Of Stagflation and Recovery

Photo by FortyTwo on Unsplash

Governments create inflation.  Since governments maintain a monopoly on money creation and exercise it constantly, the results of their policies are their own, whether they wish to own them or not.  Having said that, though government got us into this inflationary mess, more government is not going to get us out.  Yet, less government might.

The current administration—including the Federal Reserve—is in a tight spot.  Many repeatedly predicted that the unwholesome monetary and fiscal policies to respond to the equally unwholesome policies of dramatic economic shutdown of the 2020 Great Cessation would eventually lead to inflation.  So they have, even worse than what we saw in the 1970s.  The incoming Biden Administration persisted in blowing air into the inflationary balloon distended the year before.

This is not a partisan statement.  We have seen two Republican administrations doom themselves at the polls by engaging in ruinous economic policies because it was an election year.  Within memory of 2020 policymakers, the outgoing Bush Administration in 2008 mishandled the sure-to-be recession coming from the bursting of the housing bubble by panicking Congress into passing the TARP legislation, which fright drove investors to the sidelines.

True, the price rise from the 2020 massive fiscal and monetary stimulus did not appear as quickly as worriers, like me, expected.  Recipients of government largesse were not spurred to spend it as spontaneously as predicted.  Neither did negative real interest rates prod much borrowing, but it did punish savers.  While economic activity remained suppressed, people for a time sat on their money with little to do.  Eventually, puzzles all finished, people started coming out as 2021 wore on.  Congressional leadership called for more stimulus whilst the flood of funds from earlier stimulus at last began to flow.

The tight spot for the current administration is how to bring down inflation without bringing down the economy.  Of course, the economy will come down if they do not, because inflation eats away at the insides of economic activity.  Current White House leaders are sensitive about comparisons with the Carter Administration, yet there is talk of following the failed Carter example of trying to drive the economic car with one foot on the brake and the other on the accelerator.  That is the program for Carteresque stagflation, a stalled economy wrapped in continued high prices.

What we should have learned—and many have—is that the way to end inflation without getting into stagflation is not more government stimulus.  It is to end disincentives to business activity.  Reduce regulatory burdens and people will find ways to solve problems and get things done.  Inflation is caused by too much money chasing too few goods and services, stagflation impeding production of goods and services.  Reducing regulatory burdens and barriers to business activity addresses both problems by promoting productivity, innovation, and expansion, which increase supply at lower costs, reward creativity, and encourage new ideas in a virtuous economic circle.  It worked in the 1980s.  It can work 40 years later.

Of Burgers-Fries and Excellence

Photo by Peter Dawn on Unsplash

My favorite local hamburger joint is the simply named “Burger Shack.”  The hamburgers are good, made to order, with an option for a gluten-free bun; prices are decent.  Where this joint completely outshines the crowded competition is that the fries are far and away the best around.

One might think that with a commonplace menu centered on burgers, fries, and milkshakes the fare could easily become mediocre.  There is plenty of that available in the surrounding culinary community.  The national mass-production chains cater to the market for mediocre.  They had occupied the so-so field for so long that it appeared that all the burger rivalry was solely among the giant mediocrities, working hard to find new ways to repackage and remarket the same thing, becoming more alike in their efforts to appear different.

Who knew that people—lots of people—could be attracted to excellence in burgers and fries?  A few daring souls made a go at the chance that there may be customer demand for more than mediocre.  The market allowed it and rewarded it.  Competition to rise above mediocre has become fierce, with customers benefitting from the choices offered.    

Not that I would forbid mediocrity.  Mediocrity is O.K., as far as it goes, but only O.K.  I am happy that there can be more.

Enjoying better burgers, pleased with better shoes, and glad for better dentists, I find the insistence on mediocrity and the outcry against excellence astonishing.  How frequently we encounter voices decrying competition, seeking to standardize everything by treating everything and everyone the same!  Is that what people really want?  We used to have a shelf full of trophies “won” by our children just for showing up.  We failed to convince the kids to take them to their own homes for display.

More astonishing is the assertion that celebration of mediocrity and condemnation of competition promote diversity.  The theory is that diversity cannot compete in a system that rewards excellence.  What is the alternative prescription for diversity from these levelers?  They demand removal of standards that applaud excellence in achievement or that recognize merit in performance.

Reality reveals opposite results.  This leveler ethic promotes either or both of two outcomes.  First, things tend toward the same as differences are discouraged; efforts that improve performance are placed at risk of suppression.  Second—alternatively or concomitantly—the levelers who rise above to be in charge of administering this doctrine decide recognition and advancement, and they do so based on whatever standard suits their fancy or is then in vogue.  Such standards tend to be unmeasurable, subject to whim, suiting the arbitrary caprice of the chief levelers.

In short, diversity is always in danger in the tyranny of mediocrity.  No one must be more beautiful, according to the day’s definition of beauty.

For a time the big burger chains, which initially arose by offering a better, excellent idea (until the idea became standardized) put the local mom and pop joints out of business.  Markets, though, have allowed competition to work its magic, tolerating room for some intrepid innovators to test customer interest in burger excellence.  Some succeed.

There comes the levelers’ claim that competition is inhuman, or at least unkind.  It supposedly disadvantages those who are not excellent, who are only mediocre.  Since not everyone can excel, this competition must be stopped.

That claim is inhuman and unkind.  People everywhere are mediocre or less than mediocre at some things, but each can do something better than someone else can.  The variety of talents and gifts is constantly amazing (and sometimes amusing).

If mediocrity standards are imposed, however will we discern the excellence that each has to offer?  Each person may be stymied from discovering what he or she is best at doing.  How does one find the divinity in his or her humanity, embedded in the unique gifts from God awaiting to be developed?  How many advances will be lost? We will be poorer for the loss.

I do not know how long it took the owners of Burger Shack to find out that they could offer an excellent product.  Perhaps they are still finding out.  While the year’s virus restrictions play to the advantages of the big, national firms, the last time I was at Burger Shack it was booming, even under the restrictions.  If allowed, people find a way.

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