Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche

My Thoughts

Blame Neoliberalism for the Baby Formula Shortage

Strangely, you can blame neoliberalism, a philosophy that glorifies capitalism, for some of capitalism’s recent failures such as the Baby Formula Shortage.

To explain, many politicians and officials believe the government must never intervene in business. In fact, some officials believe the government does not even have to watch or monitor business activities.

Notably, US Commerce Secretary Gina N, Raimondo (D-Rhode Island) says there is little the government can do about high gas prices, CNN reports. Similarly, Raimondo admits she is not involved in President Joe Biden’s (D-Delaware) response to the Baby Formula Shortage. 

Why Isn’t the Government doing anything?

The Hill reports Raimondo admits she didn’t learn about the Baby Formula Shortage, or the problems at manufacturer Abbott Laboratories (NYSE: ABT), that led to it about April 2022. The shortage began in February 2022.

Yet Hill leads a department that describes its mission as: “Through its 13 bureaus, the Department works to drive U.S. economic competitiveness, strengthen domestic industry, and spur the growth of quality jobs in all communities across the country.”

Sample tin of Wysoy infant formula (tin - can)
Sample tin of Wysoy infant formula (tin – can) by Wyeth Laboratories is licensed under CC-BY-NC-SA 4.0

The Commerce Secretary failed to notice a major failure of American industry or respond to it. Disturbingly, Raimondo cannot imagine a government response to the Formula Shortage beyond scrambling for more formula.

Yet there are many actions Raimondo could take. For example, Raimondo could have waived trade restrictions to allow foreign baby formula onto the American market to ease the shortage. She did not. The shelves of American stores are full of foreign-made products. Why not baby formula?

Hence, many will people wonder if Raimondo is dumb or incompetent. She is not. Raimondo is a graduate of Harvard and Yale Law School. In fact, Raimondo is a well-educated lawyer who has worked as a venture capitalist and served as governor of Rhode Island.

Therefore, people will wonder what Raimondo is doing at the Commerce Department? Judging by the Department of Commerce’s website, it appears Raimondo views her role as a cheerleader and enabler for business rather than a regulator.

Is Neoliberalism to Blame?

Raimondo takes that view because of the neoliberal philosophy she practices. Raimondo believes the government has only a limited role to play in the economy. That role does not include regulation or direct investment. Two measures that could have alleviated the Baby Formula Shortage.

To explain, the government could have aggressively regulated Abbott and prevented its manufacture of contaminated baby food. Additionally, the government could finance the building of additional Baby Formula factories. For example, the government could lend Kroger (KR) or Nestle the money to build a Baby Formula factory.

Historically, the US government has taken such measures. For example, the Reconstruction Finance Corporation (RFC) financed the building of hundreds of factories during World War II. During the Great Depression, the RFC lent money to banks, mortgage companies, and utilities. For instance, the RFC financed the construction of power lines in rural areas that utilities refused to serve. Notably, President Herbert Hoover (R-California), a conservative Republican, signed the legislation creating the RFC.

Yet, neither Raimondo nor her boss Joseph R. Biden Jr. (D-Delaware) propose such measures. Instead, they end up asking the military to fly in formula and ignore the situation.

Basically, Raimondo and Biden believe any government effort to finance businesses is wrong. Additionally, they think regulation is only necessary in extreme situations.

Like many American elitists, Biden and Raimondo have an almost religious faith in markets and neoliberalism. They believe government interference in commerce and government financing of business are sin

Denying History with Extreme Neoliberalism

Hence, the supposedly liberal Democratic Biden Administration holds an extreme neoliberal view of government’s role in the economy. That view is far to the right of 20th century Republicans such as Richard M. Nixon (R-California), Dwight D. Eisenhower (R-Kansas), US Senator Robert Taft (R-Ohio), and Herbert Hoover (R-California).

