In 1970, Paul Samuelson became the first American awarded the Nobel Memorial Prize in Economic Sciences. The honor came to the Massachusetts Institute of Technology economist because he had “simply rewritten considerable parts of economic theory.”
True that. Samuelson had already written what would become the best-selling college textbook on the subject, Economics, (now translated into 45 languages) and soon would enjoy success as a magazine columnist, writing about the Dismal Science with both wit and wisdom.
A hallmark of his writing was clever wisecracks like the pointedly true, “The stock market has predicted nine of the last five recessions,” and the economically profane, “Every good cause is worth some inefficiency.” Both jabs sting yet today.
Inside the profession, Samuelson was known for sparring with the equally famous (Nobelist, too) Milton Friedman. And, boy, did government supporting Samuelson disagree with old free markets Friedman.
When it came to public policy, however, Friedman usually won because his biggest economic convert, Ronald Reagan, rose to power preaching the Friedman doctrine of “government is the problem, markets are the answer.” A generation of Reagan acolytes then dominated conservative politics for 40 years.
Government input
Samuelson, however, never bought into the Friedman tenet that “markets can regulate themselves … On the contrary,” he said, “there can be no solution without government.”
That’s not so much a partisan statement as a simple fact of life. The last several weeks confirm it, again.
For example, in late July, Congress finally approved the CHIPS and Science Act which authorizes the government to invest $52 billion in U.S.-based semiconductor manufacturing. The final Senate vote was decidedly bipartisan; 49 Democrats and 24 Republicans. Why are taxpayers giving some of the richest U.S. corporations $52 billion?
Because, under free market globalism, American semiconductor companies invested billions in cheap labor, offshore manufacturing facilities to virtually abandon the U.S. Under CHIPS, taxpayer billions will flow to companies that invest in “essential American technology and national security” here, noted the Boston Globe Aug. 8.
Farmers know how this works. Entire sectors in U.S. agriculture — like ethanol, high fructose corn syrup, crop insurance, biodiesel, supplemental food aid, foreign export markets and natural resource conservation — have thrived under protective government umbrellas for decades in the name of national security.
Additionally, extraordinary federal farm programs costs, like the Trump Administration’s recent trade war “assistance,” arise periodically. That spending, separate from the standing Farm Bill cost, totaled $115.5 billion between 2018 and 2021.
And that type of additional spending is neither unique nor unusual.
Climate change legislation
Just last week, another $40 billion in climate change spending for the U.S. Department of Agriculture was pushed through Congress by Democrats. A large chunk of that still-baking pie will go to alternative farm-based fuels like ethanol, biodiesel, wind and solar while more billions will go directly to farmers and ranchers who adopt climate-friendly changes in farming practices.
Almost every national, state and local ag group endorsed the climate bill while rural America’s overwhelming Republican congressional delegation ran from it. Only one major ag group, the American Farm Bureau Federation, opposed it. In explaining the opposition, AFBF President Zippy Duvall sounded more like Milton Friedman than any farmer and rancher.
“Farmers and ranchers support voluntary, market-driven programs,” he announced, “ … not an increase in taxes … at a time when the country is entering a recession.”
Duvall is partly right; farmers and ranchers do support voluntary, market-driven programs. But they also support government ag spending that underwrites key sectors of U.S agriculture — like alternative fuels, crop insurance, exports and food aid.
And it’s not just agriculture; this “industrial policy” reality is a key element in U.S. business sectors like energy, defense, infrastructure, finance, banking and now, tech.
Samuelson accepted this basic truth but Friedman never did. In fact, after Friedman died in 2006, the still sassy Samuelson noted, “I wish Friedman were still alive so he could witness how his extremism led to the defeat of his own ideas.”
Which, in classic Samuelson wit, proved yet another of his oft-quoted axioms: “Funeral by funeral, theory advances.”
