What is the best way for a new Congress to get the economy out of the ditch (or is it the Grand Canyon?)?
It may be to sit on the side, sipping a Slurpee.
Author and Bloomberg columnist Amity Shlaes delivered a speech at Hillsdale College (it is available here in Imprimis) from which I derive that solution to our woes. Shlaes is an authority on the New Deal (for which she has a new interpretation). One of the points Shlaes makes is that that administration officials with academic experience may not know as much about the economy as the blokes who run small businesses:
Consider the centerpiece of the New Deal’s first 100 days, the National Recovery Administration (NRA), which was in effect an enormous multisector mechanism calibrated to manage the business cycle through industrial codes that, among other things, regulated prices. The principles on which its codes were based appear risible from the perspective of microeconomics and common sense. They included the idea that prices needed to be pushed up to make recovery possible, whereas competition constrained recovery by driving prices down. They held that big firms in industry-those “too big to fail”-were to write codes for all members of their sector, large and small-which naturally worked to the advantage of those larger firms. As for consumer choice, it was deemed inefficient and an inhibitor of recovery. The absurdity of these principles was overlooked, however, because they were put forth by great minds. One member of the Brain Trust, Ray Moley, described the myopic credentialism of his fellow Brain Truster, Felix Frankfurter, in this way:
The problems of economic life were to Frankfurter matters to be settled in a law office, a court room, or around a big labor-management bargaining table . . . . The government was the protagonist. Its agents were its lawyers and commissioners. The antagonists were big corporate lawyers. In the background were misty principals whom Frankfurter never really knew at first hand . . . .
These background figures were owners of the corporations, managers, workers and consumers.
Shlaes describes the government’s targeting of the Schechter family, which operated a poultry business. She has a scene of a member of the family being hauled before a government board because (horrors!) he wasn’t charging a government-regulated price for his chickens (fyi: his price was too low). The Harvard-educated lawyer who conducted the hearing was contemptuous of the poultry vendor, who barely spoke English. But he knew how to run a profitable business, and the government didn’t.
Please read Amity’s article. We’re going to have to keep after our new Congress, and this kind of article will help us better manage our employees (yes, we employ Congress, not the other way around).