- Frank Knight and the Place of Principles in Economics and Politics - May 13, 2021
- Hayek’s Still Relevant Response to Today’s Paternalist Planners - May 12, 2021
- Biden’s Agenda of “Democratic” Paternalism and Planning - May 3, 2021
I still vividly recall sitting with a high school friend on the evening of July 20, 1969 and watching on television as astronaut Neil Armstrong stepped down onto the surface of the moon, a few minutes before 8 p.m., west coast Pacific time, and saying his famous words, “One small step for a man, one giant leap for mankind.” My glance went back and forth from watching Armstrong make his first steps on the moon’s surface and looking out the window at what was a full moon in the clear night sky over Hollywood, California where I lived, and thinking how surrealistic it all seemed.
In our new era of Covid-19 Big Government, there are those who want that famous event of a little over a half-century ago to serve as inspiration and a model for a post-coronavirus epoch of renewed and expanded political paternalism through government-business partnerships to solve the earth-bound problems of humanity. The questions I would ask are, was it really worth it and is this the appropriate role for government in a free society?
Building Up the State for Expanded Political Paternalism
Mariana Mazzucato is a professor of economics at University College, London, and the chair of the World Health Organization’s Council on the Economics of Health for All. She is one of the prominent advocates of government taking on “big missions” in society as the political “big brother” that organizes and directs those in the private sector who are to follow and obey the lead of governmental paternalists like herself. All, of course, to make a better world. (See my article, “The Downsides and Dangers of Mission-Making”.)
Professor Mazzucato argues, in her recent article, “Build Back the State” (April 15, 2021), that the Apollo mission to the moon demonstrates how government should do things that can get big things done, such as combating climate change and reducing income inequality through political leadership. She tells us, “The task for the Biden administration is to provide leadership for the missions that will shape the decades ahead, starting with the fight against climate change.”
She makes it very clear that it must be those in political power who should be in charge of the future economic direction of the United States: “We need top-down direction to catalyze innovation and investment across the economy. And the Apollo era’s example of government’s leadership, bold public interest contracts, and public sector dynamism offer a valuable template.”
In addition, there is no turning back from this. Professor Mazzucato points out that while President John F. Kennedy may have said in 1962 that going to the moon was a “choice,” today in the 21st century, the “same type of visionary leadership is not a choice, but a necessity.” By implication, denying or opposing such a more dominant role for government is to be on the “wrong side of history.” In other words, it’s either political paternalism on steroids or “curtains” for humankind.
The Political Mission-Makers Dictate to the Private Sector
Government must set the goals, determine the best way to get there, and then entice selected big business partners to go along with it through the offering of hundreds of millions, indeed, billions, of tax or borrowed dollars to do the investment and innovative work that the political leaders want them to take on. The private sector, therefore, is the “junior partner” who follows the directives and commands of those shoveling out the federal funds to the corporate coffers. To see that private self-interest never gets in the way of what and how the government wants things done, there should be imposed “fixed-price” contracts to prevent cost overruns, and at the same time to have strict regulations that assure the profits to be earned are what the political authorities consider reasonable and “fair.”
The purpose of the price, cost and profit restraints, Professor Mazzucato tells us, is to ensure that what drives their private business partners is “scientific curiosity” and the public welfare rather than “greed or speculation.” To guarantee that those devious private enterprisers don’t pull a fast one on Uncle Sam, the government bureaucracies have to be filled with technical experts with the knowledge to keep the profit-seekers on the straight and narrow path of only doing what government knows to be best:
“By strengthening the public sector’s capabilities and outlining a clear purpose for public-private alliances, the Biden administration could both deliver growth and help tackle some of the greatest challenges of our age, from inequality and weak health systems to global warming. These problems are much more complex and multi-dimensional than sending a man to the moon. But the imperative is the same: effective strategic governance of the space where public funding meets private industry.”
The Apollo Project was not “the People’s” Preference
It is interesting to note that President Kennedy told the head of NASA at that time, “I’m not that interested in space.” It was based on a political decision that the U.S. had to get there before the Soviet Union, that is, “because we hope to beat them, and demonstrate that starting behind, as we did by a couple of years, by God, we passed them.” In fact, Kennedy was more concerned that the cost of going to the moon might “wreck our budget.”
