The Stupidity of Free-Market Chic . . . . . . in the Middle East
As compensation for the loss of a good chunk of their ideological foundation in the past two years, American conservatives have had the satisfaction of watching liberals slink quietly away from their old economic biases. Surveying the "end of history" a year ago, George Will merrily observed, "There are a few brackish backwaters of Marxism--Managua, Pyongyang, Cambridge, Massachusetts--but no longer is it de rigeur for 'advanced' thinkers to think that bourgeois society is a backward, doomed stage of development toward a shimmering socialist future." The subsequent success of Violetta Chamorro in Nicaragua and John Silber in Massachusetts suggests it's getting less de rigeur by the day. A friend in Cambridge reports that guests make fun of her for keeping Marx on the shelf.
Mercifully, no one freely uses the word "corporate" to mean "evil" anymore. Liberals are finally willing to recognize that businessmen can contribute to society. But many are settling on a new bias that is no less knee-jerk--that "free market" means "good," which leads to the dangerous assumption that government intervention inevitably sours the economy. This bias pervades the breathless reporting on economic change (always called "reform") in the Soviet Union and Eastern Europe (see Jonathan Rowe, p. 20). It is also affecting the way Americans view their own government, as free market chic creeps from the editorial pages of The Wall Street Journal into the organs of conventional liberal opinion. "Re-regulate?" asked The New York Times last summer in a classic editorial oversimplification of the debate about transportation and telecommunications. "Not on your life."
This spreading bias has manifested itself most starkly in the American response to Saddam Hussein. George Bush, who in some ways--working through the U.N., bringing the Arabs on board--has handled the Middle East crisis superbly, nonetheless seemed far more willing to send tens of thousands more potential victims into the desert than he was to offset the economic impact of the invasion by tapping the strategic petroleum reserves--or even by calling vigorously for conservation at home. By the time Bush finally opened the reserves, it was too little, too late. "[T]he core explanation for the administration's caution seems to be a deep reluctance to tamper with private markets," reported the Times, which to its credit endorsed the idea of tapping the reserves early in the crisis. Meanwhile, the closest Bush has come to issuing a clarion call for national sacrifice on behalf of the military effort has been to point out in an advertisement during a baseball playoff game that if our troops in Saudi Arabia can take the time to send in their absentee ballots, Americans at home can certainly take a few moments to go to the polls. Few liberals are outraged about this laissez-faire approach. We may be on the verge of war in the desert, but here in the U.S. it's still business as usual. Why? Perhaps because today's de rigeur thinking precludes the notion of government using the national economy as a weapon.
The free-market bias has served to short-circuit public discussion of the crisis. Recently on National Public Radio's "All Things Considered," Philip Verleger of the Institute for International Economics was asked why American companies were selling gasoline abroad when we might soon be facing shortages at home. He admitted the sales "may seem to be unpatriotic" but offered this justification: "It's hard to explain to voters, but it's how the market works." Oh. That's okay, then. Meanwhile, Americans have continued sucking down gasoline at virtually the same rate as before the crisis, as though their consumption had nothing to do with the national predicament. This victory of the consumer over the citizen must be what everyone means by "the triumph of capitalism." Unfortunately, the pricing scheme of this free market seems to be slightly off: Blood may still be thicker than water, but in America it's now cheaper than oil.
The tragedy of the widespread acceptance of this business-as-usual response is that, were Bush willing to consider options that involved government intervention in the economy, he might have stumbled on a more elegant means of sticking it to Saddam--one that wouldn't cause inflation or kill Americans. The OPA would have shown him the way. Thrown together in the early days of World War II, the Office of Price Administration eventually controlled almost every price--of any dress, any peach, any stove or pork chop--in the United States. While the broader history of the OPA holds some important lessons for free marketeers (which we'll come to), of immediate interest is one specific OPA program: gasoline rationing. During World War II, bold leadership and a widely perceived threat persuaded Americans to cut the nation's gasoline and fuel oil consumption almost in half.
The federal government first resorted to gasoline rationing on the East Coast to deal with a real, immediate shortage, unlike the perceived shortage we face today. In May 1942, pipelines to carry oil from Texas and Oklahoma to the East had not been completed, and oil tankers were providing target practice for German submariners. Today, we have plenty of oil, since Iraq and Kuwait accounted for only 3.5...