The political paternalists and the social engineers are giddy with hope and anticipation. They are confident that their day has, once again, arrived. The era of even bigger government has returned, and any remaining free-market system is simply out of date. They are full of promises and plans to set the world right, as long as they and the right politicians are in charge.
To bring all this about, there is need for “A New Global Economic Consensus,” or so we are told by Mariana Mazzucato, in an essay on the website of Project Syndicate in late 2021. Dr. Mazzucato holds a professorship at University College, London, in the United Kingdom, and is the founding director of the Institute for Innovation and Public Purpose. She is also the Chair of the World Health Organization’s Council on the Economics of Health for All, along with being on the United Nations High-Level Advisory Board on Economic and Social Affairs. In other words, she is a “player” on the political paternalist scene.
In the face of the coronavirus crisis and the global warming threat, Dr. Mazzucato insists that the previous global consensus among the leading Western governments that, all things considered, freer markets, fiscal restraint, and limited government intervention were the best policies to ensure greater freedom and wide prosperity for all has been shown to be irrelevant and detrimental to the well-being of humanity.
A new consensus on government planning
There needs to be a new consensus agreed to by the governments of the world for “a radically different relationship between the public and the private sectors to create a sustainable, equitable, and resilient economy.” “Neoliberalism,” with its assertion that free enterprise should be left alone from the regulating and redistributing hand of government, has only resulted in growing inequalities and political and economic “subordination” of the poorer and less developed countries to the major industrial Western nations, says Dr. Mazzucato.
It needs to be pointed out that the term “neoliberalism” is the catchall phrase that these new political paternalists use to cover any and all economic policies of which they disapprove. Such policies are by definition, “free market injustice,” even if the actual polices condemned are really various forms of government intervention that have not turned out the way they wanted. The new political paternalism means “never having to say you’re sorry” for the consequences of your own policies or those of your interventionist predecessors.
These paternalists insist that in the face of, first, the financial crisis of 2008–2009, and now, the pandemic of 2020–2021, neoliberal capitalism has only created “unprecedented risk, uncertainty, turmoil, and climate breakdown.” The governments of the world must agree to “a new international social contract.” What is needed, Dr. Mazzucato tells us, is a “revitalizing [of] the state’s role [to] allow us to pursue societal goals, build international solidarity, and reform of global governance in the interest of the common good.” This includes “making the kinds of markets we need to nurture a green economy.”
Measurements of economic betterment such as the Gross Domestic Product (GDP) or financial success of private enterprises are no longer the acceptable benchmarks for this new global economy. Instead, there has to be a focus on “ambitious common goals” to assure “humanity’s survival on this planet.” For this, “The state would coordinate mission-oriented public-private partnerships aimed at creating a resilient, sustainable, and equitable economy.”
A seven-pillar planning program
So, specifically, what does this all mean? In the summer of 2021, Dr. Mazzucato served as a member of a group of international “experts” who prepared a report for the G-7 governments (Canada, France, Germany, Italy, Japan, the U.K., and the United States) on “Global Economic Resilience: Building Forward Better” (October 2021). Its purpose was to offer the policy plans to remake the world economy according to the proposed premises of this new political global consensus. It is nothing less than an agenda for national and international government central planning. There would be little left in the world not controlled and commanded by political authorities and their “expert” advisors — those like Marianna Mazzucato.
Offered is a Seven-Pillar planning agenda: Global Health; Climate and the Environment; Digital Governance; the Global Trading System; Investment-Focused Recovery; Labor Standards and Participation; and Supply-Chain and Critical Markets Fragilities.
Reading the subsection on the coronavirus crisis, you would never think that a good part of the response to problems during the last two years had very much to do with the governments to which Dr. Mazzucato and her report colleagues wish to assign even more decision-making authority and power. Regulatory delays in preventing the private sector from better developing and providing short-run medical supply substitutes; the confusions and inconsistencies in approving, denying, and then approving the availabilities of vaccines; the ordering and misplacing of large quantities of vaccines (including in Dr. Mazzucato’s home country of Italy); the closing down of medical facilities to both necessary and important elective surgeries for non-COVID patients; and many other such missteps. None of this has anything to do with the governments who are to be empowered with even more authority.
