Here’s a letter to The Hill. (The details of this history, I am sure, are more complicated and muddy, but the general lesson remains sufficiently straightforward and clear.)
Editor:
You report on the Trump administration’s executive order that, in your words, “rebukes defense firms for stock buybacks, paying dividends to investors and high compensation for CEOs, rather than using profits to invest in plant capacity” (“Defense industry flummoxed by Trump’s executive order on profits,” January 25). I have no special sympathies for the concerns of executives of defense firms, but their objections to detailed micromanagement by government of their operations are legitimate.
Neither Pres. Trump nor anyone in his administration knows how best to strike the countless trade-offs that firms must strike in order to obtain the amounts and kinds of capital – financial and human – that best ensure efficient operation. Proscriptions and prescriptions of the sort now imposed by the administration are destined to obstruct defense-firms’ abilities to supply the Pentagon as well as possible.
As always, history offers sound counsel. Johan Norberg writes in Peak Human that as America was entering WWII, former automotive executive Bill Knudsen “convinced Washington not to nationalize or command production, but just to put in the orders and then allow businesses to find the best and cheapest ways of producing, free from control and regulation.”*
Knudsen’s advice was wise then. It is no less wise now.
Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030* Johan Norberg, Peak Human: What We Can Learn from the Rise and Fall of Golden Ages (London: Atlantic Books, 2025), page 419.
