Marketcrafters

1. Markets are crafted, not natural

There is no sequence where markets exist first, before a governance structure.

The market-government dichotomy is false. Markets do not exist in a state of nature; they are dynamic networks shaped, managed, and sustained by the state. The conventional language of "market failure" and "government intervention" incorrectly casts the state as a reactive parent rather than an active gardener.

The gardening analogy. Just as a gardener cultivates a wild plot of land to produce an abundant harvest, policymakers must actively manage economic forces. Without ongoing state administration, markets naturally turn fallow, succumb to monopolistic consolidation, or collapse under the weight of their own volatility.

The tools of marketcraft. Marketcrafters employ a diverse vocabulary of state power to configure economic systems toward political and social goals. These tools include:

• Public investment and government procurement
• Competition and coordination policy
• Stockpiling and reserve management
• Taxation, subsidies, and targeted regulation

2. The Reconstruction Finance Corporation proved the power of a national investment bank

The RFC would no longer just be in the business of lending to shaky banks. It was now in the business of owning them.

Rescuing American finance. During the banking crisis of 1933, Jesse Jones transformed the Reconstruction Finance Corporation (RFC) into a powerful national investment bank. By purchasing preferred stock and taking equity positions in half of the nation's banks, the RFC injected vital capital directly into the financial system.

Stabilizing vital sectors. Beyond banking, the RFC used its massive financial capacity to stabilize agriculture and transportation. Through the Commodity Credit Corporation, the RFC buffered crop prices, while also restructuring the debt of the nation's struggling railroads to prevent systemic collapse.

Birthing modern housing. To stimulate the stagnant construction sector, Jones established the Federal National Mortgage Association (Fannie Mae) under the RFC umbrella. This move created a liquid secondary market for home loans, standardizing the long-term, low-down-payment mortgage.

• Capitalized half of all U.S. banks with over $1 billion ($478 billion today)
• Created the Commodity Credit Corporation to stabilize agricultural prices
• Restructured debt for 70% of the nation's largest railroads
• Established Fannie Mae to revolutionize residential housing finance

3. State-led industrial policy can build entirely new industries

In one area of industry, that of aircraft, the extent of expansion, the need for speed, and the element of risk early suggested that no satisfactory alternative existed to RFC financing

Wartime industrial mobilization. On the brink of World War II, Congress granted the RFC unprecedented authority to fund national defense. Under Jesse Jones, the RFC functioned as a flexible, fast-moving investment vehicle that bypassed bureaucratic red tape to build the arsenal of democracy.

Birthing the aviation sector. The RFC financed the construction of over 500 aviation plants, transforming a boutique industry into a mass-production powerhouse. By leasing government-owned factories to private automakers, the RFC facilitated the production of 300,000 military aircraft.

Inventing synthetic rubber. When Japanese conquests cut off America's natural rubber supply, the RFC coordinated oil and chemical companies to pool patents and research. This state-directed collaboration built fifty-one synthetic rubber plants, compressing a decade of development into two years.

• Invested $37 billion in wartime industrial expansion
• Financed 2,300 defense plants across forty-six states
• Birthed the synthetic rubber industry, reaching 1 million tons of annual capacity
• Constructed the world's longest oil pipelines to secure energy for the Northeast

4. Central banks manage market stability through the pursuit of "orderliness"

I don’t say we are ever going to have completely free markets, because markets are nursed along as children are nursed along

The mandate of orderliness. Following the 1951 Treasury-Fed Accord, Federal Reserve Chair Bill Martin rejected both rigid interest-rate pegs and laissez-faire neglect. He committed the central bank to maintaining "orderly markets," ensuring that investors could always find buyers for government securities without facing panic-inducing price drops.

Daily market management. The Fed implemented this vision through open market operations, buying and selling Treasury bills daily to guide the price of credit. This ongoing marketcrafting stabilized the financial system, giving banks the confidence to extend long-term credit to businesses and households.

Facilitating financial innovation. When rigid interest-rate caps under Regulation Q threatened bank deposits, the Fed quietly collaborated with Citibank's Walter Wriston. By green-lighting the negotiable Certificate of Deposit (CD), the Fed allowed banks to bypass regulations and reclaim vital liquidity.

