OPINION:
My inbox is stuffed with articles about the prospects for stagflation, but slow growth and runaway prices are descending on America right now.
Sooner or later, dumb policies catch up with a society. Wars, natural disasters and pandemics often instigate the reckoning — just ask the crack logicians marshaling the Russian army.
The West is smack in the middle of such a calamity too.
As this column has argued, short of a punishing recession Americans will be lucky to see inflation at 4%, never mind the Federal Reserve’s official target of 2%.
The war in Ukraine and sanctions have broken supply chains. Along with Climate Change induced heat, drought in some places and excessive rain in others, this is driving up food prices.
Land use planning is predominantly state-driven, and in the American West, it mostly promotes new industry and urbanization at the expense of agriculture. The national interest in sustaining an affordable food supply and exports to a hungry world be damned.
If the Biden administration is aware and prepared to mitigate, I am at a loss for evidence.
In Ukraine, the Russians have longer-range artillery, air superiority and the capacity to bomb Ukrainian cities into oblivion, but President Biden won’t give Kyiv the missiles and intelligence to target critical infrastructure and leaders inside Russia for fear of escalation.
Nuclear and chemical weapons are a dicey business and could backfire — Russian President Vladimir Putin would achieve a shock effect but no lasting advantages, as we could destroy the Russian fleet in retaliation. But shortages of Ukrainian wheat, sunflower oil and corn, as well as Russian fertilizer, threaten to break fragile food import dependence in the Middle East and Africa and turn sanctions on their head.
By blockading Ukrainian ports, Mr. Putin is driving up global food prices and imposing more costs on the West than the West imposes on Russia.
All of this will take massive amounts of capital to just mitigate that could otherwise be better spent on R&D, infrastructure and other productive investments.
COVID-19 and the war are slicing U.S. and European growth by about 1.5 percentage points — that’s well more than half the pre-pandemic pace.
Yes, Virginia, underarming the Ukrainian army is inflationary and also stifles growth.
Chicken is expensive because COVID-19 and working from home have driven up demand. Swine flu is pushing Asian consumers from pork to poultry, and avian flu has cut chicken flocks. Yet, Mr. Biden demonizes as monopolies the four large American meat processors.
Before investing in more chickens and processing facilities, these firms must worry about the Justice Department coming for them. That won’t bring down prices, but it will sure slow growth.
These kinds of mistakes repeat in other sectors.
Mr. Biden is weighing permanent student debt relief but not reforming universities whose tuition has rocketed on the jet engines of the federal student loan program. Universities will continue to waste capital by preparing students for jobs that don’t exist — or not teaching them to think at all.
Mr. Biden’s ballyhooed infrastructure plan so favors the union and social justice movements, much of the $550 billion in new money will be wasted. Amtrak will continue to move too slowly, highway congestion will grow, and American businesses will be saddled with more delays.
Progressive policing policies that beget unsafe cities are keeping people from returning to offices. If those are still occupied a few days a week, not much capital will be saved to pay for additional computers, printers and home offices in the suburbs.
Slower growth courtesy of the AFL-CIO and Black Lives Matter.
Starving the petroleum industry for leases will continue to raise oil and gas prices and smother demand for other goods, especially among the nearly half of households with incomes less than $75,000. Already they are fleeing Walmart and Target for dollar stores.
A handful of large money managers like Blackrock, State Street and Vanguard — aided by the radical environmental movement — are forcing incoherent, growth-killing environmental, social and governance standards on American industry.
Exxon, Shell and the like are peopled by petroleum and mechanical engineers of various sorts. They know about as much about solar technology as the Yale Law School does about nuclear physics.
As demand for fossil fuels recedes, profits should be returned to shareholders so that capital may be redeployed to new, more-productive activities — including green energy — rather than forcing Big Oil to do things it knows nothing about.
Looking at how a few money managers can bully large corporations to foolish decisions, maybe Justice antitrust chief Jonathan Kanter should stop harassing Frank Perdue’s legacy and set his sights on Blackrock’s Larry Fink.
Yes, Mr. Biden, ideologues, demagoguery and the West Wing bubble beget stagflation.
• Peter Morici is an economist, emeritus business professor at the University of Maryland, and national columnist.
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