Nor were the American people all that excited and interested in the U.S. getting to the moon first. According to Gallup opinion surveys, in 1965, four years before Armstrong’s walk on the moon, only 39 percent of the respondents supported the moon project to get there before the Soviets, “whatever it costs.” In fact, throughout the 1960s, opinion polls said that cutting the space program was near the top of the list of those government programs respondents thought not to be worth funding. Even after the successful landing on the moon in 1969, public opinion surveys reported that only 53 percent thought it had been worth the cost. And in the 1970s, those in favor of the space program decreased well into the 40s percentage range.
Americans Even Less Excited about Paying to Stop Climate Change
While Professor Mazzucato understands that going to the moon was a “choice,” government directed and commanded leadership on climate change, inequality, and health care is now a “necessity.” But in whose eyes? An Associated Press poll in 2019 found that 57 percent of Americans were willing to pay $1 a month more in taxes to “fight” global warming. But when they were asked whether they would be willing to pay an extra $10 a month to stop the climate from changing, only 28 percent said “yes,” while 68 percent said they were opposed.
Clearly, once told that a cost comes attached to the politically hailed benefit of an “unchanged” climate (whatever that would mean!), the public’s enthusiasm falls precipitously. Once the actual price tags of higher gasoline costs at the pump, increased bills for heating and air conditioning, the inconveniences of mandated restrictions on air flights with increased ticket prices, along with possible mileage limits on driving your car to “save the planet,” the numbers of voters supporting a drastic reduction in the standard and quality of life to combat the climate change bogeyman will most likely become far less than what it may be today.
The entire Apollo program in the 1960s and 1970s had a cost of an estimated $25 billion at the time, or about $157 billion in today’s dollars. That paid for all the equipment and material, and around 400,000 people working to help put a total of 12 astronauts on the moon. The Biden administration infrastructure and anti-climate change programs carry a combined price tag of upwards of $4 trillion over the next eight to ten years, if everything proposed were to be implemented and funded. It will require higher taxes and increased prices and reduced living standards far more than that $1 a month that 57 percent of the public said they were willing to pay to “save” the planet.
Exciting Missions for Those Planning to Be the Planners
When Professor Mazzucato says that what the White House is taking on is more complex and intricate than just getting men to the moon, she is telling the truth. The federal government would be basically taking over more direct decision-making for various forms of manufacturing methods, residential and business construction standards, and huge additions to expenditures on health care and welfare redistribution. There would be funding to support unionization of more of the labor force, and subsidies and grants to those in the private sector willing to do the government’s bidding. Not to mention the funding for electric cars and accompanying recharging facilities, along with more funding for Amtrak and broadband internet. Indeed, a number of analysts have made it fairly clear that only a fraction of these trillions would be allocated for what has traditionally been considered road and bridge repair and rebuilding.
The grand national “mission-making” that Professor Mazzucato happily and insistently endorses and demands from the Biden administration reeks with the pungent odor of political power-lusting, special interest corruption, and dictatorial direction of virtually every person’s life. It also carries with it the end to all reasonable and rational economic decision-making throughout the American economy.
One can only read the words of someone like Mariana Mazzucato and sense the euphoric excitement of those who dream dreams of planning the future of the world. Clearly, she views herself among those qualified and destined to tell everyone else how they should and will live. Place her in charge, or at least among the special ones whispering into the ears of those in power who give the “expert” advice without which the world is doomed to live in misery and injustice. (See my article, “If I Ruled the World: A Dangerous Dream”.)
Special Interest Politicking Grows with More and Bigger “Missions”
A spider’s web of government interventions, regulations and controls and commands of the type that must accompany a top-down system of government planning of economic and social life, as implied by Professor Mazzucato’s vision, will inescapably bring with it an intensified institutional setting of special interest favor-seeking and political profit-making.
To the extent to which private enterprises’ revenues and economic survivability is dependent on government spending and regulating and planning, every affected business will have an increased incentive to develop “relationships” with the agencies and its personnel – the overseeing “experts” in the bureaucracies – and with the politicians and their staffers whose decisions and permissions and contract privileges will determine a company’s success or failure. Political connections, and not market competitiveness, becomes increasingly central to every businessman’s attention and intention. (See my article, “Out-of-Control Government: How, Why, and What to Do”.)
