Category Archives: markets

A Start

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But we need to go further.  Recall that an official of the Communist Party of China threatened to cut off US access to life-savings medicines that are manufactured in the People’s Republic of China [Bing Translate translation from the Xinhua publication].

If China retaliates against the United States at this time, in addition to announcing the travel ban on the United States, it also announced the strategic control of medical products and the ban on exports to the United States, then the United States will fall into the ocean of new crown [corona] viruses.

Senator Tom Cotton (R, AR) and Congressman Mike Gallagher (R, WI) have introduced legislation that will begin to address such dependencies and improve our national security.

The Chinese Communist Party threatened to cut off America’s access to vital drugs in the midst of a pandemic caused by its own failures. It’s time to pull America’s supply chains for life-saving medicine out of China and make the CCP pay for contributing to this global emergency.

The proposed legislation would

  • task an FDA registry with tracking drug ingredients
  • ban the Federal government from buying drugs with a supply chain that originates in the PRC
  • require drugs to be labeled with the name of the country where they came from
  • provide benefits to manufacturers who make their drugs or medical equipment in the US
  • take effect in 2022.

But it, or quickly following legislation, needs to go much farther.

  • Feds should buy no drugs with a supply chain that passes through the PRC, not merely originate there
  • manufacturer benefits should be limited to preferential government buys and support for drug development, not overt outlays of taxpayer money
  • push the pace: the requirements should take effect in 2021, or sooner, depending on how quickly manufacturers can readjust their supply chains

Further legislation should do the same regarding other items important to national security, items like medical equipment, computer chips of all types, energy-related equipment.

A Lesson Learned?

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Our pharmaceutical companies have decided to bring back to the US some critical drug production capabilities in view of the People’s Republic of China’s current role in that manufacturing supply chain, the interference the Wuhan virus has caused in the PRC’s ability to produce those critical intermediates, and the separate threat of some ranking PRC officials to cut us off from those intermediates.

The dramatic proliferation of the coronavirus, also termed COVID-19, has US officials on an accelerated mission to bring the production of life-saving medicines back to US shores and away from the control of the Chinese government.
“The US is uncharacteristically over-reliant on drugs from China, and it’s not a sustainable model,” Das Nobel, founder and CEO of the New York-based product-and-supply service MTX Group. “The US government must prioritize its strategic planning to incentive the US Manufacturing organization and assist in bridging the gap in manufacturing cost versus gross profit.”

Such a move would violate the purely economic Ricardian principle of putting production of goods and services where that production can be done most efficiently and cheaply, even if that means some production goes to another nation. Maximizing efficiency, after all, lowers prices—whether to intermediate manufacturers and assemblers or to us consumers—the farthest.

However, national security demands some level of inefficiency in purely economic matters.  What is the value, after all, of those cheapest goods and services if we’re cut off from them altogether, as the present virus situation threatens with badly needed medicinal drugs? What’s the value of those low-costs if we don’t have our own production facilities and human skills with which to begin/ramp up our own production as quickly as needed in a crisis?

So it is, too, with moves to bring at least some aluminum and steel production back home. It’s not that Canada, Germany, or Japan are enemies or potential enemies of ours; of course, they are not. Nor is it that the PRC is an enemy of ours with whom we can get away with trading in peaceful times.

No, it’s that having facilities for a complete production chain, from ore in the ground to all of the industrially critical final products of aluminum and steel is a Critical Item for our national security: with a domestic complete chain, we can rapidly ramp up our own capabilities in the event of a cut-off from overseas, whether from war or natural cause.

So it should be with all of the goods and services critical to our national security (viz., medical equipment, computer chips).

Understand, though, that this does not, and should not, mean the end of international trade or of globalization of our economics. Trade under free trade principles should continue and be expanded: Ricardo remains correct, and following that principle remains—in the main—the soundest move. It just means that for those relatively few national security-level items, a complete chain of production capability needs to be maintained at home even as we continue to trade the bulk of those critical items under Ricardian principles. The cost delta between maximal efficiency of purely Ricardian free trade and the lesser efficiency of maintaining a core domestic production capability is simply part of the necessary cost of national security.

Whether our government should assist in bridging the gap in manufacturing cost versus gross profit or, if so, to what degree, certainly should be debated and worked out. However, as with anything else in a free society, in a free market economy, government’s role should be kept to a bare minimum, and that minimum should rest on a foundation of sunset clause included temporary measures and not on permanent subsidies or credits.

A Misstatement of the Case

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Gerald Seib opened his Monday Wall Street Journal piece with this bit:

…Americans have learned they can’t really count on Washington to deal with this crisis for them. Local leaders, businesses, churches, sports leagues—all have taken up the task, and done so more effectively than the political leadership in Washington.

That’s as it should be. Responsibility is individual, personal; we cannot wish any of that off onto others, much less government. All government can do—and it should do this much—is help us satisfy our own obligations.

