Meanwhile in Ukraine... and Kamalanomics - Dr. Mackubin Owens

Meanwhile in Ukraine... and Kamalanomics - Dr. Mackubin Owens

Ukrainian forces continue to confound expectations and predictions. Beginning on August 6, 2024, Ukrainian forces launched an incursion into Russian territory, penetrating over seven miles into Kursk Oblast. Two weeks later, Ukrainian forces are still pushing deeper into Russia.   The long-term prospects for the offensive remain unclear, but in the short term, the operation has boosted Ukrainian morale while embarrassing not only Russia in general but also Vladimir Putin in particular by demonstrating that Russia is unable to defend its own territory or protect Russian civilians in the affected region. Even if Ukraine decides to withdraw sooner than later, the damage to Russia and its propaganda apparatus is done.

 

Nonetheless, the risks of the Ukrainian operation are substantial. As history has proven again and again, tactical and operational success does not always translate into strategic success. And as some observers have noted, whether the Ukrainian Kursk operation will yield strategic results depend on a number of factors, many of which are not under Kyiv’s control. First of all, Ukraine has gambled by weakening the Donbas front to execute its Kursk offensive but so far, Russian pressure against the Donbas region of Ukraine continues unabated. Second, in a war of attrition, which the Russo-Ukrainian conflict continues to exemplify, Russia’s manpower superiority may prove decisive.  Victory still favors the side with the biggest battalions.

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Meanwhile, Kyiv’s strategic goal remains unclear. Is it to improve the country’s strategic bargaining position through the seizure of Russian territory and/or prisoners? If so, some suggest that the operation may be a clear signal that the war is entering a terminal phase and that Kyiv has calculated that its capability to resist is limited and/or that Western, i.e. American, support will not be sustained.

 

The Ukrainian offensive has reportedly given rise to a joke making the rounds in Moscow. Putin is communing with the ghost of Stalin. Putin: “the fascists have invaded Russia and are at the gates of Kursk. What should I do?” Stalin: “do what I did in 1943. Send in your best Ukrainian troops to defeat the invaders and ask the United States for money and equipment.”

 

Kamalanomics and Peronism

Recently, news outlets that not too long ago had touted Kamala Harris’ role as “border czar” are now tripping over themselves to deny that such was ever the case. Of course, technically, the United States does not have “czars.” The term is lazy journalistic shorthand used to describe someone in the executive branch who has this issue or that as part of his or her portfolio. Vice President Harris was supposed to look at the “root causes” of illegal immigration, especially on the Southern US border.

 

If her recent economic policy proposals are any indication, she didn’t learn much about these root causes. That’s because her economic policies would cause the same kinds of economic turmoil in the United States that causes people to flee from dysfunctional Latin American states: price controls, higher taxes, extensive government intervention in the economy, and subsidies paid for by printing a constantly devaluing currency. These are features of an economic program that used to go under the name of “Peronism,” a form of socialism instituted by former Argentine President Juan Perón, which long ago bankrupted his once prosperous country. Maduro of Venezuela practices his own version of Peronism.

 

The process usually begins with a socialist government promising a vast array of social programs that require increased government spending. The result is the debasement of the currency, which is the essence of inflation. As Milton Friedman, the late Nobel Laureate in Economics observed, “inflation is always and everywhere a monetary phenomenon.” The government then deflects blame by accusing businesses of “price gouging,” or in the vice-president’s words, price gauging (whatever that is).

 

Economists may disagree on a number of issues, but regardless of political or ideological preferences, they pretty much uniformly agree that the price of a good is determined by the interplay between supply and demand and that interfering with that interplay has consequences. In a market economy, prices of a particular good will fluctuate as conditions change. Thus, the short-term price of gasoline will normally increase in the spring and summer as more drivers take to the highway. As fall approaches, the situation is reversed: demand for gasoline decreases while demand for heating oil increases. Refiners respond by shifting production from one to the other.

 

In the absence of inflation, demand may increase in one sector of the economy and decrease in another but aggregate prices will not increase. The only thing that can make all prices rise is increasing the money supply, which erodes the purchasing power of the currency. Inflation (more dollars chasing fewer goods) is the result of governmental policy, not corporate greed. Of course, decreasing supply also affects prices. Prohibiting sellers from raising prices in response to either an increase in demand or a decrease in supply will result in shortages.

 

I wrote my first opinion column for a major newspaper in 1981. The paper was the Dallas Morning News. The topic was the energy crisis of the 1970s. I was working on my doctorate in politics at the time but had earned an MA in economics earlier, writing my thesis on the origins of what I called an energy POLICY crisis.

 

At the time, the United States faced an oil embargo by Arab producers in retaliation for recent US support of Israel in its wars against the Arab states. Richard Nixon had imposed wage and price controls during his last term, which predictably failed, but nonetheless remained in effect for petroleum products under President Carter. The result was widespread shortages of gasoline, which led to rationing and long lines at gas stations.
            

During the presidential campaign of 1980, Ronald Reagan said that if elected, he would lift price controls on petroleum products. There was no internet in those days but the negative reaction was overwhelming and came from both parties, including President Ford’s “energy czar,” Frank Zarb. Prices would skyrocket to unprecedented levels! 

 

In my opinion piece, I argued, on the contrary, that lifting price controls on energy would spur domestic production by providing incentives to the energy industry. Guess what. I was right. All sectors of the petroleum industry increased output. The shortages disappeared. Gasoline lines evaporated. And prices fell rapidly. It turns out that a fundamental understanding of economics is not a bad thing.

 

But under a President Harris, we are poised to repeat once again the greatest of all economic heresies: that the government can print money without limit to buy off a dependent population of subjects rather than citizens; that doing so will not debase the value of the currency; that government can blame businesses and corporate “greed” for inflation; and that interventionist policies will not undermine individual liberty. Wash, rinse, repeat.

 

But maybe I have it all wrong. Maybe Ms. Harris just wants to make our “newcomers” feel at home by welcoming them with the policies that made them leave home in the first place. What a nice lady.