A Mistaken Idea: The federal government shouldn’t take over our supply chain.

City Journal ^ | March 25, 2020 | Jonathan Meer

[karpov]

Hospitals across America are desperate for supplies as they fight Covid-19. Governors Andrew Cuomo in New York and J. B. Pritzker in Illinois want the federal government to use the Defense Production Act to force companies to manufacture personalized protective equipment (PPE) and prevent price-gouging. The governors point to exorbitant prices and potential shortages due to competition from other states and countries. They want Washington to distribute the supplies based on need and, presumably, to dictate lower prices.

In this extreme and desperate situation, such an approach is intuitively appealing—but it’s nevertheless mistaken. The laws of supply and demand don’t go away, even during a global health emergency. The alternative to markets isn’t some magical, all-knowing, completely “fair” allocation machine. That machine doesn’t exist.

We undoubtedly need more PPE, and it seems outrageous to pay higher prices, but it isn’t clear how bureaucrats overseeing a complex supply chain—one involving tens of thousands of decisions—could solve this problem. After all, mid-level FDA bureaucrats can’t just become truck dispatchers, line supervisors, and human-resources staff. Moreover, it isn’t comprehensible how “production targets” set by fiat would be enforced. Will the managers at 3M, say, be fined or fired for not meeting them? Are employees going to work themselves to the bone because an emergency directive tells them to? Without authoritarian-style threats of force, the government can no more “mandate” that additional PPE and other supplies be created than I can “mandate” that my grocery store stock more toilet paper.

More to the point, retooling a factory to produce something that it wasn’t designed to do isn’t free. Running shifts round-the-clock isn’t free, either. This is exactly why supply curves slope up—marginal producers enter the market. Maybe they do it because they’re publicly spirited; maybe they’re just greedy.

[moovova]

Mao would be proud.

[FreedomPoster]

Bauer, the Canadian hockey gear company, is re-tooling to produce medical face shields. If they can get 2X the price ante all this, more power to them, they deserve it. A bureaucrat dictating prices is a guarantee of shortages.

[Alberta's Child]

I work with clients who are closely involved in this government-industry coordination on a regular basis. Without going into too much detail, I'll just point out that this whole idea of "government taking over industry" hasn't been a part of emergency response planning in years. This is for the obvious reason that it simply doesn't work.

If the U.S. military has an urgent need to move military equipment from Point A to Point B by rail in a hurry, it would be counter-productive for the government to take over the operations of the railroad. Instead, the protocol in this situation would be for a high-ranking Pentagon official -- or even the Secretary of Defense or the President, if necessary -- call the CEO of XYZ Railroad and just make it happen.

[Rurudyne]

It has no delegated power to do so, for one.

[SoCal Pubbie]

The My Pillow Company is now making protective face masks.

[kaktuskid]

The Federal Government did take over the railroads during WW I....it did a lousy job

[Alberta's Child]

I know. That’s why they don’t do it anymore.

[jimmygrace]

Government shouldn’t take over the supply chain, I agree... but it needs to maintain strategic domestic chains during times of emergency, like our strategic petroleum reserve and weapons. This needs to extend to medical supplies, semiconductors, rare earths, and others that we suddenly realize we need in an emergency. One thing good about the past month is that we are awaken to our real need to not trust other countries.

[Vaduz]

Now that Amtrak owns it it hasn’t made a profit from 1972 but is government funding,the post office in same boat.

[Oatka]

The Federal Government did take over the railroads during WW I....it did a lousy job

IIRC, they took over a whore house in Nevada - and lost money on it.

[Publius]

The only good things that came out of the government takeover of the railroads in World War I were several standardized steam locomotive designs and a number of high-cost infrastructure projects, like the Louisville-Jeffersonville bridge across the Ohio River.

The takeover permitted the railroads to enter the 1920s with their balance sheets restored. In the long run, the program was just another corporate welfare scheme.

During World War II, the government stood aside, and America's railroads performed in an exemplary manner.