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Not Even Socialists Can Escape Economic Dislocation

A large section of Tucker Carlson’s criticism of “market capitalism” early this month focused on the impact of economic changes on the American family. “Any economic system that weakens and destroys families is not worth having,” he said. The argument? The loss of manufacturing jobs in the U.S.—jobs traditionally held by men—caused men’s wages to decline in the U.S., and women don’t want to marry men who earn less than they do. As a result,

[T]his causes a drop in marriage, a spike in out-of-wedlock births, and all the familiar disasters that inevitably follow – more drug and alcohol abuse, higher incarceration rates, fewer families formed in the next generation.

Carlson here both goes too far in his argument against “market capitalism”—wrong identifying it as the culprit when the phenomenon he identifies would have occurred in non-market economics as well—but, also, he arguably did not go far enough in his indictment of markets.

First the former, then in my next post, the latter.

As an initial matter Carlson rightly identifies “a” factor affecting family formation. The economic reductionism of the argument Carlson advanced is ironic. It’s ironic because Carlson criticizes free market conservatives and libertarians for making economic well-being the sum of human life. Carlson then argues Americans value economic outcomes so predominantly that men earning less than women has fundamentally undermined family life in the U.S.

Beyond economic changes, however, one would be hard-pressed to ignore a welter of other cultural, technological, legal, and political changes—and more specifically, changes that fundamentally shifted the character of the “mating market” between men and women over the last several generations.

Setting aside these additional factors, however, I want to consider Carlson’s claim that the economic factors he does discuss in fact resulted from an almost religious commitment to “market capitalism” in the U.S.

I’m open to the hypothesis. Yet when I hear the market blamed for different evils, one test of the claim is to run it through this mental experiment: Let’s assume an ideal, centrally-planned economy—“ideal” here meaning  one without the huge inefficiencies induced as a practical matter by any system of central planning. Now ask whether the same phenomenon of economic dislocation, especially among men, would be replicated in this centrally-planned economy? (Or, in the alternative, in an economy in which economic decisions are made hierarchically even if those decisions are made diffusely.) That is, would the same thing occur in an economy with no markets at all, one in which all “economic” decisions are made politically.

The thing is, the existence of comparative advantage between nations, and so gains from trade, does not depend on the existence of internally free markets in those nations, it depends only on relative cost advantages in production. Hence, even in our centrally-planned economy in which no markets exist, political authorities would be faced with this decision: Do we trade a smaller overall national economic pie—that is, our national population eats less—in order to sustain the current set of manufacturing jobs within the country?

I am actually open to the possibility that the answer would be “yes” over some range. At the same time, certainly some level of cost would change the answer to “no.” Consider an analogy from a technological shift rather than a shift derived from comparative national advantage: At the end of the 19th century there existed a large industry devoted to the production of horse harnesses and carriages. Even in our ideal non-market, centrally-planned economy, the cost of sustaining employment in this industry at existing rates after the advent of the automobile, at some point, becomes unconscionably high. The political authorities will want to move the economy along, with the result that individuals in the harness and carriage industry will be unemployed. Or, in the alternative, they’d be assigned to work in which they do not use their old skills.

The point is, the loss of jobs in a given sector of an economy, and economic dislocation more generally, result from changes in underlying economic factors whether a market system organizes an economy or an alternative form of production and distribution organizes an economy. Further, political decisions to draw out transition periods, and how long to extend them, would be no more obvious or easy in the centrally-planned economy than in a market economy.

To consider the same point from the other direction, one could have an autarkic national economy internally replete with free markets and not experience any of the loss of manufacturing jobs Carlson identified. The cost would be huge, but the point is, again, that underlying economic variables cause the changes, not whether the economy is organized using markets or non-market forms.

More empirically, consider the economic status of men in the old Soviet Union or in the old communist China. They were not immune from economic changes. And, more generally, it’s unclear the economic status of men was markedly superior to men in market economies. Perhaps more pertinent to anti-market arguments from the right, I am unsure men today, though subjected to the vagaries of the market, are in palpably worse shape than men in the past who instead were in subjection to economic decisions made by the manor’s lord.

This, rather than centrally-planned economies, seems to be the vision of the non-market economy that anti-market conservatives seem to romanticize. And this romanticization occurs on parts of the left as well; Karl Polyani romanticizes away the disadvantages to traditional life on the manor in his epic, The Great Transformation.

The challenge for Carlson and other critics of the market is to generate criticisms unique to the market rather than criticisms generic to economic transitions in general, whether affecting market economies or non-market economies. I will identify candidates for criticisms of this sort in my next post.

Reader Discussion

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on January 24, 2019 at 12:36:35 pm

The Music Man should be required viewing for every voter. First, it’s a good show. But more important, it makes a bitter lesson palatable: We’re all prone to be duped by people who prey on our sense of righteous outrage and moral indignation.