Government-made supply-chain failures
When the report turns to the global trading and supply-chain problems during the last two years, nary a word is said about the most important policy that brought so much of the world economy to a disruptive standstill: the government lockdowns and shutdowns that commanded factories to stop producing and employees to not work; that prohibited people from leaving their homes for weeks and months on end other than for government-approved limited shopping for food and pharmaceuticals; and the closing down of air and road travel and oceanic shipping.
Those familiar with the “Austrian” theory of capital and investment understand that not only does all production take time, whether it be days, weeks, months, and sometimes years but that production processes entail interconnected and interdependent stages of production that often crisscross counties and continents. There must be a constant and continuous flow of inputs passing through these stages of production in timely and coordinated fashions for that vast array of finished goods and services that we daily take for granted to be there for our consumer purchases, day-after-day, with few if any glitches along the way.
Break or block these intricate and time-taking structures of production, and discontinuities and delays are inevitable and inescapable between the respective production stages that connect when production begins and final goods are ready for sale. In addition, the patterns of relative prices and wages that ensure intertemporal and spatial coordination among all the competing and complementary sectors of the global economy are, likewise, distorted and misbalanced by government price controls and restrictions; this delays the needed rebalancing of what is to be produced, when, and with what combinations of inputs (including labor) in the appropriate places and steps in the global production processes.
Political controls versus markets and prices
What does the report propose in place of freer markets and competitive pricing for inputs and outputs? Nothing less than comprehensive government pre-planning for the next pandemic or financial crises. International government agreements will determine the manufacture and distribution of vaccines and antibiotics; stockpiles and political allocations for global vaccine “equity” will replace markets, prices, and competition for redirecting scarce supplies or entrepreneurial innovation and incentivizing what is to be done, by whom, or where.
How will these decisions be made if markets do not determine and guide the process? There is only one answer, of course, for an “expert” like Mariana Mazzucato: politics. The report talks about equity, social fairness, and inclusiveness. But what do these words mean in the real world of political horse-trading other than the pressure and power of politicians, overseeing bureaucrats, and the influence of special interest voting groups and ideologues playing the manipulation game to get what they want? Here is a recipe for even more economic irrationality and political corruption, if there ever was one.
The real agenda
This gets to the real ideological bull in the “Economic Resilience” China shop. Guiding the thinking and proposals in all of the report is the hysteria over and the presumption that climate change is so threatening to humankind that all power must be turned over to the governments of the world to plan the destiny of the planet.
The report says that according to the Organization for Economic Cooperation and Development (OECD), for global temperatures to stay within a 2-degree rise in the decades ahead, the expenditure by the countries of the world of “USD76.9 trillion [in green] investment per year in transport, water, sanitation, energy supply and use is needed every year until 2030.”
It is estimated that global GDP in 2020 came to $84.5 trillion, with projections suggesting that global GDP may be $122.4 trillion by 2026. This means that the entire world would have to get by with just a few trillion dollars of production and consumption not related to “saving the planet.” Who will decide, and how, whose standards of living are to be drastically curtailed to “retool” and redesign everything, everywhere, around the world for years to come?
To “decarbonize” the world, regulations and restrictions will have to dictate and direct everything done by industry and manufacturing. Governments are expected to pick winners and crowd out losers in terms of determining what investments are to be subsidized, supported, or penalized. “The world’s trade and investment will require clear regulatory standards and substantial governmental assistance and coordination,” the report says.
Concerning financing, governments must spend the necessary monies through “guaranteed public purchases and regulatory standards” for chosen solar and wind technologies, as well as other alternative energy sources. Price controls on carbon use and emissions will be designed to crowd out fossil fuels as “renewables” replace them.
Controlling everything and everyone
This “greening” of the world economy will be combined “with a broader social and environmental justice agenda to ensure good jobs and adequate social welfare.” Furthermore, “To meet their climate ambitions, governments will have to take a leading role phasing out and standing up whole industries, an unprecedented remaking of economies that must take place on a global basis. For this to be successful, changes to the way we produce, work, and trade should be undertaken.”
From technological choices, to bailing out industries and enterprises, to transportation restructuring, to facilitating educational paths considered most conducive to the new green world to come, to redesigning entire cities and how people live, there will be virtually nothing outside of or free from the social engineering hand of governments and the “global green deal” central planners.
