According to Thomas Sowell in his book Basic Economics, markets operate according to profits and losses. The profits tell producers what to produce and the losses tell them what to stop producing. When market forces are working, producers respond to what people need and want and also to what they can afford. That makes the market responsive to society. But under neoliberalism, economic interventionism creates a different less responsive marketplace. Instead of responding to people want, need and can afford, the market produces more of what the government provides subsidies for. Subsidies can be tax reprieves, for example. Or, instead of a subsidy, a low-interest loan can allow a corporation that isn’t profitable to continue making what no one wants, what no one needs, and what no one can afford. Another word for making things that no one wants, what no one needs and what no one can afford is “malinvestment,” and malinvestments waste economic resources and cause society to suffer. Sowell writes, “Profits as a realized end-result are crucial to the individual business, but it is the prospect of profits–and the threat of losses–that is crucial to the functioning of the economy as a whole.” And of course he’s right about that.
Something to ponder today, if you’re in the mood to ponder the economy, is whether low-interest loans and tax subsidies and imported cheaper labor serve the public’s interest in terms of keeping the market healthy. Is the market providing what people want at a price that they can afford? How much malinvestment surrounds us? And since the market clearly isn’t healthy and hasn’t been healthy now for a while, maybe we can see a failure of economic interventionism and a failure of neoliberalism. (A failure of TARP, a failure of QE, a failure of the ACA, a failure of Obama’s economic stimulus programs, a failure of wars in the Middle East, nearly 95 million working age people who aren’t working because the neoliberal economy is so bad that there isn’t enough prosperity in it to provide employment opportunities to those people).
The Commerce Clause in the U.S. Constitution was interpreted differently during the modern liberal period from 1861 to 1944. Congress’s power expanded under the Commerce Clause to help the nation make the most of new markets that formed during railroad transportation improvements. Article One, Section Eight is a long list of Congressional powers. The Commerce Clause reads, “The Congress shall have Power To regulate Commerce with foreign Nations, and among the several States; and with the Indian tribes;”. As the economy continues to lack prosperity, I hope that Congress will stop using the Commerce Clause for economic interventionism. I hope that Congress will count the terrible costliness of their harmful interventions. Because they have interfered enough to destroy the market mechanism of market self-regulation. Not only have they interfered with the self-regulation of markets, they have stimulated the growth of monopolies across the nation. In doing so they haven’t added to their influence but instead have undermined the U.S. economy and prosperity.
If you want to read more about how Americans have navigated challenging economic times over our history and through three different political ideologies, then buy a copy of Political Catsup with Economy Fries at Amazon.com today.
The quote came from:
Thomas Sowell, Basic Economics, Third Edition, (Basic Books, A Member of the Perseus Books Group, NY, 2007), 173.