More Political Planning Means Less Personal Choice and Freedom
How can the tentacles of government intervention and planning extend so far into the economic activities of every corner of society and not bring with it a decrease in the degree of liberty and freedom of choice of the citizenry in their roles as consumers and producers? As the “senior partner” in these government-business “mission” relationships, the autonomy of individuals on the producer side of the economy necessarily is confined within the targets and goals, the “carrots” and the “sticks” of what those in political authority demand and determine as the direction of economic activity.
Control and command over production by necessity narrows and dictates what is offered to the consuming public and on what terms. The loss of economic liberty carries with it a narrowing of personal choice and self-determination as to how we live and the options offered to us and at what expense; they are taken out of our own hands in the free associations of an open and competitive marketplace and shifted into the political hands of those imposing the top-down directives over all of our lives. In an earlier period of time not too long ago this would have been labelled tyranny and totalitarianism. (See my article, “‘Great National Purposes’ Mean Less Freedom”.)
The Mutual Benefits in Free Market Exchange
Finally, Professor Mazzucato’s government “mission-making” weakens and finally destroys all economic rationality concerning what is to be produced in the society, as well as how and for whom. Since the time of Adam Smith, the virtue of the liberal free market economy has been understood as leaving each and every individual at liberty to make his own decisions as a consumer and producer. This is made possible due to the institutions of private property, freedom of association and exchange, and unrestricted peaceful and honest competition among all the participants in the social system of division of labor.
Self-interest is harnessed to the general well-being of all those in society by requiring everyone to creatively and effectively find niches for themselves in the arenas of production and trade by which they may acquire the things they want and desire by offering in exchange some good or service willingly taken by others in the agreed-upon buying and selling.
Prices Inform and Coordinate All That People Do
People express what they want and the values they place on the things they desire by the prices they are willing to pay for them. Sellers articulate what they may be willing to produce and sell through the prices at which they offer their goods and services to others in the market. At the same time, competing producers bid for the labor services and resources and capital equipment they may use in their respective lines of production, and those offering their means of production in the pursuit of employment evaluate the alternative prices and wages offered by the rival producers and decide which ones seem most attractive to negotiate over and accept.
The end result is that the prices for finished goods and the prices for the factors of production offer entrepreneurs, private enterprisers, and businessmen the means of determining what to produce and how to produce; that is, prices provide the tools for the “economic calculation” of deciding which lines of production and with what combination of inputs might bring a profit versus a loss, and if there exists potential for profitability; in what ways of producing the chosen good maximizes the net possible gain.
Production is guided into those directions reflecting the most highly valued wants of consumers, and supply-side competition sees to it that the scarce resources of society, including labor, are allocated and applied in ways that tend to utilize them in the most economically efficient and effective ways. Free markets supply what people, in their role as consumers, actually want and are willing to pay for, and each earns an income based on what the market says their services are considered to be worth in their respective roles as producers.
The entire competitive market process and price system sees to it that supplies and demands are tending to match, that information is provided to everyone about what, how and where to be doing things in ever-changing economic circumstances, and that each participant has a fairly wide latitude to make their own decisions in their joint roles as consumer and producer.
Political Planning Making Decision-Making Irrational
Many, if not most or all of these free decisions are to be taken out of people’s hands and coercively transferred to the control of those in political power. The governmental “mission-makers” will now decide what shall be produced and in what ways and for which purposes. Goods produced and supplied will now reflect the ideas of how people like Mariana Mazzucato, in their roles as “experts” advising the government, think these things should be done.
By manipulating prices, setting profit margins, dictating what goods should be produced in what technological ways to meet what they think is good and needed by “society” and “the planet,” the entire economic system loses all reasonable footing for rational decision-making.
Let’s take Professor Mazzucato’s three areas of “mission” concern: the global environment, health care, and income inequality. How and by whom will it be decided that certain relative quantities of resources and labor will be devoted to infrastructure retrofitting versus wind-power turbine construction versus solar power manufacturing, and with what pieces of land for each of these two latter activities versus the uses of that land for residential housing, farming, wildlife preserves, retail shopping needs, or manufacturing sites of things that are considered useful and desirable to be produced by the “mission” planners?
