They're Finding There's No 'On' Button for a Whole Economy

Think for a moment about Directive 10-289. It was passed via executive edict amidst a collapsing economy. Factories were shutting down. Workers were fleeing their jobs. Production was grinding to a halt. People were starting to panic. Government decided to do something to fix the problem. It ordered everyone to keep doing what they were doing before. It tried to stop history.

The Directive read: “All workers, wage earners and employees of any kind whatsoever shall henceforth be attached to their jobs and shall not leave nor be dismissed nor change employment, under penalty of a term in jail.”

Also: “All industrial, commercial, manufacturing and business establishments of any nature whatsoever shall henceforth remain in operation, and the owners of such establishments shall not quit nor leave nor retire, nor close, sell or transfer their business, under penalty of the nationalization of their establishment and of any and all of their property.”

Don’t be alarmed. It’s fiction, a snippet of the apocalyptic vision of social collapse in Ayn Rand’s Atlas Shrugged, a book that has gained new credibility over the last year when life itself became stranger than fiction. Instead of forcing the economy to stay open – which is insane but at least it hopes for continued production – our governments in real life actually forced the economy to close to stop a virus. It attempted to stop production not completely, but just enough to “flatten the curve,” “slow the spread,” “stop the spread,” “suppress the virus.”

In some ways, this is even more dangerous than Directive 10-289. In 2020, workers wanted to work, businesses wanted to open, people wanted to travel, performers wanted to make money, hospitals wanted to treat all patients, consumers wanted to shop, and civic groups wanted to meet. But in the course of a week in the middle of March, it all came crashing down by force of executive edict. This happened in most parts of the world, but for a handful of countries that defied the orders.

Here we are a year later with strange and continuing signs of dislocations. In Washington, DC, as I write, more than half the gas stations are out of gas, a result of a run on gas due to a shipping line hacking, plus don’t you dare raise prices!

More alarming is the 44% increase in job openings since January, jobs ready for the taking but without any takers. This is in the middle of relatively high unemployment that compares to a brief period after the 2008 crash and in the mid-1990s before that. This is also extremely peculiar. Think about this: labor force participation in the US today is only 61.7%, the lowest rate we’ve experienced since the grim economic times of 1976. If there’s something about today that reminds you of the 1970s, here is an example.

As an illustration, I headed for breakfast two days ago to a place that everyone knows has the best omelettes in town. There was a line of people out front ready to spend money and have a great time. The owner came out and announced to everyone that he could not open the shop because he had no one in the kitchen, no servers, no cashiers. There was no one who could cover the morning shift. He pointed to the closed sign and said he would have to hope that some people would show up by noon.

Extremely peculiar. Talk about a mismatch between supply and demand, one that affects goods, services, and labor.

As everyone knows, the Biden administration extended unemployment benefits to September. Many millions of people have decided to wait it out, live off the continuing largesse, and gradually spend the free money that arrived in their bank accounts over the last year. As a result, what looks like the very labor strike that communists predicted under capitalism is happening but not for the reasons they said. They aren’t fleeing exploitation; they are living off the capitalistic surpluses pillaged and redistributed by government.

Many of the workers who had happy jobs, were working their way up, paying their bills, and living a normal life suddenly found themselves locked out of their workplaces 14 months ago, thanks to government edicts that purported to be controlling a virus. When two weeks extended to 6 months and then a year, many people moved into other professions and undertakings.

You can’t just tell a hundred million people to sit tight for a year. They are going to find other ways to pass the time. So when business finally reopened at full capacity, not only could businesses not reacquire their old workforces; they were lucky even to have people show up for job interviews.

Mothers with children are still in a very tight spot; with many schools still closed around the country, they found themselves acting as homeschoolers whether they wanted to or not because the schools they paid for with their tax dollars refused service.

The Wall Street Journal did a deep dive into the hospitality industry and found that there aren’t even enough workers around in many places to flip the rooms after the guests leave.

“To meet demand,” reports the Wall Street Journal, “David Mariotti, general manager of Remington-managed One Ocean Resort & Spa in Atlantic Beach, Fla., said he spends about half of his 50-plus-hour workweek on housekeeping tasks when it gets busy. He drives the laundry truck, cleans guest rooms, stocks linen closets and performs other duties he did for training purposes before the pandemic.”

The lockdowns occurred in an economy that was already experiencing growing labor shortages thanks to the immigration crackdown that from 2016 sent many in the undocumented class even deeper undergroup, fleeing the country, or running out of hopes of legal immigration. Even from 2016, many foreign workers who had good access to American labor markets found themselves locked out – which is arguably a major reason why large tech firms turned so hard against Trump in the presidential election.

The lockdowns of 2020 had some features in common with Directive 10-289 from Atlas Shrugged. It was a central plan, imposed by executive order, as brutal in its enforcement as it was ignorant in its implementation. There is no on button for a whole economy. Neither is there an off button. You attempt something like that, you unleash forces you cannot control. Those forces will continue to vex markets for a very long time after slightly pensive government officials long for a return to normal life.

This article was originally published on realclearmarkets.com and has been reprinted upon agreement.