A wrong balance, the report says, has too long been in place that has focused too much on “fiscal discipline” imposed on governments that has “crowded out public investment.” Government spending should be used to get private companies to invest in and produce with the methods of production that result in those final products the political paternalists and social engineers consider best for all.
As part of this, any short-run attention to budget deficit reduction must be ended. In her Project Syndicate article, in summarizing these themes, Dr. Mazzucato said that government “public spending must be channeled through new contractual and institutional mechanisms that measure and incentivize the creation of long-term public value rather than short-term private profit.” More government borrowing and increases in the money supply continue to be the order of the day to pay for the coming brave new green world.
Imposing labor unions
This refocusing away from market pricing and free-enterprise profitability is also reflected in the report’s proposals for labor standards and participation. Labor unionization should be fostered and supported, with no mention of whether those expected to join labor unions and pay mandatory dues to the union leaders want union membership or representation. The political paternalists say unions are “good” for the ordinary working person, so it must be true. Therefore, they are expected or likely even forced into a labor union. End of story.
How will this affect the efficiency and market competitiveness of the businesses upon whom unionization is to be forced? The authors of the “Plan” simply say, “the means [unionization for social justice] must be consistent with our collective values even if they do not produce the lowest cost solution from a financial perspective.”
In other words, this is the abolition of market-based pricing of labor, or any concern with whether people are employed where and how they may contribute their highest value-added services in terms of producing what it is that consumers want and are willing to pay for. Wage and work conditions in the new green economy world will be a matter of what is worked out between union leaders and those making political decisions in government.
More government control over the Internet
Finally, concerning “digital governance,” the authors mask their ideas in concerns about cyber security and Internet terrorism and blackmail. But it all adds up to a politicization of social media and the worldwide web, in general. Referring to “monopolistic behavior” by digital corporations, they have no hesitancy in turning control over the size, service, and content oversight to the largest and most threatening monopoly in any society — the government and its coercive powers.
But that’s because the report’s authors likely presume that the “expert” regulators and overseers either will be themselves or people just like them. Surely, the paternalist has a confident and clear conscience that she or someone else with her views and values will always do the right thing for the good of all. So, what is to be feared in giving her or her ideological partners control over the modern means by which humanity increasingly communicates with each other about almost everything?
Oh, and by the way, another reason the digital world must be placed under the controlling wing of government is that “mining crypto-assets is associated with life threatening levels of pollution” and increasing inequality. To save the planet, governments just have to stop any development of alternative means of payment and exchange outside of their own monopoly paper monies. Stopping the evolution of potential competing monies is, by implication, “for the children” and their future well-being on the planet. What can trump that?
Imposing green planning
The report ends with a summarizing of how much the world and everyone in it needs an agenda like the one they’ve outlined. Without the leading and guiding hand of government and advisors like the authors, the world is doomed. The closing page has a photograph of a wide, blue sky with a formation of military aircraft cutting through the air, with the white smoke streams following in the aircrafts’ wake.
In an era of “progressive” paternalists who normally ridicule imageries of militarism and war power, what a subliminal message is offered that standing behind the government’s determination to socially engineer the remaking of a green new world is the brute force of politics to impose it on everyone, everywhere.
It is not surprising that Marianna Mazzucato is one of the co-authors of this report on Global Economic Resilience. She has long been a proselytizer for what she has called “mission-making,” that is, governments constructing society-wide plans that contain targeted “missions” to which and for which large segments of the population must be expected in their corner of the world to conform, so as to assure the mission’s success. She grandiosely speaks of “social values” that should take precedence over the mere and far less important, self-interested values of the individual members of the global community.
The collective good, you see, comes before the good of any one or any number of individuals. But what is the collective good? Who defines it, and who knows what its shape and content is or should be? Seemingly, some are given these insights and understandings that other mortals do not. Dr. Mazzucato bandies about these and other terms as if no confusion or cloudiness exists in their use. I stopped counting the number of times in this report on Global Economic Resilience that there appeared the words, “solidarity,” or “inclusion,” or “equity,” or “social fairness” or “social value,” or “planet saving” goals and purposes.
It is as if the mere repetition of them, over and over again, magically gives meaning and substance to them, like in some primitive religious chant. In fact, they are just the rhetorical ritualism of the modern political paternalists and social engineers who basically believe they know what is right and good for everyone.
