The Age of Legalization – American Expectations

Inflation will continue The number one issue facing the country So calm down, because it offends the American myth. We were told a long time ago that capitalism has perfectly calibrated the economy so that anyone can have anything, anytime, however they want. And that the wonders of globalization and other efficiencies will lower the cost of this massive undertaking to the NIB, continually improving living standards in the United States. As long as you ignore the privations and poverty that make this narrative possible (and actually implausible), you can celebrate the greatest of all possible worlds.

John Kenneth Galbraith had a name for this: rich societywhere we just need to take care of ourselves by dividing the returns of our productive spirit fairly.

When this balance is threatened, politics spirals out of control. After the stock market crash of 1929, which led to a shortage of mass production, we finally reimagine how the state interacts with the economy. When the Arab oil embargo in 1973 created runaway gas lines and eventually prices, it gave way to the Reagan Revolution and alarmed liberal economists to fear the bogeyman of inflation to this day.

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What led to our current predicament of soaring prices, missing merchandise, and rationing was obvious if you knew where to look. weeks before COVID Lockdowns in the US, Matt Stoller of the American Economic Freedoms Project books It is the most perceptive and also the simplest prediction we have seen over the past several years. It boils down to this: our system of production, logistics and organizational control is not designed to handle any stress.

Unfortunately, policymakers continue to try to solve new problems in the old ways, reshaping the trade needed to ensure stability and resilience and combine.

Last week we talked about lack of infant formula. This is a focused industry led by Primarily by two conglomerates Which does not depend on the success formula. Abbott Labs, the creator of Similac, produces medical devices and other health products, and Reckitt Benckiser, the creator of Enfamil, is best known for making Lysol.

Beyond the new normal supply chain issues, the main issue here includes a voluntary recall in February at the Abbott facility in Sturgis, Michigan, after two children died and two others became ill from the bacteria. Then Abbott pulled a large amount of the product from the market, and closed the plant. But the market structure itself created the conditions for a crisis.

Stoller posted some Great details about the formula marketwhich I’ll summarize: First, the Food and Drug Administration makes it very difficult for companies to hack it (and fittingly, this is more of a medicinal product than a food), but it’s easy for them stay at. Factory inspections are clearly lenient, given Sturgis plant case. A whistleblower from Abbott Trouble Warning It was ignored by regulators for months. In short, Abbott deceived the Food and Drug Administration, which was not difficult to deceive.

The second, I Explained last weekthe Women, Infants, and Children (WIC) program is responsible for about half of all formula purchases, through a complex competitive bidding process where states negotiate wholesale discounts in exchange for market exclusivity.

Policy makers continue to try to solve new problems in the old ways, reshaping the trade needed to ensure stability and resilience and coalesce.

WIC-eligible formula appears on store shelves alongside competitors, but those competitors know that most people coming into the store won’t be able to buy their products. So the oligopoly formula is often reduced to a practical monopoly. This drives up prices for non-WIC families, as the monopoly provider seeks to recoup the money that was cut through deep discounts. formula Incredibly expensive In the United States, there are It was a crime ring around it two decades.

When Abbott’s summons happened, he was 34 states where Abbott had a near-monopoly They will surely suffer the most. be sure to file six states With the most severe deficiencies (Iowa, Missouri, North Dakota, South Dakota, Tennessee, and Texas) are Abbott says WIC.

But here’s where things get weird. Federal officials may be clueless, but they aren’t completely stupid. They knew that a big recall of an important product close to the only source could be disastrous. In March, the USDA demolish the monopoly, allowing WIC parents to discount non-contractual products. Beneficiaries of the Women’s, Infants, and Children’s Program (WIC) have access to different product sizes too, which is a new wrinkle. Purchase limits are in place To prevent hoarding. After nearly three months, the USDA Abbott pleads Allowing non-contractual purchases until the end of August, indicating that the company at the center of this crisis is still in control of whether the government can increase supply to get out of it.

White House announce that “more infant formula was produced in the past four weeks than in the four weeks preceding the recall.” The FDA says there was more sales in April Also from the pre-summon. But that leaves aside the important question of logistics. Just because there are more fixtures being produced and sold doesn’t mean they’re in the right place; Companies should positively ramp up production and shipments, even though they know they will shut down again once the Abbott plant is back online. imports being increased, but this does not appear to be the main problem. When you neglect production and think things look like magic, the obstacle and processing of getting to the things you need to go to is lost.

Most importantly, policy makers must look at the market structure that created this trap. It appears that WIC Poor people save a lot of money, but at the expense of the ineligible middle class for WIC and flexibility. If you want to help feeding babies from poor families, nationalize the WIC formula sector and let other brands fight for the rest of the market, with antitrust policy used to prevent anti-competitive behaviour. Or you can just give the poor money, instead of turning every purchase in their life into one program or another.

Failure to plan or understand markets is even more acute with coronavirus vaccines, an astonishing innovation from US-based companies that Americans are still on the brink of not being able to access. There was an opportunity for long-awaited COVID aid passed through Congress with $40 billion earmarked for Ukraine, but President Biden Frustrated by that fightand separates the two priorities.

As Republicans continue Ban fast financing And Seeking a vote on immigration policy Combined with her, there’s a real possibility that we’re going for it Quotas for the next generation of COVID vaccines. America may be arsenal of democracyBut it’s certainly not a public health arsenal.

I’m in an uncomfortable situation I totally agree with Larry Summers That myopia is appalling. But again, in the context of the past two years, it’s not surprising. Our actions suggest that we assume that everything grows on trees until it is not available, and thus politicians grow and recover. Pandemic preparedness during a pandemic should be the easiest thing to achieve, but here we are.

In fact, rationing is not limited to formula and vaccines; It is our official economic policy. The Fed rate hike is designed to stop inflation in order to “make the request“a euphemism for putting people out of work in the hope that millions will not have enough money to buy things. The current strategy is to legalize our way through inflation, despite the fact that interest rates can’t Ending lockdowns in China Or stop the war in Ukraine, the current main drivers of lower prices.

What this comes down to is that public policy has relied – absurdly – on a belief in a spontaneous process of capitalism, in which shortages not only must but cannot happen. When that inner promise is not fulfilled, people get really angry about it, and they should. They should know that it is the result of decades of bad politics: monopoly, centralization of production, and lax regulatory response. So we realize this shortcoming and start Re-engineering policy To ensure the general welfare, this anger will harvest a whirlwind in November and beyond.

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