Bill Ackman Thankfully Questions Misery As the Cure for Inflation
AP Photo/The Canadian Press, Pawel Dwulit, File
Bill Ackman Thankfully Questions Misery As the Cure for Inflation
AP Photo/The Canadian Press, Pawel Dwulit, File
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It’s always been a mystery why those fearful of low-wage overseas workers don’t clamor for more immigration. Don’t they see the obvious?

When individuals reach the United States, their productivity automatically soars. Thanks to copious investment, those lucky enough to work in the U.S. do so exponentially more productively. And their higher wages support the previous contention. Much as some who should know better believe foreigners are coming for “free stuff,” the more apparent truth is that they come for investment in all things American. Translated, work in the U.S. pays really well relative to other parts of the world.

This happy reality came to mind recently while reading about an interview with outspoken hedge-fund billionaire Bill Ackman. Commenting recently on what some errantly deem “inflation,” Ackman asked, “Doesn’t it make more sense to moderate wage inflation with increased immigration than by raising rates, destroying demand, putting people out of work, and causing a recession?”

Ackman is surely right about immigration. Legalize the inflow of willing workers. Humans are the producers of abundance, and the U.S. is where they can produce the most. It’s very simple.

Where Ackman arguably misses is in his presumption that more willing workers will reduce wage pressures. Quite the opposite, and that’s a good thing. Wages aren’t driven by supply and demand as is popularly assumed, but they are driven by investment. Since the U.S. is a magnet for so much of the world’s savings, wages naturally grow and grow in the U.S. to once again reflect the relative productivity of individuals lucky enough to work in the United States. See above.

Prior to the Ackman quote you just read, he observed that “Inflation can be mitigated by reducing demand and/or by increasing supply,” but that too isn’t exactly correct. Wage prices are once again far more a consequence of investment versus supply/demand, after which we can think more about the productivity of immigrants.

Does their increased production act as an inflation deterrent? Ackman’s analysis would signal yes, but it wouldn’t. The simple truth is that supply is what enables demand. We produce so that we can consume, in which case increasingly productive immigrants would be “demanding” goods and services in concert with their production of same. Immigrants won’t push down prices with their production simply because their production represents their demand. These things balance, by definition. If you’re an exporter you’re an importer.

Still, Ackman is right about opening up the world’s most economically advanced country to more immigrants, plus he’s extremely correct in asking if it is remotely sane to attack inflation by “putting people out of work.” For this alone, let’s hope Ackman’s outspokenness continues.

That’s the case because it’s accepted wisdom among economists and the punditry on the Left and Right that economic growth causes inflation. How sad that such a backwards belief is so prominent, but it is. As former Fed Vice Chairman Donald Kohn long made plain, as did former Fed Chairman Ben Bernanke, the Phillips Curve heavily informs thinking inside the central bank. To economists on the Left like Kohn and Bernanke, the answer to inflation is rising joblessness.

About this, members of the Right shouldn’t be so smug. With their hagiography of Paul Volcker, they too buy into the laughable notion that people must suffer to beat inflation. As a consequence, Right-leaning members of the commentariat have for months made a case for burning the economic village in order to save it. Manhattan Institute senior fellow Allison Schrader is the latest to make a disappointing case for contraction as inflation’s cure.

The good news is that Ackman is right, and they’re all wrong. The Phillips Curve narrative embraced by both sides presumes that country economies are closed shops. Actually, and as is shown repeatedly in my new book The Money Confusion, all that’s produced in the world is a consequence of global cooperation. This basic truth is a reminder that when concentrating on labor and capacity, the only reasonable focus is on the whole world. Assuming the impossibility that is “full employment” or full “capacity utilization” in the U.S., the only closed economy is the world economy.

Better yet, limited supply of anything is logically the impetus for the creation of more. Certainly in the U.S., rising wages born of productivity create the incentive among producers to automate functions formerly done by humans. Along these lines, when’s the last time any readers bought an airplane or movie ticket from a live human being, or had their gasoline pumped by an attendant? Growth is the path to advances that reduce labor pressures.

That growth mitigates alleged labor shortages is a statement of the obvious, and it is simply because economic growth is driven by investment. Which is important. Investment is all about marrying savings with production in order to get more production at costs that plummet. That’s why more and more of us have literal supercomputers in our pockets the cost of which continues to plummet.

Yes, economic growth is all about falling prices contra the analysis of Left and Right. All of which speaks to the value of Ackman’s questioning of the hideous reasoning behind fighting “inflation” with misery. Can the dominant ideologies be serious? The answer seems yes, which is why we should be grateful for influential figures like Ackman.

Hopefully he follows his disdainful questioning about unemployment as an inflation fix with something along the lines of “If Biden wants to beat inflation, why doesn’t he get on TV with Treasury secretary Yellen in order to announce a dollar-price rule?” Talk about a question pregnant with a real solution for inflation. The latter is a currency phenomenon, nothing else. Too bad neither side gets this now. Perhaps Bill Ackman does.

John Tamny is editor of RealClearMarkets, Vice President at FreedomWorks, a senior fellow at the Market Institute, and a senior economic adviser to Applied Finance Advisors ( His latest book, The Money Confusion: How Illiteracy About Currencies and Inflation Sets the Stage For the Crypto Revolution, releases today. 

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