Letter 2 America for March 14, 2023

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Dear America,

After a year of the consternation of the economist establishment, including our treasury department and "The Fed," over inflation and the cognate consequences they all fear, I find my frustration over the dogmatic, pat observations they continually utter unbearable.  Someone should ask them to examine the dogma in question because it leads to the ineluctable conclusion that the consuming public is creating inflation, which in turn is enriching the executive class and the owners of the capital in our capitalist system but not inculpating them.  But the fact is that they, and not those who put their hands to creation of the goods and services we all need and consume, seem to be the only ones benefiting from the anathematic inflationary spiral that the experts bemoan.  It was recently announced that the top three oil companies, including Exxon-Mobil, "earned" profits totaling nearly $200 billion in 2022 while they supplied us amply with the gasoline we needed.  But if the law of supply and demand is correct, the sufficiency of demand should not have yielded the inflation in gas prices that we all experienced.  Something is profoundly wrong with the assumptions that go into the fabrication of economic laws.  Ample supply should not have yielded inflated prices for the commodities in question, including food...and toilet paper.  To put it concisely, the rich are getting richer in proportion to the amount of inflation while the working masses continue to struggle to stay even with it.  Add to that the fact that more than 60% of the activity in our economy is consumer spending, and that without that spending (the more the better), the supply side withers and dies and you cannot escape the pivotal question: What do they want from us?

I admit that that question is a little on the glib side.  I know what they want from us and so do you.  They want us to continue buying and they want to continue to pay us no more for our labor than they have since the Reagan pontification of the primacy of the "supply side" in our economic system while they raise prices in more than the same amount they give us back in the illusory wage spiral that in the final analysis keeps us just treading water.  It's risky to point these things out in that criticism of our capitalist system has been anathematized as everything from un-American to uhhh, communist, and wearing either badge is self-destructive today.  But someone has to question the fundamental assumptions that make the abuse of the workers of the world (a loaded phrase given its significance during the first half of the last century) the norm in our economic system.  It is fundamentally unfair for the CEO of an American corporation to make millions per year for taking meetings out on the golf course while the people screwing in the bolts on the assembly line can't seem to get ahead.  As to what to do about this injustice, the solution is in the nature of the problem: prices...as in price controls.  Of course, you can't ask economists about them, such as those levied on specific goods, because history hasn't exactly bourn them out as remedial, primarily because they have had too limited scopes and durations.  For example, rent controls supposedly result in lower quality housing and scarcity.  But rent control in New York City has endured for decades, and for those who benefit from it, rent control has made life in New York livable.  Yet, as far as I know, rent-controlled landlords haven't jumped out of the residential real estate business, suggesting that it continues to be a money maker, just more moderately.  Similarly, though inflation threatened our society during our twentieth century wars, price controls made our continued production of consumer and military goods possible.  So let me point to an example of a type of price control that worked for decades, and that led to a spike in accretion of unearned wealth when they ended.

The Energy Policy and Conservation Act was passed in 1975.  It banned the export of American petroleum.  Those of you who are of a certain age will remember the OPEC oil embargo that started a couple of years before its enactment and I for one do not recall anyone quarreling with it as a means of preserving American economic hegemony in the world.  Then in 2015--remember who was president then, and thus who held the "veto pen" at the time--our Republican congress passed a repeal of the law and President Obama signed it, one of the reasons that I don't think he was quite the great president of the people he is revered as in his emeritus status.  Prices for American crude oil rose immediately and so did oil company profits as our manufacturers began charging what their foreign competitors did.  But refiners and shippers suffered because petroleum products they produced had to compete with those manufactured from higher petroleum prices abroad.  To put it concisely, big oil producers got even richer, but those around them struggled.  In other words, removing price controls on oil producers' products made them richer while everyone else took the hit.

My point is that price controls, when properly conceived and levied, can be used to redistribute the wealth that capitalism produces in a more equitable fashion.  A windfall profits tax on that $200 billion boon that landed in petroleum producers laps in 2022 could be used to mitigate the increase in our national deficit for next year from implementation of programs to subsidize day care for working people, and thus give them more financial fluidity and stability.  Similarly, price controls in the face of labor shortages could have the same effect, redistributing wealth to those who produce goods since those who own the means of producing them will have no choice but to pay them more if they don't want to lose them and thus, limit the production of their sole source of wealth.

We're half-way to a fairer form of capitalism.  Labor is scarce and jobs are going begging.  It's a labor, not an employers', market.  All we need from our government is for prices for the goods that sustain labor to be made more affordable to them for American capitalism to become American economic justice.  Think about it.

Your friend,


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This page contains a single entry by Michael Wolf published on March 16, 2023 4:33 PM.

Letter 2 America for March 1, 2023 was the previous entry in this blog.

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