02 June 2024

Tru Dat

One of the surprises of the Russian/Ukraine war is that they have been able to consistently out-produce munitions compared to NATO despite the fact that the Russian GDP is just 4.5% that of the alliance.

The answer to this is fairly simple, I think.

The west has abandoned its system of government armories, either shutting them down or privatizing them, and that, as Ian Welsh notes, "You Can’t Run Industrial Policy OR A War Economy Under Neoliberalism."

This was clear to me when I was listening to a YouTube video where they suggested that the best way to address this was to, "Approve tax breaks to incentivize artillery production." 

Yeah, that will work just as well as it does when the government incentivizes the build-out of broadband infrastructure.  (Spoiler it doesn't.)

The profit motive is insufficient, and inefficient, when applied to actions in support of national policies. 

This is why we see, for example, the case of IP restrictions on weapon systems making it literally impossible for repair work to be done. 

The best case of this are the F-22 and F-35, which were designed from the start to prevent operations of the systems without direct paid support from the prime contractor, Lockheed-Martin. 

It's the Hotel California model of business, "You can check out any time you like, but you can never leave."

There are times when a command economy just works better:

China has subsidized charging station as well. I can’t find reliable figures, though one source says around 10 billion dollars. How many charging stations does China have? Over seven million, 2.2 million of which are public units. The US has 186,200.

Meanwhile Tesla has abandoned its charging station subsidiary, selling it off and had plenty of complaints, while they owned it, of stations being out of service. Bottom line Chinese EVs sell for about eleven to twelve thousand dollars, though when sent to the West the companies charge multiples of that and take the profits, so if you want a cheap EV you’ll have to figure out how to buy in China and import it yourself, which most Western countries make very difficult.

A quick note here, Tesla did not sell off its charging station subsidiary, it just fired the entire division, because its boss, a woman, had the temerity to disagree with him about the number of layoffs at her division.

That may be a distinction without a difference.


So, let’s fish and cut bait: as the title said, you can’t run industrial policy or a war economy under neoliberalism. It’s impossible. Russia easily and massively increased its production of weapons and ammunition during the Ukrainian war. The West? Hardly at all.

Washington spends 7.5 billion for 7 charging stations. This isn’t just incompetence, this is corruption. Yes, China and Russia have corruption. Lots of it. It is nothing compared to American and European corruption, not even on the same scale. In China, especially, most corruption is “honest corruption” — you can take a slice, but you have to actually deliver. If X number of homes or charging stations are to be produced, you’ve got to produce them.

This is a feature of neoliberalism. Neoliberalism is about unearned profits. This is seen most clearly in the stock market and in real estate. During the post-war period the stock market traded sideways. The indices basically didn’t go up at all. Under neoliberalism they went up inexorably. What is odd about this is that during the post-war period GDP growth was higher, so stock prices haven’t been rising since 1980 because of better economic performance, but rather because it’s government policy run mostly thru the Federal Reserve.

But this isn’t just true of housing and stock prices, it’s true of almost everything. Profit margins have soared during the neoliberal era. Our companies don’t compete on price or quality, they try to create oligpolies or monopolies so that they can charge more without having to provide significantly more value. The way they took advantage of Covid to raise prices far faster than their costs were rising is instructive.

Simply put, neoliberalism is about unearned money: about capital gains; PE plays where you buy a company with debt, load it with the debt and then dump it; monopolies and oligopolies and getting government to juice asset prices or pay you far more than you deserve for shoddy goods (see mil-industrial complex.)


And you can’t run industrial policy or a war economy if you want fake profits based on not actually producing good new goods at cheap prices. It can’t be done. If an entire society is based around “give me money for the least possible effort”, you’re cooked.

The west's embrace of rent-seeking as the primary means of profit generation means that it is simply not possible for us to execute on areas of significant societal need.

If everything is completely driven by the profit motive, significant societal need is simply an opportunity to loot.


Post a Comment