Notably, Hoover signed the law that created the Reconstruction Finance Corporation (RFC) and Nixon implemented wage and price controls. On 15 April 1971, Nixon responded to inflation with a 90-day freeze on prices and wages, a Pay Board and a Price Commission.

Hence, Nixon, a conservative Republican, implemented price controls in 1971. In 2022, Biden, “a progressive Democrat,” fears such measures. Such is the hold neoliberalism has on the minds of America’s leaders.

Thanks to the intellectual straightjacket of neoliberalism, the Biden Administration adopts a 19th century view of the economy that President Grover Cleveland (D-New York), 1885-1889 and 1893-1897 would have approved of. Cleveland was the president who responded to a financial crisis by begging investment banker J.P. Morgan for help.

The Neoliberal Alternate Reality

One problem we face is that neoliberalism appears to be the only economic philosophy taught at some of our elite institutions. Another is that our leaders increasingly come from the alternate reality of America’s bicoastal elites.

To explain, our elites live in a world where government increasingly does not matter. For example, elitists do not need a public library because the Amazon Kindle can provide all the books they need.

Additionally, the wealthy do not send their kids to public schools they have private academies. The highest level of elitists such as Raimondo can even avoid public highways and airports by flying on private jets.

Hence, it is easy for wealthy individuals such as Raimondo and Biden to pretend the government does not matter. As podcast guru Ezra Klein muses, it is ”easier to imagine travel to Mars than public libraries.”

I contend that Klein’s assumption is true for many upper-class Americans but not for the working class. It is hard for many of America’s Ivy League educated intellectuals to imagine public libraries or public schools or public roads. However, it is easy for a working class American such as a schoolteacher, a factory worker, or a waitress to imagine public schools and libraries which they often rely upon.

The Neoliberal Fantasy World

In contrast, many of our wealthy live in a fantasy world constructed by Milton Friedman and Ayn Rand. In that fantasy world, government is evil and has no role to play in the economy. This fantasy world denies our history and a great deal of modern economics, including the 20th century’s greatest economist, Lord John Maynard Keynes.

That fantasy world leaves us with a weak and impotent government that cannot deal with something as simple as a Baby Formula Shortage. Worse, such beliefs empower extremists such as US Senator Joe Manchin (D-West Virginia). Manchin believes any increase in the $7.25 federal minimum wage is too much.

Manchin tries to impose 19th century economic ideas such as the balanced budget and “austerity” in a 21st century world. The only 19th century economic nonsense Manchin has not dredged up is the gold standard, but I imagine it is coming.

Back to the 19th Century

Worst of all, both Democrats and Republicans embrace the neoliberal fantasy. Just as Raimondo thinks she has no power over business. We have a Republican US Senate nominee from Ohio (J.D. Vance) who said “I think that what Trump should do (win the presidency in 2024), if I was giving him one piece of advice: Fire every single midlevel bureaucrat, every civil servant in the administrative state, replace them with our people.”

In other words, Vance wants to destroy the Civil Service and return to the 19th century Spoils System of President Andrew Jackson (D-Tennessee). Under the spoils system, all federal employees were political employees fired and hired by the president. Jackson fired competent administrators and replaced them with political hacks.

horse carriage on gray concrete
Photo by Brett Jordan on

Another aspect of the spoils system was that federal employees had to make cash donations to politicians to keep their jobs. Federal employees had to donate most of their salaries to the president’s reelection effort to keep their jobs.

Vance, Raimondo, and Manchin can take such extreme positions because the neoliberal fantasy has replaced sound economics, genuine history, and effective government. Worse, nobody challenges such insanity.

I contend the Baby Formula Shortage is only the first of many crises and catastrophes if the neoliberal fantasy remains unchallenged. We must dump the fantasy that unrestrained capitalism and rugged individualism can solve our problems on the ash heap of history where it belongs. Unfortunately, that fantasy now dominates our politics, our media, and the intellectual life of our nation’s leaders.

If we do not destroy the neoliberal fantasy. I predict many people will suffer and blood will run in the streets.