Lawfare Daily: Chris Hughes on His New Book, ‘Marketcrafters’

I think you really do need all three of these things for market craft to be effective. You need the clear mission. You need the discretion and power to move forward and to do that confidently. And you need accountability to ensure that the mission is being met.

Market craft is when a state entrepreneur or a policy maker harnesses market forces to achieve some kind of public good. It could be national security. It could be financial stability. It could be building semiconductors. But it is about using the private sector, the dynamism of capitalism to make the country work in a way that you want to see it. So that's the opposite of what is happening right now in the White House where Trump and co are bludgeoning the economy, trying their hardest to tear it apart, to raise prices and push us into a recession. Market craft is something much more precise. In the book I have a collection of different moments throughout history where individuals have had a mandate, many of whom are Republicans, many of whom are Democrats, and they organize and manage markets to meet that specific goal. Sometimes they succeed, often they fail. But we can learn from those experiences to create some kind of framework which we're going to need on the other side of the chaos that we're in today.

I think for a lot of books, at least for this one for me, they stem from an underlying frustration or anger. And this one was this dichotomy between markets over here and government over here that we seem to just be unable to get rid of. We are constantly talking about markets as if they are some natural phenomenon and we use a language of intervening. Even progressive folks will say, well, government needs to intervene in the market to do X, Y, or Z. That is conceptually wrong. That doesn't describe how markets work in the United States. And so instead, I often go to the metaphor of a vegetable garden. When I was growing up, my dad had a vegetable garden in the backyard. I didn't love working in it, but I spent a lot of time there, particularly on summer evenings. And I use that example because markets are organic forces that do turn through a logic that is part of them as institutions, but they also need to be cared for. They need to be cultivated. And that is a dynamic interaction between markets and government to make sure that they're working the way that we want them to work. And so it took me time to come to that outlook. And then once I did, you can look back at the past and see example after example of how institutions have been built to try to cultivate markets in a direction. You can start to see opportunities for how to do it successfully in the future. I'll give you one example. I start the book about a hundred years ago in the midst of the Great Depression. And there's so many different parts of the New Deal that we could focus on, but the story that really landed the most with me was of this Texas entrepreneur named Jesse Jones. This guy grew up in Tennessee, moved to Texas, made millions of dollars at a relatively young age. He's an up-and-coming guy. He ends up in Washington running a national investment bank called the Reconstruction Finance Corporation. And this institution has a market crafting mandate that evolves over time. First it's stability, later it's about housing, later it's about the war and aviation. But my point is, they weren't waiting to intervene in any particular market. They were creating institutions which said, 'Hey, we need markets to be stable and so we're going to engineer them to be that way. We need a housing market so that we can have jobs and cheap housing. We need planes to fight a war.' That's not intervening. That's crafting.

I like your metaphor. I think it's useful. So, if we plop down in history in the early 1970s, I think most people know that we experienced two pretty radical energy crises. First in 1973 and then again in 1979, where the price of oil skyrocketed initially from an embargo in the Middle East and then later after the revolution in Iran and some complicating geopolitical factors. So the question coming out of those crises is how are we never going to have to face a world where the price of gasoline can double in the course of weeks? And the mandate that was favored by Republicans, a libertarian Treasury Secretary who ran that FEO that you're talking about named Bill Simon, and Alan Greenspan and Henry Kissinger and others, was to do something called price buffering by building reserve stocks. So this is an old idea in political economy, goes back actually millennia to rice and other commodities, where a central organizing force, in this case the state, can say, 'Hey, we want stable prices in energy markets.' So when the prices are high, we're going to buy, and when the prices are low, we're going to sell. In other words, creating a band that keeps the prices stable. And you need to build stockpiles in many cases to do that. Not always. You can use futures contracts and other kinds of financial tools to do that. But in the case of oil and gas, we built the Strategic Petroleum Reserve, which now has the capacity to hold 700 million barrels of oil. And that is well over a 100 days supply at current import levels. And we use the reserve. When prices skyrocket, sometimes you'll hear a press release from the White House that the president has released so many gallons from the strategic reserve, and it works quite well. In fact, the Biden administration did more work with this on some other energy futures contracts because it provides stability not just to consumers but also to investors who can know that they're going to get a certain return. So that kind of approach is actually something that we've done in other moments in history. I talk in the book about where we did it with wheat and corn and agricultural commodities, and it could be applied to things like eggs and coffee and groceries because right now we have such a pronounced cost of living crisis. It's only going to get worse as these tariffs, the effects of the tariffs come through. And so we need to have some framework on the other side of this, which isn't going to say that everything is always going to be cheap, but it is going to say, 'Hey, the government can craft a market to ensure that commodities that are important to all of us, like groceries, the prices of them are more stable than they've been in the past.'

