America needs supply-side reform

"who cares, america won't manufacture low end stuff like clothes, but we'll manufacture high end stuff like refrigerators."

"who cares, america won't manufacture low end stuff like refrigerators, but we'll manufacture high end stuff like TVs."

"who cares, america won't manufacture low end stuff like TVs but we'll manufacture high end stuff like computer chips."

"who cares, america won't manufacture low end stuff like computer chips but we'll manufacture high end stuff like bored ape NFTs."

The author assumes this is related to economic policy, although he mentions the "depression economics" problem. Maybe it's not. Maybe it's related to antitrust policy.

If you're a monopoly or oligopoly, a situation where there's not quite enough supply lets you crank up prices and run your factories at their most profitable point. You don't have to worry about losing market share to a competitor. If you're a monopolist in a range of products, you can deal with someone trying to move into part of your space by lowering prices for the competed items only, until the new entrant cracks. Known examples are generic drug companies, cable TV companies, cellular phone companies, and bulk agricultural product wholesalers.

It seems to take at least four real competitors before price competition happens. That's from an EU study. Once you're down to three players, the magic happens, the margins go way up, and supply shortages become profitable.

We've seen this with solar panel tariffs. We add tariffs to encourage domestic manufacturing, but instead of domestic factories we just get cutbacks in installations and less employment overall.

There the impacts are direct and obvious, but I worry that similar things happen in other industries as well. There are certainly a lot of people that think copper, steel, and aluminum tariffs are leading to workarounds that involve more imports of finished goods.

Is the US ultimately hurting or helping domestic manufacturing with these policies? I don't think the answers are clear.

That, in the wake of energy shocks from Russia's invasion of Ukraine and everything-else shocks from the zero-covid policy in China, the author can still say with a straight face that free trade will solve our supply problems, can only be the product of motivated reasoning. It's one thing to supplement your domestic production with a bit of temporary outside help, but to allow whole industries to go overseas and have no substantive domestic production, in a nation as large as the USA, makes no sense. Free trade is what got us here. It's like the author slept through the last three years.

Table 1 made me realize you could probably protect the rainforests and improve American health and help US ranchers with a small tariff on Brazilian beef. I'm sure most Brazilians would be 1) happy to each cheaper beef and 2) welcome reduced pressure on their rainforests. Even the Brazilian ranchers don't necessarily lose. They still have beef to sell. They just won't have to invest as much in land-clearing.

So, make it cheap to be poor so the bottom 80% of Americans can generate free cash flow on the family/individual level.

* free health care * free/cheap public transit (trains, bicycles, walking; energy efficient) * cheap real estate (not only housing, but cheap retail/office space) --> density + kill zoning

And let the IRS do tax returns for people. Kill the Intuit strangle hold on tax returns.

The financialization of American industry has been an unmitigated disaster, whose proportions we still haven't grasped.

The sugar rush that comes from a bump in stock prices when you hire ex-MBB MBAs is corrosive to societal fabric and national security in the long run.

I think globalization is in a reversing trend due to freedom and control over supply chains. I also think cheap consumer non sustainable goods are reversing. If you buy too cheap goods you sell your future freedom.

America doesn't change policies, only parties.

