Quotation of the Day…

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… is from page 20 of University of Connecticut economist Richard Langlois’s monumental forthcoming (2023) study, The Corporation and the Twentieth Century:

The hobbling of the country’s foreign competitors in the war had endowed American firms with a decided, if arguably artificial, comparative advantage in mass production, one that continued to generate rents for the manufacturing sector through the 1960s. This created a weak selection environment in which ineffective structures and practices, including those driven by antirust policy and industry-wide unionism, could endure unchallenged.

DBx: An especially wrongheaded and virulent myth is that the American economy and people were given a great advantage in the immediate post-WWII years by the war-damage done to economies in Europe and Asia. The myth is a perfect example of the fallacy of focusing only on that which is seen and ignoring that which is not seen.

That which is seen is the very real growth and flourishing during that era of particular kinds of firms and employment in America. American producers whose competitors were bombed to smithereens or lying bloody in their mass graves of course thrived. And we can and should applaud these producers for doing so even as we lament the cause of their thriving.

But there’s also that which is not seen.

Part of that which is not seen are the goods and services – some for consumption, others as inputs for production – that, because foreign producers were so hobbled, we Americans did not receive in exchange for our exports. Another part of that which is not seen are the entrepreneurial successes, businesses, and jobs – and higher real wages – that would have existed during that era in America but which, because resources available from our trading partners were less abundant than these would have been absent the ravages of war, never materialized.

And as Dick Langlois points out, also not seen are the inefficiencies of the post-war American economy that arose and persisted only because competition from foreign producers was then so anemic.

Here’s the bottom line: To wish to restore, or to move back to something closer to, the mid-20th century American economy is to wish to restore, or to move closer to, an economy that’s far less productive and, hence, one in which the material standards of living of – and economic opportunities for – ordinary people were much lower than these are today.

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