How will these be weighed and considered versus allocations and uses of the scarce resources of the society for health care research, the servicing of patients, and the manufacturing of the medical devices and equipment and facilities connected with the provision of health care needs?
How will all these decisions be made versus a reallocation of income and wealth through tax transfers and in-kind services to those deemed “marginalized” and “unprivileged” and “underrepresented” in society? How will it be decided that not enough disposable income has been redistributed to “people of color” – and since “colors” come in a variety of shades, the determination of what and how much goes to each racial and ethnic “color” group? The same applies to those declaring their chosen gender and sexual orientation. How and who decides the proper “marginal” distribution of employments and relative incomes between “straight” people of color versus white people who are gay or handicapped and who come from differing family income and educational backgrounds?
Who Selects the “Experts” Like Mariana Mazzucato?
And who selects the “experts” like Professor Mazzucato, and on what bases and benchmarks, and how is it known that what they say are the necessary “mission” priorities are the ones to which all in society are to be made to conform? Oh, and by the way, Mariana Mazzucato’s Wikipedia page tells us that she is “Italian-American” and married, and, seemingly, “straight.” Her own home page tells us that she is “on a mission to save capitalism from itself” and that “this economist has a plan to fix capitalism. It is time we all listened.”
Straight? White? Italian-American? Clearly privileged and overrepresented. So what if she tells us how smart and important she is on her own home page? Where is the “person of color” or the gender-marginalized handicapped, gay or lesbian person who should be doing her jobs instead of her? Wait! Italian? Doesn’t that mean that some of her past family members may have been real fascists exploiting and oppressing Libyans and Ethiopians and Somalis in Africa during Mussolini’s time in power? Why has she not been culturally cancelled?
Decision-Making Is Taken Out of Real People’s Hands
All economic and social questions and problems are taken out of the peaceful, voluntary, and private arenas of market exchange and the nongovernmental institutions of civil society. Prices can no longer tell people what their fellow human beings actually want and how much they value it. Individuals cannot pursue ways of earning a living guided by what others might like to buy from them, and sort out how best to do it based on the agreed-up mutual terms of hiring and employing. “The people” are no longer allowed to freely speak to each other through prices, and associate with each other as they find best and most advantageous through the free bargaining and contracting that is otherwise central to an open and competitive free market. (See my article, “Price Controls Attack Freedom of Speech”.)
To the extent that climate changes may be occurring that have negative effects on people in different ways in different parts of the world, the advantage and benefit of the free market system is that changing demands, shifting resource and supply possibilities, and changing terms-of-trade in the relative price structures for inputs and outputs constantly and flexibly incorporates the relevant information and of all the worldwide changing circumstances. Individuals and private enterprises in each and every corner of the global division of labor then have profit-motivated incentives and the personal liberty to utilize their own unique and specialized types of knowledge to competitively discover and bring about the appropriate modifications in what people do, where and in what ways, and with the most cost-efficient uses of resources, capital investments and labor skills to do so. (See my article, “F. A. Hayek and Why Government Can’t Manage Society”.)
We all are, instead, under Professor Mazzucato’s scheme of things, reduced to those manipulated pawns on the great chessboard of society about which Adam Smith once spoke, with the social engineers and political paternalists moving us about and positioning each of us as they think we should be arranged and related to each other, instead of each of us deciding ourselves where we want to be and doing what, in collaborative associations with others, as we peacefully see fit. (See my article, “Adam Smith on Moral Sentiments, Division of Labor, and the Invisible Hand”.)
Yes, Mariana Mazzucato and Joe Biden are on “missions” with “big plans.” But their political missions and their big economic central plans require all of us to give up our own individual and personal plans to be straightjacketed into their compulsory designs for us. We need to remember Adam Smith’s words in The Wealth of Nations, “The statesman, who should attempt to direct private people . . . would nowhere be so dangerous as in the hands of a man who had the folly and presumption enough to fancy himself fit to exercise it.”
[Originally posted on American Institute for Economic Research (AIER)]