Yeah, they are. And I find that sometimes it can help to talk about it specifically to just prevent getting to too abstract a place. So you're right that I think that market craft works best when policymakers create an institution or charge an existing institution with a clear mission. What is our goal? And then they give it power and discretion to get it done. Of course there's accountability. You need to make sure that they're connecting the dots in a way that meets the mandate, but it's those that are sort of the magic ingredients for success. So, let's take the CHIPS Act, which was just recently passed in 2022. Of course, it's a Biden administration victory, but the idea was a Republican idea. It first emerged in the first Trump administration. Keith Krach at the State Department was particularly a big leader on it. And for years, a lot of Republicans on the Hill had talked about how are we going to ensure that we have semiconductors made in the United States from a national security perspective. We cannot have them all on this island off the coast of China. That cannot be the only place where this happens. And we need to have some kind of what we would call an industrial policy to bring semiconductor production back to the United States from a national security perspective. So, it's because of all of that groundwork on the right that had been laid that there was this opportunity for a bipartisan agreement in the Biden administration that Republicans and Democrats both supported to create a new institution inside the Commerce Department. Clear goal. Let's make semiconductors in the United States. They gave it $50 billion. And they even said, you know what, we're going to let the commerce secretary herself decide how to divvy that up. She decided to put $40 billion into public investment and roughly $10 billion into R&D. And then she hired a couple really talented people, Mike Schmidt and Todd Fischer, some from the public sector, some from the private sector, and said, 'Bring semiconductor manufacturing back here to the United States.' So now you fast forward a few years later and all five major global semiconductor firms are constructing plants or have plants already open. TSMC just announced another $100 billion investment. TSMC's facilities are making the cutting edge chips that are in our iPhones here in the United States in Arizona. And the $50 billion of public funds has attracted $300 plus billion of private funds. And so there are issues here which we can talk about in the CHIPS Act. It's not all coming up roses. But directionally, this is what successful market craft can look like. And it does have those attributes of clear mission and an empowered institution with the discretion to attract smart experts and get it done.

Yeah. So let's be really clear, DOGE is not market craft. And why is it not? Because it is not trying to harness market forces to achieve a public good. DOGE, at least ostensibly, claims to be making government more efficient. They're just really running through the administrative state willy-nilly, laying folks off and trying to dismantle as much of government as possible. So that's sort of, what do we even categorize that as? A government reform initiative? Something along those lines. But it's not about harnessing the private sector to help us achieve something in the common good. But there are some signs of that in the Trump administration. For instance, the crypto reserve fund that the president has talked about. The idea is that potentially Treasury could buy crypto assets, pool them, and this would work as a way of legitimizing that market, providing significant demand, and sort of bring it into the financial perimeter, based on a belief that the definition of the common good in that case is a crypto market that is robust. Now I obviously I disagree with the ends, and I think that's an important point. Market craft in and of itself is not normative. It is a method for using private sector forces to achieve a political end, and we will disagree about those political ends. Like I disagree with the crypto reserve fund, but there are a lot of people who might disagree on national security grounds with CHIPS, or on Federal Reserve interest rate policy, which we can get to soon I hope. So my point is that market craft is a method and not a value system. It can be a very useful one. So the second half of your question I think was around when does market craft go wrong or go bad, and there are many examples. The one that I learned the most about in writing the book was about healthcare markets in the 1960s, when the real allergy to creating any kind of coordinating institution at the federal level meant that we chose a structure for healthcare markets that is incredibly piecemeal and that enables private sector investors and actors to disproportionately profit from the market arrangement. So in the 1960s when we created Medicare and Medicaid, we effectively agreed to a system that had no central coordinating force in the United States government, that was going to be a private-based system for insurance for working age folks that would not cover everyone. And even the public programs, even Medicare and Medicaid at the time, didn't have caps or limits on reimbursement rates, which it took well over a decade to fix. So it was clunky. They were trying to make healthcare accessible and keep market forces and yet have some government. But because they didn't have that coordinating institution with the power and discretion, we got the Balkanization that began then and of course continues today. So market craft can often go wrong, and we have to be clear-eyed about that if we're going to do it well in the future.