Repeating these words does not and cannot hide the fact that they are empty terms that offer nothing other than a linguistic cover for those like Dr. Mazzucato who want to be the political and social dictators of the world. They are on, as she calls it, a “mission” from which no dissent should be offered, because how can anyone disagree with, well, the “good” and the “right” that somehow she and those like her just know to be the case?
Loss of freedom
We have seen this political and ideological euphoria before in the early stages of the various collectivist systems of the last century. Soviet five-year plans, Nazi four-year plans, fascist corporativist “totalitarian” plans. Now the Green New Deal paternalist plans to save the planet.
Lost in all this new utopian euphoria is the simple but essential truth and reality that those who dream these planning dreams lack the knowledge, wisdom, and ability to better guide and direct the affairs of billions of people than each of those multitudes of individual human beings themselves. What they lack, including Dr. Mazzucato, is any humility or hesitancy about their coercing paternalism.
In 1960, Austrian economist Friedrich A. Hayek, while participating in a conference on Man’s Contracting World in an Expanding Universe, emphasized:
The problem of social order is predominately a problem of how we can best cope with our constitutional ignorance of most of the facts that guide human action. It is a problem created by the fact that those who determine the social order and who guide policy can know only an infinitesimal fraction of the total human knowledge that should be used.
The chief task of an effective social order is thus to assure the utilization of knowledge that can exist only in dispersed form among millions or billions of individuals. Now, the main point I want to submit to you is that freedom is the most successful method man has found to cope with that constitutional ignorance of all individuals, and to achieve the maximum utilization of knowledge. Coercion is bad precisely because it prevents the individual from making the fullest use of his knowledge and capacities, which are always unique in some respects.
The dilemma, Hayek went on to explain, is that when government intervention, control, and planning are evaluated and judged on a pragmatic case-by-case basis, the rationale for the particular intervention, control, or plan will seem clear cut in terms of a specific goal, target, or outcome that can possibly be achieved with the use of political paternalism on such a pragmatic basis. On the other hand, what is lost or given up is some imaginary alternative and uncertain “might-have-been” if government had left things to the purposes and decisions of multitudes of separate individuals in their respective corners of society.
Or as Hayek expressed it:
The reasons offered for the restriction of liberty are always the achievement of some concrete and particular aim, whereas the losses that result from the restriction of liberty are almost by definition the unknown things which might have happened had things been left free…. Therefore, in a policy that believes it can balance in every particular instance between liberty and control, liberty is bound to lose out.
Following one pragmatically decided interventionist decision after another can only lead, cumulatively, to the chipping away and the loss of liberty in society as a whole:
If nobody can hope to master more than a small fraction of the knowledge we know that society utilizes, the chief need is increasingly an impersonal mechanism for the coordination of individual actions. The order at which we aim must therefore rest not on specific commands, but on the spontaneous adjustment of the separate individuals to each other.
That is, a free-market economy guided by a competitive price system.
Such a rejection of a free-market order accompanied by a blind confidence in the possibilities of political paternalism have been seen already in the 20th century experiments in communism, fascism, and Nazism. Just give “us” the governmental decision-making power and “we” will set all things right in terms of some vision of a bright and beautiful future. One may only hope that the human cost and brutality of this latest variation on the central planning theme comes nowhere near its predecessors.
We can only hope that mass murder and brutal tyranny is somehow avoided this time around. But with the resulting subordination of individual freedom, market competition, and the price system to a Global Green Plan, this new green world will lack the essential ingredients for determining whether or not what is produced is really wanted by the consuming members of society, or whether the scarce resources of the society are in any manner bring allocated and utilized in a way reflecting the actual opportunity costs of their use in serving preferred consumer ends.
What we may see imposed are arbitrary and economically irrational government designs over the various private means at our individual disposal, with neither our input nor voluntary consent. The political paternalists and social engineers are giddy with dreams of even greater power than they already possess. The rest of us may have to bear the burdens for their command-and-control dreams to come true.
First published at: The Future of Freedom Foundation.
Photo by Kaitlyn Hansen, Attribution 2.0 Generic (CC BY 2.0).
Dr. Richard M. Ebeling is the BB&T Distinguished Professor of Ethics and Free Enterprise Leadership at The Citadel.
