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Capitalism or fascism? Which economic system will better resolve the supply shortages?

Image courtesy of Adobe Stock.

How do we get enough of the respirators, personal protective equipment, and medicine we need to get through the COVID-19 pandemic?

Fascinating to watch the press conference Saturday 3/21/20 with various federal officials and members of the coronavirus task force.  Most fascinating feature was looking at the various comments and questions/answers from an economics perspective. Thought about Friday’s briefing as well.

Here is the difference in perspective I perceived: do we rely on capitalism or fascism as our model to get things done?

Underlying the comments from all the federal officials is the idea that the private sector can figure out how to provide everything we need.

The common thread underlying a huge portion of the questions from media is the idea that the federal government should tell which specific companies how much of which specific products to produce, specify they price they will charge, and provide the addresses for where to send each pallet of supplies.

In other words, should we use a capitalist model to provide goods we need or should we use the fascist model?

As a thumbnail description, in the fascist economic model the means of production are owned by the private sector but the central planning authority tells companies how much of which product to produce. In contrast, the next step away from freedom is communism, in which the means of production are owned by the government and a central planning agency decides how much of each specific product to produce.

Capitalism?

The private sector is rapidly stepping up based on multiple comments I heard. A few examples from the press conferences:

Haynes, maker of a range of cotton underclothing, is converting several of their production lines to produce masks. My guess is that in short order they will be cranking out hundreds of thousands a day.

One company, I believe General Motors, is going to convert one of their manufacturing plants into making respirators. That would be a simple step for a company that handles manufacturing of metal items. Actually, subsequent print comments indicate they are going to use their procurement, logistics, and overall supply chain capacities to increase production at another company which actually makes the equipment.

Other companies, names not mentioned, are also converting some of their production capacity to respirators.

Big retailers, Walmart was a specific example, are moving as much stuff into and out of their stores as they can. If I heard correctly, they are hiring a lot more people to handle the increased volume.

Other examples I’ve read about in the media include some of the huge meat processing plants are converting over several of their production lines from producing restaurant size packages of meats to consumer size packages. The difference is size of serving and labeling. Restaurants use large packages while consumers need individual servings. Consumer packaging requires far more detailed labeling, including nutrition details. Restaurant size packages don’t need that extra labeling. That company was able to figure out on their own they are going to be selling dramatically smaller amount of meat to restaurants at the same time as there is a huge increase in demand from consumers. They did not need any central planning authority telling them to shift their production.

Two of the big Pharma companies have each voluntarily donated several million doses of anti-malaria medicine to the federal government because there is a possibility, just a possibility at this point, that malaria medicine combined with antibiotics might be an effective treatment. They did not have to be told they’re making a donation (which would actually be called expropriation) or told to sell the meds.

Wall Street Journal reports New Manufacturers Jump Into Mask Making as Coronavirus Spreads. A number of companies are setting up new production lines to crank out masks.

3M has doubled their  production capacity of N95 masks to the rate of 1.1 billion per year. That’s an increase of production to the tune of about a million and a half a day.

The federal government’s role of motivating the capitalist system can be seen with HHS announcing they will purchase 500 million masks in the next 18 months. That sends a powerful signal to anyone who is paying attention that there will be a huge market for masks and there will be adequate compensation for anyone who increases production.

Can you somehow figure out how to manufacture several hundred thousand masks in a month or two? I know a customer who will gladly buy your entire run. Have your sales manager call HHS. I’ll guess you could get a signed purchase order in a week. Maybe 10 days. Maybe less.

Fascism?

In contrast, the common thread of essentially every question in two press conferences that discussed supplies contained the implication that the federal government should be directing the entire production and distribution system. Just a few of the questions, paraphrased:

  • Has the federal government already ordered manufacturing companies to shift production?
  • Why didn’t the federal government buy enough masks for everyone in the country a few weeks ago?
  • When will the federal government resolve the shortages faced by two specific doctors who complained in print?
  • What is the date certain that the supplies purchased today or yesterday will reach hospitals?
  • Why are some supplies, at a time of shortages, increasing in cost?

Which do we choose?

The conclusion I draw is the journalists in the briefing room want to solve the shortages using the fascist economic model.

The federal officials want to solve the shortages using the capitalist economic model.

My vote is for capitalism.

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