 80%, and a three-pound chicken has decreased by over 91%. Furthermore, these measures are severely understated since the quality of the goods described has been increasing over time. Consider this: a house in 1920 did not have the space, central HVAC, double pane windows, or the microwave oven a house built in 1998 had—and even still, Americans worked fewer minutes to buy the higher-quality home.
Any industrial policy will be wrought with political incentives and American Compass’ industrial policy is no different. Their plan is to subsidize a national bank to “reshore domestic manufacturing … and secure critical industry.” Just like industrial policy of the past, which failed to anticipate that “critical infrastructure” would include semi-conductors and AI technology, this industrial policy is based on the American manufacturing economy of a bygone era. The United States’ economy is primarily made up of services, not industry and manufacturing. In 2021, services made up 77.6% of GDP while industry only made up 17.9% of GDP. Subsidizing dying industries that government officials select based on their nostalgia for the past is going to do nothing but impede American economic growth. Allowing the price mechanism to alert entrepreneurs and consumers of the highest and best use of goods and services is the key to real economic growth. Even if we could insulate such a policy from special interest groups and cronyism, it is impossible for any government to know which sectors and industries are worthy of subsidy.
This plan seeks to “create demand for domestic manufacturing” by “establish[ing] a 50% local content requirement (LCR) for goods that are critical to national security or the industrial base as defined by the Departments of Commerce and Defense, mandating that domestic labor and domestically sourced intermediate goods account for at least half the value in those critical goods.” If promoting domestic industry is inherently economically beneficial, we ought to have a 100% local content requirement. Since the authors recognize that a 100% LCR is economically infeasible, they ought to realize that a 50% LCR is inherently arbitrary and furthermore ought to realize that prices already guide consumer and producer actions to produce goods with the LCR which both maximize profit and gets consumers the best price.
One need only look at the impact of the Jones Act to be able to predict the disastrous consequences a policy like this proposal would have. The Jones Act requires US ships and American crews to carry any cargo that is shipped between any US ports. There are tremendous costs associated with these restrictions including transportation, environmental, production, and infrastructure costs. Much higher shipping costs have resulted in an inordinate amount of cargo to be shipped by truck in the US. The Maritime Administration estimates that this “congestion in the nation’s transportation system costs Americans $200 billion every year, wastes 4.2 billion hours spent in traffic, and wastes 2.9 billion gallons of fuel used while idling.”
Monday marks the 50th anniversary of the military coup in Chile that removed Marxist President Salvador Allende from office. Allende committed suicide that day rather than surrender and go into exile. Army Gen. Augusto Pinochet took power and remained at the helm of Chile’s government for more than 16 years.
n the midst of the Cold War, Washington contributed, financially and otherwise, to groups in Chile opposed to Allende while the Soviet KGB and Havana backed him. In early September 1973, as economic chaos and a constitutional crisis shook the country, the U.S. was aware of rumblings in the armed forces. But Central Intelligence Agency briefings for President Richard Nixon, declassified last month, suggest that the agency wasn’t informed ahead of time about the military’s decision to move against Allende. “Although military officers are increasingly determined to restore political and economic order, they may still lack an effectively coordinated plan that would capitalize on the widespread civilian opposition,” the CIA told Nixon on the morning of Sept. 11.
It’s true that Allende had used the electoral process to get to the presidency. He narrowly finished first in the 1970 election, but with less than 37% of the vote. That meant Congress had to green-light his inauguration. His Popular Unity coalition—which brought together the Communist Party and his own Socialist Party—combined with his warm relationship with Fidel Castroand a long record of preaching bolshevism caused hesitation in the chamber. It was overcome after he pledged to abide by a statute of constitutional guarantees. Once in office, he unleashed a revolutionary rampage, not only failing to “govern,” as Mr. Lagos put it, but refusing to accept limits on executive power.
Expropriation and nationalizations sent investors fleeing. There was triple-digit hyperinflation, followed by price controls, dire shortages and rationing. Allende also trampled institutions. He inflamed civil society by targeting the free press and with a plan to turn schools into indoctrination centers.
In May 1973 the Supreme Court accused the government of flouting judicial decisions and the law. The medical and bar associations took a similar stance. On Aug. 22 the lower house of the Chilean Congress passed a resolution denouncing Allende’s power grab and calling on the military to uphold its oath to the constitution.
Without enough votes in the Senate to unseat him, there was no legal way to stop the lawless president. Everyone knew it. A month after the coup, left-of-center former Christian Democrat President Eduardo Frei declared “the military has saved Chile.”
A useful way to think about price controls is that they destroy mutually beneficial Coasean bargains. By a “Coasean bargain,” I mean an offer that takes the following form: “I’ll pay you to reduce this harm” or “I’ll compensate you for bearing this harm.”
Consider minimum wage as an example of the former instance. Imagine factory workers on a hot summer day making $7.25 per hour. In a free market, they (could) strike the following deal with their employer: “We’ll go down to $7 per hour if you install AC.” Assuming that AC is sufficiently cheap, it’s a win-win. Workers get the AC, which they value more than 25 cents per hour, and the employer saves more on his wage bill than he expends on his AC bill. In essence, the workers are saying: “We’ll pay you to remove this harm.”
Except, the minimum wage prevents wages from falling to seven dollars. A mutually beneficial exchange fails to materialize.
As for those despicable accusations that social-media companies were killing people by refusing to censor Americans with dissenting views on Covid, in 2021 President Biden was among those who made such a claim against Facebook and then took days to retract it.
As if his accusation wasn’t appalling enough, the president was attacking Facebook in part for not doing enough to squelch dissenting views on vaccines, when Mr. Biden himself had raised doubts about vaccines in 2020 when he thought it would help him win the presidency.
Leslie Bienen and Margery Smelkinson, writing in the Wall Street Journal, rightly bemoan the reality that “the Covid pandemic is over, but administrators at some schools are slow to get the word.” Here’s their conclusion:
These onerous rules are likely to make students sicker. Students with Covid-like symptoms will stay away from the campus health clinic for fear they will be tested and summarily sent off campus. They may end up circulating infections such as flu, strep or mononucleosis. Those who do leave campus with Covid will encounter elderly people, who are at higher risk. It’s hard to think of a more useless and ill-conceived “mitigation” policy.