By J.F. McKenna
The talk of recession redux begins. Economists sneak the r-word into analyses, with the hope that America won’t blame the messengers. Pols wonder if their once-clever leveraging of the word might be translated into an admission of public-policy failure. Throw in a further uptick in layoffs and the reportedly worst drought in a half-century, topped off with higher food prices, and echoes of 1930s Steinbeck gain volume:After a while the faces of the watching men lost their bemused perplexity and became hard and angry and resistant.
Cities such as Cleveland, Detroit and Pittsburgh confront another economic contraction. In these cities and elsewhere, business data render a generally bloodless account, even though real economic pain travels door to door.
These times, in fact, perversely highlight the root of the word economics. The word grew out of household. Nowhere is the impact of a recession felt more acutely than at home. Nowhere is arm’s-length policymaking more resented. In the household, the distantly concocted macro-nostrum gets tested in earnest. If the so-called master plan falls short, a house payment goes out late, back-to-school shopping is curtailed, another brake job substitutes for a car trade-in.
The nightly business numbers, of course, mask these domestic consequences. And disguised results feed only more arm’s-length decisions—as well as a detached perplexity over why the first round of policy didn’t work as anticipated.
Policymakers should consider themselves warned, especially as they begin to soft-peddle their role in creating the coming “recessionary cycle.” We’re from the government, and we’re here to help—the folks in the neighborhoods have upgraded that tired libertarian punch line to a serious millennial threat.
To some extent, we’re all to blame. Not that long ago, in a column for a business magazine, I chided myself and others for hanging on too long to fuzzy recollections of old Keynesian lectures from college, and for ignoring the basics of the “make it, mine it and grow it” formula, the core of economic prosperity. I recalled how refreshing it had been to introduce myself to the work of economist Milton Friedman, particularly his classic Free to Choose.
Friedman, who died in 2006, had preached that old-time “monetarist” religion, extoling free trade and free enterprise. In short, the well-tested basics I heard from successful people in business and manufacturing. Friedman had been anything but blind to the fact that economics has its roots in household.
“Everyone of us,” he writes in Free to Choose, “every day without recognizing it, engages in deals with people all over the world whom we do not know and who do not know us. No super planning agency is telling them to produce something for us….The essence of a free private market is that it is a situation in which everybody deals with one another because he or she believes he or she will be better off….That makes clear, I think, why free private markets are so closely related to human freedom.”
Free, private, real—economic policy that begins and ends at the you-and-me level.
In that same column, I repeated a story by economist and author Thomas Sowell about Friedman, who had been a graduate-level professor of Sowell’s at the University of Chicago. I encourage policy makers to keep reading. More important, I encourage those policymakers to reflect on Friedman’s lesson.
On a term paper, Sowell had recalled, “I wrote that either a-this would happen or b-that would happen. Professor Friedman wrote in the margin: ‘Or c-your analysis is wrong.’
“‘Where was my analysis wrong?’ I asked him.
“‘I didn’t say your analysis was wrong,’ he replied. ‘I just wanted you to keep that policy in mind.’”
The Friedman-Sowell exchange is a cautionary tale for Americans as we brace for Recession 2.0—but especially for those perplexed policymakers whose decisions may make the rest of us become harder, angrier and more resistant.
J.F. McKenna is a business journalist, communications specialist and former editor and associate publisher of the national manufacturing magazine Tooling & Production. Reach him at email@example.com