The star of The Music Man is a con man. As he arrives in River City, he asks a fellow con man to point out any new thing in the town that might be used as a source of grievance. The only bit of novelty is the billiards hall. It’s not much—but it’ll suffice. With that, the con man whips the crowd into a panic about the threat posed by the pool hall. There’s trouble in River City! Have you noticed that your teenaged children are acting like, well, teenagers? They never used to act that way! Obviously, the source of this behavior must be this pool hall! We need to band together and fight back! We need to restore some imagined, idyllic past! We need to make River City great again!

This style of argument has been the bread-and-butter of right-wing media since the days of the KKK and John Birch. But not just the right wing: Pretty much every campaign by someone who isn’t an incumbent (and often by those who are) entails some amount of pining for the good ol’ days, and a call to restore something that’s been lost.

Thus Fox News. And also, thus Tucker Carlson: Like the Music Man, he identifies some aspects of modernity that may be cause for concern—and then makes a tenuous causal connection between those things and other aspects of modernity. They’ve learned that dissatisfaction + nostalgia = money.

It’s not crazy to complain about the behavior of (some) teenagers; it’s just crazy to think that the behavior was caused by (or could be cured by) a pool hall. Likewise, it’s not crazy to express concern about trends in family stability, drug addiction, and suicide. But it’s crazy to think that these trends were caused solely by (or could be cured by) US military involvement in Syria, corporate tax cuts, or Bain Capital.

By the way, fans of Monty Python’s Life of Brian should see Bret Stephen’s editorial regarding Tucker Carlson here: https://www.nytimes.com/2019/01/04/opinion/fox-news-media-trump.html?action=click&module=RelatedLinks&pgtype=Article

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nobody.really
on January 24, 2019 at 17:32:41 pm

Nobody:

what in the world does war in syria have to do with Carlson's argument. Sticking to military theme, this is, perhaps, A Bridge Too Far?

BUT:

Agreed. There is, and perhaps always has been a tendency to present some nostalgic depiction of the formerly ideal life, pretend that it is the ultimate condition, and a condition that is once again *readily* attainable.

FALSE - on all counts. It is as false as the Left's promises of a New Nostalgic Age, the ever close, yet still distant Utopia of social justice, right over the horizon.
BUT, is this not politics as we have known and practiced it for the last century. You cite the KKK and John Birch. The Left also has Margaret Sanger and eugenics intended to weed out the undesirables (recall: "Three generations of imbeciles is enough"). Regrettably, our prospective leaders are prone to promise all manner of improvement - either taking us back to some now lost golden age OR promise to expedite our journey to the New Eden.

Carlson, as I understand him is also offering a glimpse of what was (and could or should be), applauds it and laments its current absence. Fair enough.
HOWEVER, I suspect that Carlson is mistaking a government influenced market system, which is what we have, for the free market, which we have not had since the rise of the Trust Busters. Add to that the innumerable favors to preferred segments of the market and you find that much of what Carlson complains about is, as Rogers argues above, not inherent in the free market.
As an example, back in the 1950's, a law was passed, the Kefauver-??-?? (I forget the actual name) which made it plain that vertical integration was viewed with disfavor. Cutting to the chase (brevity's sake) the effect ultimately was to cause a change in the nature / characteristics of those occupying the Managerial Suite. In effect, what was now required to lead corporations to new greatness / growth was not engineers but bloody accountants / financial whiz kids. Carlson is right to criticize the "financialization" of the economy, although I suspect he is a little shaky on the causes. Decision are made now based primarily upon financial considerations to the detriment of both the workers AND the corporation. E.G. General Electric - recall all the praise heaped upon Jack Welch in the 1980's and the growth and earnings GE reported. Guess what, while GE lost their shares in EVERY segment of the medical imaging market (and it was significant share) it nonetheless produced exceptional earnings. And the trick was, GE became a bank and GE Capital fueled all the growth and earnings. In the long run, GE was doomed and has now been dropped from the Dow 500.
What became of all those highly skilled and well compensated medical imaging experts? Not pretty. I know a number of them. Same is true for other GE markets.
Question:

Would GE have engaged in such a strategy were they still permitted to vertically integrate.
I don;t know BUT....

BTW1: I am not here arguing that the Kefauver bill was the sole reason for the change in corporate approach / strategy but a significant factor.

BTW2: Were you in prison again? That must explain your absence from these hallowed pages. Good to see you back.
take care

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gabe
on January 25, 2019 at 13:26:22 pm

[W]hat in the world does war in [S]yria have to do with Carlson’s argument[?}

The first line of Rogers’s essay includes a link to Carlson's 1/3/19 essay, in which Carlson’s first example of elitist Republican opinion is the general Washington consensus (now shared by Trump, apparently), that Trump erred in announcing an abrupt withdrawal of US troops from Syria.

BUT, is this not politics as we have known and practiced it for the last century. You cite the KKK and John Birch. The Left also has Margaret Sanger and eugenics intended to weed out the undesirables (recall: “Three generations of imbeciles is enough”). Regrettably, our prospective leaders are prone to promise all manner of improvement – either taking us back to some now lost golden age OR promise to expedite our journey to the New Eden.

