Jandos Rothstein
If you understand why central economic planning has almost always been a disastrous failure, you should also understand why we need central planning for coronavirus—and why President Trump’s decision to leave the response to the market will probably kill people.
The arguments against centrally planned economies are powerful. But they don’t apply in emergencies like the COVID-19 pandemic. To see why, consider the most powerful of those arguments, articulated long ago by the economist Friedrich Hayek: Central planners must decide what goals ought to be served by economic activity, and people’s goals are too various for planners to know how to do that.
Hayek, one of the patron saints of modern market fundamentalism, argued that people can’t be expected to agree on the purposes worth pursuing, not least because “new ends constantly arise with the satisfaction of old needs and with the appearance of new opportunities.” Each of us has a “unique combination of information, skills and capacities which nobody else can fully appreciate.” Yet somehow we must live together and cooperate. “What makes agreement and peace in such a society possible is that the individuals are not required to agree on ends but only on means which are capable of serving a great variety of purposes and which each hopes will assist him in the pursuit of his own purposes.”
Hayek’s arguments were unpersuasive in the Great Depression, when, as President Franklin Roosevelt observed, one-third of the nation was “ill-housed, ill-clad, ill-nourished.” A central planner can know enough to mass-produce housing, clothing, and food for those who haven’t got enough.
Similarly, today we confront a threat where there is little disagreement on the end worth pursuing—stopping the pandemic—and where central governments can do a better job than private or local decision-makers.
Arguments for localization much like Hayek’s, however, are now being cited by President Trump to explain his refusal to invoke his emergency authority under the Defense Production Act. The act, which dates back to the Truman administration, gives the president the power to seize control of supply chains in an emergency, require manufacturers to prioritize manufacture of needed supplies, and strategically allocate what has been produced.
Trump has activated his authority under the act but thus far has not used that authority. Nor has he asked Congress to raise the limit for spending under the law, which is currently capped at $750 million. “Some of the president’s advisers have privately said that they share the longstanding opposition of conservatives to government intervention and oppose using the law,” The New York Times reports. Trump argues that production of urgently needed medical supplies—ventilators, masks, and other medical supplies—is already being done as fast as possible by private industry, and that no federal guidance is needed. The business community is happy to produce materials that they know they’ll be able to sell.
The dangerous move is Trump’s refusal to give the federal government a role in allocating scarce but vital products. In a conference call with governors in which they asked for help, he said, “Respirators, ventilators, all of the equipment—try getting it yourselves. We will be backing you, but try getting it yourselves. Point of sales, much better, much more direct if you can get it yourself.” A few days later, he explained: “Governors are supposed to be doing a lot of this work … The Federal government is not supposed to be out there buying vast amounts of items and then shipping. You know, we’re not a shipping clerk.”
Gov. Michelle Lujan Grisham of New Mexico told Trump, however, that the federal government was pitting the states against one another in competition for desperately needed products. Ordinarily, market competition makes sense because markets respond to the huge range of consumer demands without any central criterion for who gets what. But that logic won’t work in pandemics; the market will not necessarily respond to public-health priorities.
During a pandemic, a central planner can determine, unlike any local official, where the medical need is greatest and where resource shortages are most likely to cost lives.
Gov. Kristi Noem, Republican of South Dakota, told Trump: “We, for two weeks, were requesting reagents for our public health lab from C.D.C., who pushed us to private suppliers who kept canceling orders on us. And we kept making requests, placing orders. I don’t want to be less of a priority because we’re a smaller state or less populated.” Illinois Gov. J.B. Pritzker said, “We’re competing against each other. We’re competing against other countries … And indeed, we’re overpaying … for [personal protective equipment], because of that competition. This should have been a coordinated effort by the federal government.” In some cases, states have lost out because the federal government has outbid them.
During a pandemic, a central planner can determine, unlike any local official, where the medical need is greatest and where resource shortages are most likely to cost lives. In these unique circumstances, there really is a single societal goal: minimizing deaths from the disease. In the general free-for-all that Trump is promoting, on the other hand, there’s no reason to think that the medical equipment will go where it’s most urgently needed. That means that people will die unnecessarily.
Of course, central planning even in wartime will work only if the central planners do their jobs properly. Conservatives like to point out that state officials are often incompetent and corrupt, and that warning is particularly salient in the age of Trump. Trump could easily decide that the nation’s greatest priority is to hold down the mortality rate in electoral swing states, neglecting New York and California because they won’t vote for him anyway. We have to count on Congress and competent people in federal agencies like the CDC to fight for fair decisions.
Hayek himself conceded that wartime and “other temporary disasters” were an exception to his assumption that people normally cannot be united around any overarching goal. Coronavirus is exactly that kind of disaster. Resources need to be consciously deployed, not just to allocate medical supplies but to make sure that millions of otherwise healthy businesses are not destroyed. It is necessary to temporarily and selectively suspend capitalism in order to save it. Hayek understood that. Do his modern acolytes?
