Early on in the lockdown, probably April, I read an article that pointed out the mob related issues created by the pandemic.  Essentially, the Italian government is concerned that the mob will take advantage of the distressed businesses.  Later on, the mob will come back and ask for favors that the business owner can no longer refuse.  That sounds pretty awful, because it is pretty awful.  However, we all know how the mob functions, so we should not be too surprised that the pandemic would prompt mobsters to seek new prey.  Desperate times can call for desperate measures; however, I would be really wary about taking money from the mob. 

Enter the issues facing big business these days: pandemic lockdowns have created numerous problems for businesses largely surrounding the distinct lack of revenue (typically businesses need revenue), so businesses in the U.S. and other western nations find themselves in a similar position to their Italian friends.  Unfortunately, the mob is not there with open arms (fortunately?) ready to unload a pile of dirty money in exchange for money laundering, drug smuggling, etc.  However, western nations do have large governments standing by ready to give out easy loans to bail out businesses considered to be essential and in sufficient need.  The Wall Street Journal reports that western nations have been experimenting with higher levels of government intervention in industry to compete with state backed companies in Asia, and COVID-19 accelerated the shift towards this behavior.

 Luckily, governments are unlikely to ask airlines to transport drugs or cover up a murder, so a government loan is much better than one from the mob.  However, government intervention and centralized control of industry does not produce ideal results.  The greatest example of this in the modern era is the failure of the USSR.  Centralized control leads to great mismatches between consumer needs and goods produced.  Eventually, the economic troubles caught up with the USSR and largely drove the nation’s downfall (clearly, this was not the only issue).  The West and the USSR are not the same, so the outcome should be quite different, right?  Hmmmm, not so much, because even the New York Times chronicled some of the issues surrounding the US Government’s ownership of a majority stake in GM.  As it turns out, conflicts of interest abound when governments try to acquire parts of the industries that they regulate.  I fear that the same inefficiencies that plagued GM and the USSR could begin to plague western nations broadly if bailouts and stimulus become the norm.  Italy has begun bailing out hotels, the US sponsored a massive program to protect paychecks for employees of businesses that were forced to close, Denmark has ordered farmers to kill 17 million minks (COVID is weird), etc.  Who knows what industries will want or need some outside help before this is all over?

Sadly, letting the private sector fall apart and put itself back together is extremely unpopular, and it is easy to understand why.  In the short term, lots of people will lose their jobs.  And why shouldn’t governments help fix the problems that were caused in part due to the lockdowns they created?  If the US Government steps in in a big way to seize control of industries struggling due to the pandemic, there will be much greater economic turmoil down the road, that’s why.  Imagine a world where you cannot get upgraded to business class because government airlines mandate equal legroom for all.  Imagine a world where the government decided what movies were produced and what theaters they showed in.  Imagine restaurants across the nation with limited pop size selection.  Imagine an economy without choices. An economy without choices is the economy we get when central authorities seize control of industry. Economies are complex webs made up of trillions of human choices, and it is impossible for central planners to adequately anticipate what those choices will be.