• Ended the wartime interest-rate peg via the 1951 Accord
• Established daily open market operations to smooth bond market volatility
• Co-created the negotiable CD to circumvent Regulation Q interest-rate caps
• Transformed the Fed from a passive lender of last resort to an active market manager

5. Fragmented, compromised marketcraft creates systemic waste

Instead of serving as a foundation for national health insurance, Medicare functioned more like a prophylactic against it

The healthcare compromise. In the 1940s, labor organizer Katherine Ellickson and her allies fought for universal national health insurance, but faced fierce opposition from the medical lobby. Decades later, Wilbur Mills engineered a fragmented compromise that split healthcare reform into Medicare and Medicaid.

The cost of private administration. To appease conservative Democrats and the American Medical Association, the legislation left the administration of Medicare to private insurance companies. Crucially, the law failed to establish any federal cost controls, allowing doctors and hospitals to charge the government uncapped fees.

A legacy of inefficiency. This structural compromise created a highly balkanized, wasteful healthcare system that remains the most expensive in the developed world. While Medicare successfully desegregated Southern hospitals and extended lives, its administrative bloat prevented the realization of universal coverage.

• Split healthcare reform into a fragmented "three-layered cake" (Medicare Parts A and B, and Medicaid)
• Allowed private insurers to administer public benefits without federal cost controls
• Triggered an immediate 17% spike in hospital charges and 40% rise in physician fees
• Left millions of low-wage workers uninsured while driving healthcare spending to 17% of GDP

6. Offshore markets can act as safety valves for global currency systems

The capital controls of the United States... could not have operated so smoothly—with a minimum restrictive effect on international trade and investment—if it had not been for the enormous expansion of the Euro-dollar market.

The Bretton Woods dilemma. In the 1960s, the global currency system faced a severe "dollar overhang," as foreign dollar holdings eclipsed America's gold reserves. To prevent a run on gold, the U.S. government implemented strict capital controls to limit the outflow of domestic dollars.

The Eurodollar safety valve. Andrew Brimmer, the first Black Fed governor, recognized that the growing offshore dollar (Eurodollar) market could stabilize the global system. By allowing foreign branches of U.S. banks to operate outside domestic regulations, the Fed kept dollars circulating abroad, reducing the gold drain.

Securing dollar dominance. This pragmatic marketcraft allowed American multinational corporations to continue investing globally despite capital controls. Even after the collapse of Bretton Woods, the deep liquidity of the Eurodollar market cemented the U.S. dollar as the undisputed global reserve currency.

• Managed capital controls to restrict domestic dollar outflows
• Nurtured the unregulated Eurodollar market to absorb global dollar demand
• Established Fed swap lines with foreign central banks to guarantee offshore liquidity
• Preserved the dollar's "exorbitant privilege" through decades of global currency transition

7. Price controls require coordinated monetary policy to cure inflation

If a restrictive monetary policy had been imposed at the same time that controls were used, we could have avoided both the vacillating nature of the program and the disappointment we experienced when controls were lifted and we discovered that inflation was as much a problem as ever

The stagflation challenge. In the early 1970s, Fed Chair Arthur Burns faced the unprecedented combination of high inflation and rising unemployment. Believing that inflation was driven by structural forces like wage-price spirals, Burns advocated for an all-of-government approach to price stability.

The Camp David shock. In August 1971, President Nixon closed the gold window and implemented a ninety-day freeze on wages and prices. This dramatic marketcrafting effort, heavily supported by Burns, successfully temporarily halted inflation and stimulated short-term economic growth.

The failure of coordination. The experiment collapsed because the Fed failed to pair the price controls with restrictive monetary policy. By keeping interest rates low to support Nixon's reelection, the Fed allowed excess demand to build up, causing inflation to explode once the controls were lifted.

• Supported Nixon's decision to close the gold window and end Bretton Woods
• Implemented the first peacetime wage and price controls in U.S. history
• Failed to tighten monetary policy while price controls were in effect
• Triggered double-digit inflation once temporary price caps were removed

8. Strategic stockpiling and price management can successfully buffer supply shocks

...the abrupt nature and magnitude of current shortages could, in a free market, cause the price of crude oil to shoot substantially above the levels required to bring supply and demand into balance.

Managing the oil embargo. When the 1973 OPEC oil embargo cut off petroleum supplies, President Nixon appointed Bill Simon as the nation's first "energy czar." Despite his libertarian background, Simon quickly embraced the administrative power of the newly created Federal Energy Office (FEO).

Conserve and control. Simon implemented a highly successful "conserve and control" strategy to manage the supply shortfall. By capping refinery output, mandating speed limits, and enforcing price controls, the FEO prevented catastrophic price spikes and ensured that essential services remained fueled.

