Politicians should have less say in the economy, not more

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The next assault upon economic logic to arrive in the bookshops is coming from Isabella Weber. The Guardian is already drooling over ‘Anti-Fascist Economics: In Defence of Affordability, Dignity and Democracy’ which means, obviously, that all proper-thinking residents of north London will be doing so as soon as they can. Weber is an economics professor at UMass Amherst, which is a bit like teaching at SOAS or Sussex but without the intellectual rigour of either. Which is rather how this retailing of anti-fascist economics ends up promoting many of the things that actual fascists did to their economies. 

Note that I am not trying to say that Weber is a fascist. Only that there’s a remarkable overlap between the economic policies she suggests and those actually enacted by real-life fascists in power. For example, Weber insists that rent controls would be a good idea. As did Mussolini, Hitler, Franco and Salazar, even the Peronists in Argentina. Yes, that is something of a cheap shot but not a very cheap one. For if we’re going to start considering what an anti-fascist economics is going to be like then we do need to be, well, not doing fascist economics.

The essence of fascist economics was that the form of capitalism and markets was preserved. But all of the things that make such a system work were subjected to political control. Prices, what was made, who made it, profit levels and so on, were things to be politically determined, not by the market. True, true, there were flavours of fascism but political control of the economy under the guise of a market and capitalist system was common to all. Which is indeed what Weber is suggesting.

She is not arguing for the wholesale expropriation of private property – she is not a socialist or a communist in that sense. But she does insist that government – politics – should be deciding prices of at least certain goods. Using the rhetoric of how the capitalists are ripping off the working woman to support that idea too – something which has more than just an echo of speechifying from the 1930s. This garnered a response from the Nobel laureate Paul Krugman that her argument was ‘truly stupid’, for which he later apologised. Apologised for being so rude, note, not changing his view of the proposals. 

My own view is coloured by a paper she co-wrote talking about ‘related shifts of hegemonic power within the world capitalist system’ and my view is that no good at all is ever going to come from such verbiage. Germany’s plan to cap the price of gas – one of those price controls – didn’t work out well, despite Weber’s involvement: one study found it actually increased gas prices. I’m also deeply, deeply dubious about anyone saying that China dealt with Covid well or properly. That’s a great deal too close to celebrating the thwack of really firm government for me. Almost, you know, fascist-adjacent in its authoritarianism. 

But my real objection is to not very well thought through plans based upon, well I suppose they’re based upon, Amherst economics. One is outlined in brief in the Guardian’s book review:

Take food, for example. At every stage of the value chain from source to table, she is urging governments to identify and implement interventions to keep prices down. At one end, four multinationals control between 70% and 90% of global grain trading (with profits that ‘thrive on volatility’). This does not optimise affordability. Her proposal? Create public buffer stock systems – publicly owned entities that can buy and sell grain into its market, not with the goal of maximising profits, but stabilising prices to protect producers and consumers. Keynes made this case a century ago. 

The problem with this is that it was dealt with a quarter of a millennium ago. It’s a point that Adam Smith makes in ‘The Wealth of Nations’. Speculators in grain – and yes, they’re both using grain as their example – move supply and prices through time. So would a public stock. But as we’ve already got vast speculative markets in grain we do not need that public option. The problem is already solved, stocks are held, supply and prices are moved through time. 

It’s possible to witter on about how the system rests on speculators making money, which they shouldn’t, so we should have a public option instead. But that’s to misunderstand the very basics of speculative markets. The futures and options markets are, to the participants, zero sum. We out here gain the benefits of those movements in supply and prices, but anyone who makes money on a contract does so at the expense of whoever is on the other side of it. Those who get their speculation right make money, those who don’t lose: there is no net profit – nor loss. But the whole game is still net positive to society as a whole, because it achieves the movement of supply. And where someone does make a steady living from it – the merchant who actually buys at harvest, stores the grain and sells it later – that profit is just the cost of storage, finance and risk. A public buffer stock would have to bear exactly the same costs, only without anyone’s own money riding on getting the timing right.

And do we really think government is going to speculate better than the assembled forces of the world’s speculators? Or is it more likely to be the idiot player in the market that others then profit from, at the taxpayer’s expense?

But that’s not the worst of it, for what is also being ignored here is public choice economics. Those who run government have their own economic interests. Those interests provide the incentives that they react to. So, if politicians get to run buffer stocks with our money – get to speculate in the commodity markets with our money – then they’re going to do so in favour of politicians’ interests. 

This is not just a theoretical concern. Even when there’s a real crisis, like the Iran war, decisions on when and how far to draw on reserves are made with one eye on the electoral calendar. Currently the Trump administration has run the Strategic Petroleum Reserve down to its lowest level since 1982 just before the midterms, despite Trump having criticised the Biden administration for doing the same thing. We could even generalise this and suggest – nay, insist – that things determined politically will be determined for political reasons. Which is a darn good reason not to have things politically determined, of course.

Plus, you know, political power over a nominally market economy – really rather fascist.

Even on other issues, Weber seems less than realistic. She’s a leading advocate of what’s popularly called ‘greedflation’. This is the idea that prices rise when producers with market power think they can get away with it, and that supply shocks give them cover to do so together. Therefore, she argues, targeted price controls work because we can just tell them they cannot do that.

But the theory doesn’t hold up. Sure, sure, we can agree with Weber that companies will raise prices if they think they can get away with it. Competition is why they can’t. That’s the knock-down argument in favour of free-to-enter markets. But the market power of certain producers isn’t the only possible cause of their being able to get away with higher prices. The standard explanation, which Weber rejects, is that an increase in the money supply leads to more cash in consumer pockets without an increase in production, leaving consumers willing to bid up prices to gain their desires. In such a case, companies can charge more, but it’s not thanks to their market power. It’s down to politicians and central bankers having indulged in the age-old sport of excessive money printing.

OK, so it’s fairly obvious that I don’t like Isabella Weber’s economics much. I think she’s wrong on all of the questions she attempts to address. Bully for me. You should make up your own mind about her and her proposals.

But there’s still this nagging point to be considered. The entire point of fascist economics was that politics gained more power over prices, income distributions and production within a nominally still capitalist and free-market economy. So how is insisting politics should have more power over prices, income distributions and production within a nominally still capitalist and free-market economy anti-fascist?

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