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The Global Economy Works When We Get Out of the Way

The current supply chain crunch is not an indictment of globalization, but of government interventions.

When you sit at the table and give thanks for “all the hands that prepared the meal,” you likely think of your parents or spouse. If you take a course in economics, you will realize that you are thankful for millions of people: farmers, truckers, factory workers, retail employees, and everyone else who invents, builds, delivers, installs, and maintains the tools, machinery, buildings, oil pipes, transportation vehicles, communications systems, roads, railways, ports, airports, and other kinds of infrastructure, plus the entrepreneurs who connect all of it.

Take a look at any object in your possession. Consider your cell phone. How did it come to you? First, a large variety of raw materials must have been extracted, stored, loaded, moved, unloaded, and processed through many stages at incalculable locations all over the globe. Then, numerous intermediate goods must have reached the vast network of manufacturers of consumer products with more storing, loading, moving, and unloading through complex and interconnected distribution channels to bring the finished good to a retailer near you. The mechanism relies on a global commercial fabric and numerous technological marvels that must be developed, constructed, operated, repaired, and eventually replaced, with hundreds of millions of workers who must deliver their services with precision, on time, at every step of a process that spans across continents and generations.

The global economy depends on billions upon billions of individual decisions driven by nothing more than personal self-interest and coordinated solely by free-market price signals. Any part of that giant market ecosystem can experience problems due to managerial mistakes, labor strikes, bad weather, or communication disruptions that cause ripple effects. Most of the time the wounds along the supply chains heal as quickly as minor scratches on a healthy child’s skin, whether the source of trouble is hacking or solar flares causing internet failures, hurricanes or terror threats shutting down ports and oil refineries, and flooding or civil unrest disrupting mining for rare minerals in a given region

Occasionally, we get systemic failures in the global economy. Those can only come from large-scale natural or man-made disasters. Shall we blame Covid-19 or businesses for the current mess? Neither of those. Consider the impact of the novel coronavirus. In two years, less than 1 in 1,000 people on our planet has died after contracting the disease. The vast majority of those victims were not part of the supply chains. Like Colin Powell, they were overwhelmingly retirees, very old and suffering one or more terminal conditions like cancer.

Obviously, we have a global man-made commercial gridlock, so let’s move on to the next available suspect. Profit-seeking under competition for customers forces companies to cut costs by outsourcing while keeping low inventories requiring production and transport on very tight schedules. Shall we blame the bottlenecks on the greedy entrepreneurs who outsourced so many jobs in the past several decades? No. This is not a market failure. And neither were the Great Depression of the 1930s, the Great Stagflation of the 1970s, nor the Great Meltdown of 2008. Every national, regional, and global economic crisis of the past century has been a direct result of bad policies: wars, debts, inflation, and restrictions.

Proposals to retreat from our mutual interdependence with the rest of the world, such as that of The American Conservative Associate Editor Declan Leary last week, are unsound. We might as well decide to grow our own oranges in Michigan instead of importing them from Florida. Or I can learn how to fix my children’s’ teeth instead of relying on the dentist across the street. We could become more self-reliant as a country, a state, communities, or individuals. But the cost of doing so will be unacceptably high. Ask the Albanians who remember the days before the fall of the Berlin Wall or any of the North Korean refugees.

A plan to abandon America’s reliance on foreign markets in favor of autarky may cut our living standards in half with severe negative impacts on life expectancy and environmental quality. What’s more, using government restrictions to achieve this result doesn’t even guarantee more reliable supply chains. The current bottlenecks are a direct result of other political interventions—governors ordering people not to work, Congress paying people not to work, the president threatening unvaccinated people who want to work, etc.

America’s birth at the dawn of the Industrial Revolution unleashed an amazing amount of entrepreneurial energy. Private property and market prices have been channeling self-interest into productive activities in a systematic way for over two centuries. Capitalism has built a vast network of peaceful collaboration for the satisfaction of our wants. It’s not a perfect system because it relies on imperfect human beings. The free enterprise system has its rainy days but all major economic floods have been caused by government malfeasance.

All credit for the current bottlenecks goes to the world political elites who adopted the totalitarian Chinese Communist Party Covid measures. Simultaneously with this economic hara-kiri, Congress indiscriminately sends all Americans money for nothing. On top of that, the Fed shows no signs of reversing its unprecedented cheap money policies that started almost 14 years ago. Meanwhile, California had already made plans to sabotage the supply chains by demonizing the most reliable energy sources, banning older trucks, and kicking out all independent truckers.

Capitalism is very resilient and human ingenuity always delivers the goods when men are free to act. To help the supply chains heal faster, we should: (1) stop governors from deciding which jobs are essential, (2) stop Congress from incentivizing people not to produce, (3) stop the president from harassing producers who choose not to vaccinate and wear masks, (4) stop intimidating sellers who charge more during temporary supply disruptions and spikes in demand, and (5) stop the Fed from assisting the spending madness in our federal government.

Alex Tokarev is associate professor of economics and philosophy at Northwood University, and a former contributor to World magazine. Kristin Tokarev is Professor Tokarev’s daughter and research assistant, as well as a master’s student in business analytics.

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