Until it isn't, which is when the rest of us are expected to bail them out:
For decades, we have prized efficiency in our economy. We strive for it. We reward it. In normal times, that's a good thing. Running just at the margins is efficient. A single just-in-time global supply chain is efficient. Consolidation is efficient. And that's all profitable. Inefficiency, on the other hand, is waste. Extra inventory is inefficient. Overcapacity is inefficient. Using many small suppliers is inefficient. Inefficiency is unprofitable.Our economy has been an embrace of the efficient over any other possible good for decades, and now we are reaping he whirlwind.
But inefficiency is essential security, as the COVID-19 pandemic is teaching us. All of the overcapacity that has been squeezed out of our healthcare system; we now wish we had it. All of the redundancy in our food production that has been consolidated away; we want that, too. We need our old, local supply chains -- not the single global ones that are so fragile in this crisis. And we want our local restaurants and businesses to survive, not just the national chains.
We have lost much inefficiency to the market in the past few decades. Investors have become very good at noticing any fat in every system and swooping down to monetize those redundant assets. The winner-take-all mentality that has permeated so many industries squeezes any inefficiencies out of the system.
This drive for efficiency leads to brittle systems that function properly when everything is normal but break under stress. And when they break, everyone suffers. The less fortunate suffer and die. The more fortunate are merely hurt, and perhaps lose their freedoms or their future. But even the extremely fortunate suffer -- maybe not in the short term, but in the long term from the constriction of the rest of society.
The market isn't going to supply any of these things, least of all in a strategic capacity that will result in resilience. What's necessary to make any of this work is regulation.
The government is the entity that steps in and enforces a level playing field instead of a race to the bottom. Smart regulation addresses the long-term need for security, and ensures it's not continuously sacrificed to short-term considerations.
We have largely been content to ignore the long term and let Wall Street run our economy as efficiently as it can. That's no longer sustainable. We need inefficiency -- the right kind in the right way -- to ensure our security. No, it's not free. But it's worth the cost.