(This little post has been sitting in my files for about half a year. It does not, I think, make any new points, but it still strikes me as worth publishing, if only as a matter of adding my small contribution to an ongoing movement)
Maureen Tkacik at The New Republic offers “Crash
Course ,” an extensive article on the managerial failures at
Boeing that led to two crashes and 346 deaths. Shameful, of
course. Horrible, of course. There’s an economic lesson here. In
capitalist economics it is assumed, usually without question,
that businessmen will act at least in the interest of their
business, of preserving their capital. But that is exactly what
the Boeing executives and managers did not do. I don’t know how
this will work out. It is possible that Boeing will simply go
bankrupt, which would be a shame – all that knowledge, all that
history, all those skills and so many jobs lost.
The Economic Lesson
Conservative economists consistently argue that businessmen
(and it is almost always businessmen) will do the
“rational” thing, conserving capital and making their business
grow. But this is exactly what the Boeing executives did not do.
For them, managing Boeing became an exercise in applying abstract
theories of wealth creation rather than the concrete practices of
engineering and making of aircraft, leading to the abysmal
failure of the Boeing 737 Max. A second claim is made that not
only are businessmen rational in this narrow sense, but also that
most businessmen are brilliant, and will seek out or create the
best business ideas. And, finally, conservative economists claim
that rational businessmen will produce optimal (in some sense)
Conservative economists went on to imagine the economy as a
network of these optimal business organizations, which would
lead, though market processes, to an optimal economy. Keynes
delivered the death blow to that idea that an economy would
invariably converge to an optimum state, pointing out that the
observed economy around him (his major macroeconomic work,
The General Theory of Employment, Interest and Money ,
was written during the depression of the 1930s) did not match the
theoretical predictions of conservative economics. The kind of
arrogance we saw from Boeing executives and managers, the belief
that they knew better than people who had been doing the job for
their entire careers, the arrogance that led Boeing to produce an
unsafe aircraft itself destroys the idea that businessmen are in
any sense the superior men (why is it always men?) of
conservative fantasy. There is nothing that requires capitalists
to act in the interests of, even, preserving their own capital
and often they do not.
What are the policy implications?
Which leaves us where? If the lawless capitalism that
conservative macroeconomists have been advocating since before
their position was even called conservative, let alone
libertarian, is not to govern our economy, what is? On the other
side of the argument, there is a whole line of socialist thinking
which argues for minutely detailed control of the economy. This,
equally, has failed. I will mention some of the problems here as
Critique of Lawless Capitalism
- Governance is not an economic activity and attempts to
make it so are inherently corrupting.
- Regulation is our friend. It prevents some of the
worst outcomes possible in an unregulated economy. Without it,
finance turns instantly corrupt.
- Sometimes government intervention is the only way to
proceed. Some activities like providing health care cannot
be done equitably and efficiently without either intense
regulation of private enterprise or government provision of
- Monopoly and oligopoly are corrupting. The holders
of such large “private” fortunes must be kept from buying the
government they want.
- Letting a wealthy minority govern invariably leaves the
vast majority impoverished.
Critique of the Planned Socialist Economy
- It is corrupt. This is not only so in Communist
countries, but also within large businesses and the military.
There is always, in planned economies, an underground economy
of scroungers and their customers.
- It is totalitarian: it makes every interaction
which might even possibly be economic subject to the
intervention of the state.
- It is inefficient, requiring the creation of a
vast bureaucracy which promptly proceeds to work to maintain
and expand itself.
- It is unnecessarily conservative, leaving one
dealing with the bureaucracy to get permission to do anything
new. This is the experience of anyone dealing with a complex
grant application or one of the old European government
telecommunication monopolies, which kept European
telecommunications back for many years.
- All attempts to produce minutely planned civilian
economies have failed.
The separation of governance and day-to-day economic activity
is a valuable check on both economic and government
I return, finally, to something that political conservatives
often advocate when they are not shilling for vast wealth and
entrenched privilege: attention to the character of people in
positions of both governmental and economic power. An economy
where most of the actors are grifters will produce little of
value. A government where most officials are corrupt will extort
the wealth of the vast majority and produce tyranny.
The bulk of this essay was written before the COVID-19
pandemic, which underscores the above. Somehow we must begin to
pick officials of good character, or all our theorizing will be