The Century of Revolution, 1603-1714

By Christopher Hill

Copyright © 1961, 1980 by Christopher Hill

In 1601 a member of Parliament asked, when a list of monopolies was read out, ‘Is not bread there?’ His irony exaggerated only slightly. It is difficult for us to picture to ourselves the life of a man living in a house built with monopoly bricks, with windows (if any) of monopoly glass; heated by monopoly coal (in Ireland monopoly timber), burning in a grate made of monopoly iron. His walls were lined with monopoly tapestries. He slept on monopoly feathers, did his hair with monopoly brushes and monopoly combs. He washed himself with monopoly soap, his clothes in monopoly starch. He dressed in monopoly lace, monopoly linen, monopoly leather, monopoly gold thread. His hat was of monopoly beaver, with a monopoly band. His clothes were held up by monopoly belts, monopoly buttons, monopoly pins. They were dyed with monopoly dyes. He ate monopoly butter, monopoly currants, monopoly red herrings, monopoly salmon, and monopoly lobsters. His food was seasoned with monopoly salt, monopoly pepper, monopoly vinegar. Out of monopoly glasses he drank monopoly wines and monopoly spirits; out of pewter mugs made from monopoly tin he drank monopoly beer made from monopoly hops, kept in monopoly barrels or monopoly bottles, sold in monopoly-licensed ale-houses. He smoked monopoly tobacco in monopoly pipes, played with monopoly dice or monopoly cards, or on monopoly lute-strings. He wrote with monopoly pens, on monopoly writing-paper; read (through monopoly spectacles, by the light of monopoly candles) monopoly printed books, including monopoly Bibles and monopoly Latin grammars, printed on paper made from monopoly saltpetre. He exercised himself with monopoly golf balls and in monopoly-licensed bowling alleys. A monopolist collected the fines which he paid for searing. He travelled in monopoly sedan chairs or monopoly hackney coaches, drawn by horses fed on monopoly hay. He tipped with monopoly farthings. At sea he was lighted by monopoly lighthouses. When he made his will, he went to a monopolist. (In Ireland one could not be born, married, or die without 6d. To a monopolist.) Pedlars were licensed by a monopolist. Mice were caught in monopoly mousetraps. Not all these patents existed at once, but all come from the first decades of the seventeenth century. In 1621 there were alleged to be 700 of them.

Apart possibly from beer and salt, these were not quite necessities. But monopolies added to the price of just those semi-luxuries which were beginning to come within the reach of yeoman and artisans whose standard of living was rising. They affected the daily life of hundreds of thousands of Englishmen. By the end of the sixteen-thirties they were bringing nearly £100,000 a year to the Exchequer.

Monopolies interfered with the normal channels of trade. Merchants were prohibited from landing their cargoes at the most convenient port whenever a monopolist’s right of search chanced to require their unloading elsewhere. By the late sixteen-thirties the economy was beginning to suffer. The clothing industry was hit by increased cost of soap and alum, and by the scarcity of potash caused by suppression of imports. The Greenland Company lacked oil. The salt monopoly embarrassed the Fishery Society. The rise in the price of coal hit nearly all industries. ‘No freeman of London,’ said a pamphlet of 1640, ‘after he hath served his years and set up his trade, can be sure long to enjoy the labour of his trade, but either his is forbidden longer to use it, or is forced at length with the rest of his trade to purchase it as a monopoly, at a dear rate, which they and all the kingdom pay for. Witness the soap business.’

Nor was the objection to monopolies only economic. Buckingham, the great monopoly-monger, had popish connections. The soap monopoly, which promised the King £20,000 a year in the sixteen-thirties, was attacked not only because it doubled the price and its inferior product blistered the hands of washer-women, but also because the monopolists were Papists. If we think of monopolies simply as a tax, then we can regard them as a crude anticipation of the excise, the value added tax on consumption later developed under Parliament’s auspices. The fiscal benefit to the crown from monopolies was considerable, but it could not compare with the injury done to the consumer and industry by the rise in prices. Every 1s. charged at the customs brought 10d in to the Exchequer; but 1s increased cost to consumers by monopolies brought a bare 1 1/2d to the Exchequer: the soap monopoly brought less than 1/2d. The rest went into the pockets of patentees and courtiers.

Since monopolies were enforced by the royal prerogative and the prerogative courts, they gave rise to constitutional conflicts. Parliament, the representative institution of the men of property, favoured greater industrial freedom. In 1624 Parliament declared that monopolies were opposed to the ‘fundamental laws of this...realm’. Because of its invasion by the prerogative, this Statute of Monopolies was described by a contemporary as ‘a bill against monarchy’. Charles evaded it by disregarding the common-law courts, and bringing cases affecting monopolies before Star Chamber, on the ground that his prerogative was being questioned. Sale of monopolies was the line of least resistance for governments in financial difficulties, and was extensively used in the sixteen-thirties. The knowledge that their patents would be attacked if Parliament ever met encouraged monopolists to aim at quick profits. Indeed, the King himself was not above selling the same patent twice over, so no patentee could be squeamish about consumers’ interests. It was a vicious circle.

The industrial revolution could not have happened if the system of monopolies had remained in place.

The current administration's ideas of supply-side reforms starts with the Defense Production Act and ends with Executive Order 11615. The opposition party's idea of supply-side reforms involves looking for additional ballots in Georgia.

Hang onto your inflation hedges, because it doesn't look very good for America.