The Strategic Petroleum Reserve. To build long-term energy resilience, Simon and Alan Greenspan championed the creation of the Strategic Petroleum Reserve (SPR). This massive government-run stockpile provided a crucial buffer against future supply disruptions, successfully preventing another major energy crisis for decades.

• Established the Federal Energy Office to centrally manage fuel allocation
• Enforced price controls to prevent market-driven price gouging at the pump
• Mandated conservation measures, including a national 50 mph speed limit
• Created the Strategic Petroleum Reserve to store 500 million barrels of crude oil

9. Rigid monetary rules can inflict unnecessary economic devastation

We have bounced this economy all over the mat for three years with no growth

The monetarist experiment. In October 1979, Fed Chair Paul Volcker initiated a radical shift in monetary policy, abandoning interest-rate targeting to focus exclusively on restricting the money supply. This experimental marketcraft allowed interest rates to soar to unprecedented levels, triggering a severe recession.

The voice of dissent. Nancy Teeters, the first female Fed governor, emerged as the leading critic of this rigid monetarist approach. She argued that because the inflation was driven by supply-side energy and food shocks, the Fed's brutal tightening was inflicting unnecessary damage on housing, manufacturing, and employment.

The return to discretion. As unemployment climbed toward 11% and the global financial system teetered on the brink of collapse, Teeters led a successful campaign to abandon the monetarist experiment. Her persistent dissents paved the way for the Fed to reclaim its discretionary power, lowering rates to rescue the economy.

• Voted for the initial 1979 shift to money supply targeting to shock inflation
• Challenged Volcker's rigid rules as unemployment reached a postwar high of 10.8%
• Argued that inflation was driven by supply-side shocks, not excess demand
• Led the FOMC's return to discretionary interest-rate management in late 1982

10. The "free-market" fantasy of self-regulation invites catastrophic financial collapse

I made a mistake in presuming that the self-interest of organizations, specifically banks and others, were such that they were best capable of protecting their own shareholders and their equity in the firms

The deregulation of finance. Over his two decades as Fed Chair, Alan Greenspan championed a marketcraft of financial innovation and deregulation. He blocked the regulation of derivatives, promoted credit default swaps, and allowed banks to use their own proprietary models to calculate risk, birthing a massive shadow banking system.

The moral hazard trap. This system operated under the assumption of the "Greenspan put"—the belief that the government would always step in to rescue large institutions in a crisis. When the subprime mortgage crisis hit, Treasury Secretary Hank Paulson attempted to reassert market discipline by letting Lehman Brothers fail.

The Great Financial Crisis. Paulson's refusal to provide a government backstop triggered a catastrophic global panic, forcing the state to execute the largest financial bailouts in history. The crisis exposed the fundamental flaw in the belief that highly leveraged, complex financial markets could self-regulate.

• Blocked the regulation of the $28 trillion over-the-counter derivatives market
• Lowered capital requirements for banks using off-balance-sheet vehicles (SPVs)
• Allowed Lehman Brothers to collapse, triggering a systemic global financial panic
• Forced to execute the $700 billion TARP bailout to save the banking system

11. A new bipartisan consensus is reviving state-led industrial policy and antimonopoly

Capitalism without competition isn’t capitalism; it’s exploitation.

The "build and balance" paradigm. In the wake of the Great Financial Crisis and the Covid-19 pandemic, a new generation of policy leaders has rejected the neoliberal consensus. Led by figures like Brian Deese, Jake Sullivan, and Lina Khan, this movement seeks to use state power to actively shape markets for national resilience and worker prosperity.

The return of industrial policy. The Biden administration's landmark legislative victories—the CHIPS and Science Act and the Inflation Reduction Act—represent a massive return to state-led industrial strategy. By deploying hundreds of billions in public subsidies, the government is actively reshoring semiconductor manufacturing and scaling clean energy.

Reinvigorating antitrust. Simultaneously, FTC Chair Lina Khan is leading a revolution in competition policy, challenging the dominant market power of tech giants like Amazon. This new marketcraft has found unexpected bipartisan support among economic nationalists on the right, who agree that the state must manage markets to protect the common good.

• Passed the $52 billion CHIPS Act to reshore advanced semiconductor manufacturing
• Enacted the $350 billion Inflation Reduction Act to catalyze private clean energy investment
• Reformed antitrust guidelines to challenge corporate monopolies across tech, healthcare, and agriculture
• Forged a new cross-partisan consensus around economic nationalism and supply-chain resilience

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