Gwartney was a founding coauthor of the Economic Freedom of the World index, which since 1996 has been published by more than 100 institutions, including the Fraser Institute in Canada and the Cato Institute in the U.S. The index was the idea of Milton and Rose Friedman and Fraser’s Michael Walker, but Gwartney and his team (including one of us, Mr. Lawson) led the charge to establish it and make it viable. It now scores 165 countries based on several dozen indicators, including low government spending, protection of private property rights, stable prices, free trade, and light regulation of markets. More than 1,300 peer-reviewed journal articles have used the Economic Freedom of the World index to demonstrate the beneficial effects of economic freedom for national income growth, healthy outcomes and equality across many dimensions.
Gwartney (like Mr. Vedder), in research published by the Joint Economic Committee of Congress, empirically demonstrated that excessive governmental spending led to output below a maximum potential. That prompted Gwartney to make an early 2000 visit to Russia, which had spent a decade struggling with the transition from the Soviet command economy. The new president, Vladimir Putin, wanted to reverse the decline. His economic adviser Andrei Illarionovinvited a small delegation of market-oriented American economists to meet with Mr. Putin and other Russian officials. Within months of the visit, Russia had replaced its income tax, which had a top rate of 80%, with a 13% flat rate. The economy boomed, only to stagnate after a few years as Mr. Putin increasingly reverted to an authoritarian kleptocracy.
So how does Mr. Ackman explain his naiveté about DEI, which many of his Twitter followers find astonishing? Ms. Gay’s ideology—her commitment to “diversity, equity and inclusion”—was out in the open well before Oct. 8. To say that she flaunted it wouldn’t be an overstatement.
“I think diversity, equity, inclusion are wonderful things, OK?” Mr. Ackman says. “Small ‘d,’ small ‘e,’ small ‘i.’ But when you capitalize them in turning into a movement, the way that it’s applied at places like Harvard, it’s not about true diversity, equity and inclusion.” He concedes that “it takes, frankly, a little bit of study to understand this. I’m not up on campus. I didn’t understand the details, the implementation, and the philosophical backdrop.” He likens DEI to ESG—environmental, social and governance, self-righteous nostrums by which many corporations abide. “Well-intentioned movements like ESG can have catastrophic consequences for the world. Europe’s loss of energy independence was a contributing factor in Putin having the confidence to invade Ukraine.”
Yet the more economists study the effects of the pandemic, the less evidence they find for the argument that globalization reduces resilience. Almost all of the shortages that occurred during the pandemic had little to do with globalized supply chains. Rather, they sprang from two causes. First: In many instances, producers and suppliers were caught short by radical shifts in the composition of demand. Semiconductor shortages were not due to a reduction in production but a shift from using them in automobiles to using them in video games. By the time auto manufacturers realized they had overestimated the falloff in demand, the semiconductors they needed were being used to power Xboxes. Second, and relatedly: Some firms relied so heavily on lean manufacturing techniques that they lacked the inventory to cope with even a mild perturbation in their supply chains.
Meanwhile, the more globalized supply chains were, the more resilient they were in the face of the pandemic. One study of Indian producers found that in the areas hardest hit by the pandemic, it was the producers who relied on more complex supply chains that were more able to weather the storm. Apparently, such firms tended to be more conscious of the risks from disruption and thus better prepared to cope with shocks.
This phenomenon was not limited to the subcontinent. Economists Pinelopi K. Goldberg and Tristan Reed recently looked at whether the global economy suffered from shortages due to disruptions in the global supply chain. They found the exact opposite. That’s because an economy with thoroughly nationalized supply chains increases its vulnerability to localized shocks. Even in instances like personal protective equipment (PPE), the evidence strongly suggests economies more reliant on imports were able to recover their stocks far more quickly than those that tried to produce more PPE indigenously.
“In sum,” they write, “despite the prominence of resilience concerns in the public debate in the past three years, the evidence to date provides no support either for the view that global supply chains were not resilient during the pandemic or that the world economy would have been more resilient if there had been less dependence on foreign inputs and trade…unless a sector is highly dependent on a single import source (as is the case with the dependence of the energy sector in Europe on Russia), international trade seems to contribute to resilience, not compromise it.” They conclude “it is unlikely that trade restrictions will improve countries’ resilience.” In other words, a more globalized economy might prove to be a more resilient economy. The post-neoliberal emphasis on the location of production is largely misplaced.
Perhaps it is a blessing that Mexico enjoys middling state capacity. Were Mexico to enjoy greater state capacity, the presidency would likely suffocate the economy through more effective central planning.
I don’t think journalists or universities grasp how much their reputation has suffered, and that it’s due to their own intellectual dishonesty. A generation ago newspapers and universities were esteemed institutions. Now you see open contempt for them.