Perhaps—but, as a general proposition, conservatives specialize in the former while liberals specialize in the latter. The Eugenics movement was not focused on restoring some idealized past; it was focused on forging a brave new future. As G.K. Chesterton observed, “The whole modern world has divided itself into Conservatives and Progressives. The business of Progressives is to go on making mistakes. The business of Conservatives is to prevent mistakes from being corrected. Even when the revolutionist might himself repent of his revolution, the traditionalist is already defending it as part of his tradition. Thus we have two great types -- the advanced person who rushes us into ruin, and the retrospective person who admires the ruins.”

Admittedly, this distinction isn’t simple, as conservatives often use nostalgia as a means of foisting novel ideas upon a population. Karen Armstrong observes that fundamentalism refers to a utopian movement putatively grounded in restoring some past order, but actually grounded in myth, so the new order is in fact a novel creation. Social contract theory and libertarians make arguments based on some “state of nature” that bears no relationship to anything we find in nature. Much of Native American powwow tradition developed from Buffalo Bill Cody’s Wild West shows, which ran from 1883-1916. The Christian term “fundamentalism” arose from a set of essays published from 1910-1915. Wahhabism barely existed before the 1930s. The State of Israel, founded in 1948, bears no relationship to its biblical namesake, and much of contemporary Hebrew has been invented out of thin air. Even the ancient traditions of organized crime syndicates often find their origins in the Godfather movies.

Decision are made now based primarily upon financial considerations to the detriment of both the workers AND the corporation. E.G. General Electric – recall all the praise heaped upon Jack Welch in the 1980’s and the growth and earnings GE reported. Guess what, while GE lost their shares in EVERY segment of the medical imaging market (and it was significant share) it nonetheless produced exceptional earnings. And the trick was, GE became a bank and GE Capital fueled all the growth and earnings. In the long run, GE was doomed and has now been dropped from the Dow 500.

What became of all those highly skilled and well-compensated medical imaging experts? Not pretty. I know a number of them. Same is true for other GE markets.

This criticism poses an interesting question: What, exactly, is wrong with how GE managed itself?

1. Yes, GE is no longer in the Dow 500. NONE of the firms on the original Dow Jones Industrial Average—but GE outlasted all the others. If you value institutional stability, arguably this fact illustrates that instability is the norm, and that GE has demonstrated extraordinary levels of stability over time.

2. SHOULD we value stability? Maybe so; arguably, Carlson (and conservatives generally) believe that there is a RIGHT state of the world, and that we should strive to achieve it, maintain it, and calcify around it.

An alternative point of view is that we should embrace creative destruction—growth that leads, yes, to change. Yup, GE is doing less well right now, which may hurt some of its medical imaging experts. But has GE’s behavior damaged our economy, or even the economy of medical imaging experts? That’s far from clear to me. Maybe it has, so that the aggregate economy is worse off. Or maybe GE’s stumble is another firm’s gain, and if GE hadn’t stumbled, it would be some other firm’s medical imaging experts that would be suffering. Why should I, as an outsider, care more about GE’s employees than for anyone else’s?

More generally, should GE promote its own perpetuation, or the welfare of its shareholders? If GE can make more money for its shareholders by liquidating, is that a bad outcome? Such a liquidation would free up capital (including human capital) to pursue other, presumably more productive, pursuits. If we focus solely on the inconvenience and frustrated expectations of GE employees, this looks bad. If we focus on the economy as a whole—including, for example, people employed by GE’s competitors—the picture is less clear. I have insufficient reason to conclude that “financial” considerations lead to sub-optimal outcomes.

But the Tucker Carlsons of the world will have little trouble drawing attention to the laid-off GE employees (while excluding any reference to employees at GE’s rivals), building sympathy for those employees, and building a sense of outrage over this terrible injustice. People’s expectations have been frustrated! Clearly, something must be done!

Were you in prison again? That must explain your absence from these hallowed pages.

Only min. security (damn Mueller investigation,) but no internet access. With the shutdown, however, the guards no longer give a shit, so I’m able to access a cellphone. With or w/o the shutdown, I expect to be out by the end of the year, given good behavior. (Assuming they don't find the cellphone.....) Talk more then.

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nobody.really
on January 25, 2019 at 15:14:39 pm

Good to hear that you are not in solitary - that would prevent some obstacles to blogging.

Re: GE's stumble & "some other firm's gain.
Yep, unfortunately, the firm gaining was a foreign firm.
Also, the financialization resulted in ever small resources devoted to product development / design. Accompanying such a "shortfall" and the ensuing loss of product lines is the concomitant loss of all those highly paid / highly skilled support positions in engineering, manufacturing, tooling, etc etc. I would also add that The Brand of GE suffered as well. These are not trifling matters.

Anyway, stuff the cellphone into the hollowed out pages of your copy of "Das Kapital" - it surely will be safe there as no one really reads that tripe.

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Image of gabe
gabe
on February 01, 2019 at 05:47:14 am

[…] national comparative advantages or costs of international trade, etc.), then it is these changes, not the market system per se, that generate the studied […]

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Puzzling NBER Reports on Blue-Collar Men, Marriage and Manufacturing

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