That help, also, needs to come from the bottom up, with the Federal government’s help coming last. That top tier of our American government hierarchy has national responsibilities, and even with the present COVID-19 situation, conditions on the ground vary widely from locale to locale, State to State. Responses need to be similarly local or unique to each State.

The Federal government can spur development of medical treatments—the public-private partnerships with medical enterprises, for instance—and short-term (I’ll repeat that: short-term, with sunset clauses built in to guarantee shortness) economic measures to mitigate the stresses on our businesses, small and large. It can deploy military mobile hospitals and shelters to particular hot spots, and it can take other such temporary nation-wide steps to mitigate the situation.

Necessary mitigation, even control, of the situation, though, must begin with us as individuals. That mitigation begins with stopping our panic-buying and hoarding of necessary supplies. They continue with looking out for our most vulnerable neighbors: the elderly, the less or non-mobile, the poor among us.  They go further: avoiding large gatherings for the duration (which is not the same as not going out at all, not giving our custom to the mom and pop businesses in our neighborhoods and city regions), seeing to the welfare of neighbors with early grade school-aged children whose schools have been closed for the duration, checking on the older kids.

We need, also, to consider a mantra from a war we fought four generations ago: Is this trip really necessary? (And yes, it is, within the context of continuing to do at least occasional business with those mom and pops.)

In the end, we must revive and live by the words a man spoke some 60 years ago (which I’ll rephrase here): Ask not what your government can do for you. Ask what you can do for yourself and your neighbor.

Nationalizing our Economy

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A city mayor wants the Federal government to nationalize critical parts of our economy.

New York City Mayor Bill de Blasio is arguing that the best way to tackle the coronavirus outbreak is for the federal government to take over critical private companies in the medical field and have them running 24 hours a day.
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“This is a case for a nationalization, literally a nationalization, of crucial factories and industries that could produce the medical supplies to prepare this country for what we need,” de Blasio told MSNBC‘s Joy Reid on Saturday, calling for “24/7 shifts” during what he called a “war-like situation.”

Just like the Progressive Theodore Roosevelt, who wanted to nationalize one-sixth of our then-economy, the railroads, because—presaging a later President—they’d made enough money and grown (in his personal view) too powerful.

Just like the Democrats Woodrow Wilson and Harry Truman, under the excuse of war that de Blasio is bastardizing—Wilson nationalizing all the factories east of the Mississippi until the Supreme Court overruled him and Truman trying to seize the steel industry until the Supreme Court blocked him.

Just like Progressive-Democrat Barack Obama, who nationalized a current sixth of our economy, our health insurance industry, in order to turn it into a Government mandated, privately funded welfare program.

Now the Progressive-Democrat Bill de Blasio is grasping at his excuse for Government to seize control of our economy.

What’s the Progressive-Democrats’ limiting principle on such nationalizations? Nor they nor their forebears have ever been willing to say. That leaves us to conclude that their limit is the natural limit: complete nationalization of all of our economy—rank, pure socialism.

Remember this power grab attempt in November.

Biden and the Sanders Supporters

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In the end game of the Progressive-Democratic Party’s Presidential primary contest—and, yes, at this stage, Party is down to three contestants, with Party’s elite choosing to freeze Congresswoman Tulsi Gabbard (D, HI) out of the contest, she being too willing to speak freely and honestly and too far behind for her axis of approach to counter Senator Bernie Sanders’ (I, VT), the end game is on us—the question arises whether Joe Biden, front runner, can win over Sanders’ supporters, who are every bit as ardent and critically large in number as the NLMSM makes them out to be. Those supporters, after all, will be critical in the general election if Biden is to be electable in the general election.

Here are a couple of critical considerations for that question.

Mr Biden’s agenda is indistinguishable from Mrs Clinton’s and thus anathema to the left Democratic base.

And

he [Biden] has to…persuade them that he’ll bring them to the table and push for a substantial part of their agenda.

This explicit promise, especially, illustrates how strongly Biden stands foursquare against everything that Sanders and his supporters stand for:

Mr Biden recently told MSNBC that he would veto a Medicare for All bill if it crossed his desk.

He can’t, though, move to bring Sanders’ supporters across that gaping chasm. If he makes a credible push for the Left’s agenda, for Sanders’ agenda, he’ll betray his own supporters. That betrayal will demonstrate to both his own supporters and Sanders’ that he cannot be trusted. More broadly, that betrayal will demonstrate to all voters in the general election that he cannot be trusted: he’ll just change his policy positions according to what benefits him personally in the moment.

That stands in sharp contrast with Sanders who, regardless of what anyone might think of his positions and policies, has remained steadfast in those positions and policies, regardless of any fickle political winds.

We’ll get a clue, maybe, in tomorrow’s Progressive-Democratic Party debate in DC.