Always Keep Your Eye on Production: A Wartime Priority
When they’re in major wars, governments often seem to suddenly discover my “Always keep your eye on production” principle. Case in point: During the New Deal, Team Roosevelt eagerly pushed militant unionization, using now-standard arguments about the hidden economic benefits. Like: “Unions boost demand by putting money into the hands of people who will spend it,” and “Unions encourage technological progress by raising the price of low-skilled labor.”
Once the U.S. entered World War II, however, the Roosevelt administration asked for – and received – the famous No-Strike Pledge. Unions promised not to strike for the duration of the war, and their real wages eroded in the face of high inflation. The reasoning behind the Pledge was clear: The war effort depends on production, strikes reduce production, so strikes are bad. What about all those arguments about the hidden wonders of militant unionism? Whatever – we’ve got to win the war.
If government eagerly keeps its eye on production during wartime, why not during peacetime? A cynic would say that politicians care a lot more about winning major wars than fostering economic growth. A bigger cynic would add that politicians are just following the voters’ anti-market, pro-government worldview. When they identify with an system’s motives and aims – like militarily crushing evil foreigners – voters stop trying to make water run uphill. Productive societies are victorious societies. The rest is details.