The economics of magic words
David Giacalone forwarded this article to me, which is titled “Antitrust and Social Security.” There’s nothing terribly interesting about it—just the usual rationalization of the Welfare State that steals money from people who earn it and gives it to people who do not—but I can’t resist pointing out the line that is really the epicenter of the author’s other errors: “Markets are not the product of Mother Nature. They are embedded in institutions and are at root political creations.” That is absolutely, completely, totally false. And if you say a statement that is so wholly wrong, it puts you into a sort of Looking-Glass world where everything else you say is backwards from common sense.
If markets were “at root political creations,” then explain the following phenomenon:
Political unrest in Taiwan and elsewhere was only a fraction of Nationalist China’s concerns. The country was teetering on the brink of economic collapse. During the war, as inflation spiraled out of control, the government had inflicted heavy taxes on farmers and forced them to sell grain at fixed prices. In the immediate postwar years, many Chinese lost what was left of their fortunes when the Nationalist government, attempting to impose strict control over the nation’s money supply, asked its citizens to exchange their gold and foreign currency for government certificates. The result was hyperinflation. In 1947, the government issues at least 10,000 billion Chinese dollars in bank notes. Within one six-month period in 1948 prices soared by a factor of 85,000. A sack of rice priced at 12 yuan in 1937 cost 63 million yuan by August 1948. Shoppers pushed heaps of paper currency in wheelbarrows just to buy a few groceries. When a Guangdong paper mill recycled “eight hundred cases of notes ranging from one hundred to two-thousand-dollar bills which it used as raw material in the manufacture of paper,” it was reasonable to conclude that KMT currency was literally worth less than the paper it was printed on.
Iris Chang, The Chinese in America: A Narrative History 240 (2003) (citations omitted).
If markets are political creations, what accounts for inflation? There was no political stone unturned in the KMT’s attempt to manipulate the Chinese economy. Where they just clumsy? It’s hard to imagine that the Chinese government did not try every political trick. Yet the laws of supply and demand continued to operate in spite of it all. The fact is, markets are a product of nature, and pre-exist the state every bit as much as reason itself. (Yes, I know there are many who think that that, too, is a political creation.) In our policies we can choose to command nature only to the degree to which we obey her.
