Sam Hill on Milton Friedman: This is the 50th anniversary of economist Milton Friedman’s edict that businesses should focus on making money and let the market take care of everything else. There’s been endless chatter about it. But here’s my take: Friedman was right, but add an asterisk. He was correct that business has neither the resources nor expertise to take on problems like poverty, education or hunger. Where he was wrong was thinking markets would step in. There’s an old joke about two economists stuck in the bottom of a well. One says: “I’ve got it! Assume we had a ladder.” Friedman assumed fair competition and pricing-in of externalities (like climate change) because he lived during a time when that was the acknowledged role of government. Today, government is not up to those tasks because business has spent the last 50 years defenestrating it. Those inspired by Friedman believe that government isn’t necessary, arguing that if checks and balances are needed, a competitive market will provide them. And how’s that working out? Did Johnson & Johnson stop Purdue Pharma during the opioid epidemic? Did Exxon call out Peabody (coal) because of climate change? Did CalPERS, California’s mega-pension fund, act as a brake on the practices that led to the Great Recession? Is Facebook fact-checking Twitter? Physicist Niels Bohr said: “The opposite of every great truth is another great truth.” That’s also true of great lies. The opposite of the great lie of utopian socialism is the great lie of unfettered capitalism. These days everyone from the Business Roundtable to the World Economic Forum is piling on Friedman. Companies insist they’ve moved away from “shareholder capitalism” and point to their business practices and foundations. That’s all nice, but you don’t see any CEO giving up their stock options. If business really wants to help take on societal issues, like poverty, outsource it. Enable an effective and independent government. Pay your taxes. Forego bailouts. Fire your lobbyists. Discontinue political contributions—to either side. Stop trash-talking regulation. Otherwise Friedman-think isn’t going anywhere.
Buffalo or Bust: A must-read by Abrahm Lustgarten, via ProPublica and The New York Times, on climate change-related migrations that await us in the not-so-distant future. It’s sadly well-timed. As everyone knows, apocalyptic fires have engulfed western states. And Hurricane Sally slowly lashed the Gulf Coast as a slew of other storms gathered steam in the gulf and in the Atlantic. (Like other storms, Sally intensified just before landfall—a phenomenon associated with climate change.) And it was reported last week in The Washington Post that two major Antarctic glaciers are “tearing loose.” There is so much to unpack in Abrahm’s piece, but here are a few things that chilled me to the bone. (Not a pun.) First, between 2040 and 2060, extreme temps could dominate the southwest/southern regions. For instance: some places in Arizona, like Phoenix, would have temperatures above 95 for half the year. (2040 isn’t too fare away, is it?) Meanwhile, “the most habitable climate in North America,” writes Lustgarten and his colleagues, “will shift northward and the incidence of large fires will increase across the country. This suggests that the climate crisis will profoundly interrupt the way we live and farm.” Also: some 50 million Americans could be impacted by rising sea levels during the same time period. A mid-century boom for cities like Duluth, Buffalo and Rochester? Who really knows? But I’m glad I sold my home in Hilton Head.
Help on the Way? Well, well, well—what do we have here? President Trump showing signs of compromise with House Speaker Nancy Pelosi? If so, that’s a good thing. Another 860,000 Americans filed for unemployment benefits last week. It was “the 26th week in a row total initial claims were far greater than the worst week of the Great Recession,” pointed out Heidi Shierholz of the Economic Policy Institute. There was more bad news, particularly on the state and local level. Illinois Governor J.B. Pritzker, for instance, warned last Wednesday that he may have to layoff “thousands” of state workers and cut services if Congress, and the president, don’t come to the rescue. (According to Pew, state and local government employment nationwide, including temporary layoffs, is down more than one million jobs since March.) A survey of U.S. mayors, reports Yahoo! Finance, says that almost all of them expect their operating budgets to head down in the next year or so. In other words: more layoffs. Still, Republicans like Senate Majority Leader Mitch McConnell and Senator Ted Cruz of Texas have been reluctant to meet congressional Democrats half-way, claiming that more pandemic aid will just bailout irresponsible blue governors and lazy unemployed workers everywhere. But now, President Trump—perhaps, I’d guess, agitated by Bob Woodward and some internal polling numbers—has indicated he might support something like the $1.5 trillion compromise proposed by a bipartisan group known as the Problem Solvers Caucus in the House. It would include $500 billion for the local/state governments and perhaps revive a version of the successful $600 weekly enhanced unemployment benefits program. With the Federal Reserve Board warning that a quick, Larry Kudlow-like “V” recovery isn’t coming to a neighborhood near you soon, it is pretty clear that Congress and the president have to move before November 3. But I don’t know how the president is going to reconcile budget aid with his, and his party’s, distaste for blue Americans. Maybe Cruz and the gang can pull out their Ouija boards, contact Ayn Rand, and come up with a solution.
Loose Change: Washington Post economics columnist and legend-at-large Robert Samuelson hung it up last week, writing his final column. (Read it here.) Bob also wrote for Newsweek for years. I had the honor, in the ’90s, of editing him, Jane Bryant Quinn and Allan Sloan. Combined they won a truckload of Loeb awards, considered by many to be the Pulitzers of business journalism. I was not worthy…The Godfather of Chicken McNuggets? Don’t miss Jordan Harbinger’s interview with billionaire and philanthropist Ray Dalio. My favorite part: Dalio explains how in the early ’80s he figured out a way to settle down chicken costs so McDonald’s could keep its menu prices stable. “I had sort of enough of a unique understanding of pricing, markets, and the mechanics of growing chicken to know that we could lock in the grain price,” Dalio told Harbinger. So if you if love fast food, you can thank Dalio for, as Jordan says, helping bring “the Chicken McNugget into the world.” Tune into The Jordan Harbinger Show for that and more…Loving Companies: My friend and management expert/consultant Louis Carter has created a new method for unearthing great companies to work for. Read all about it…On the Street Jukebox: “The Last Resort” by Don Henley and the Eagles seems about right for 2020 and what’s going on out West. (See Hot and Humid above.) It was the last track on the classic Hotel California album. Great protest song then; even better protest song now. Click here to watch and listen…Thanks for reading.
