Posted on 12/31/2007 8:47:28 PM PST by SeekAndFind
If you asked most Americans today what the biggest threat to our future prosperity is you would get answers like competition from abroad, outsourcing, the subprime mortgage crisis, and the wave of illegal immigration swamping the labor market.
Those answers would be wrong.
In fact, the biggest threat to Americas’ continued prosperity is the growing disquiet about our economic prospects in the face of those challenges, and the economic populism that is bursting out in response to these fears. Democratic presidential candidate John Edwards has distilled those fears into the central message of his campaign, but echoes of his message can be heard in most of the Presidential candidates’ pitches for votes. Certainly much of Governor Mike Huckabee’s meteoric rise in the polls can be attributed to his ability to tap into middle-class fears about the economy’s future.
Edwards’ campaign is built almost entirely on a foundation of class warfare—“the people versus the powerful”—and is chock full of attacks on business, the “wealthy,” and just about anyone who stands in the way of remaking the American economy into a nanny-state paradise built upon government protection and largesse.
Middle class unease about America’s future prospects in the world economy is coming to be a dominant theme in the 2008 elections, no matter who the Democrats and Republicans ultimately choose as their nominees, barring a resurgence of violence in Iraq or another terrorist attack on American soil, of course.
Unfortunately, Americans are woefully undereducated when it comes to the real roots of our enduring prosperity. Since at least the time of the Great Depression, many Americans have been taught that the government somehow “controls” the economy—and that good times and bad have been the product primarily of the economic stewardship of the President and Congress. This is a deeply dangerous illusion for a number of reasons. While it is certainly true that the government—particularly in these times when government spending is such a large and growing part of the economy—can have profound impacts on economic growth, it is certainly not the case that government policy has ever been particularly successful at driving that growth.
In fact, quite the opposite is the case. Government policies have proven time and again capable of slowing economic growth, but with few exceptions they have never proven capable of stimulating the economy in the long term. Even policies that economic conservatives think of as “pro-growth,” such as deregulation, tax cuts and reducing trade barriers are more accurately thought of as the removal of government-created barriers to growth than actual government stimulants to economic activity.
“The economy,” simply put, is not manageable like a machine. It is dynamic, driven by the choices, actions, and desires of over 300 million Americans, and ultimately the billions of people around the world. However frustrating it is to think that our fortunes are hostage to the actions of people across the globe, there is almost nothing positive the government can do to change that fact. We all live on the same planet and are tapping into the same resources to better our lives. It is the inventiveness of individuals and firms that shape those resources into useful products and services that truly make up the economy.
For instance, oil prices have skyrocketed because demand for oil has climbed steadily, particularly in Asia and India as their economies have grown. Conversely, the prices of electronics have dropped precipitously for precisely the same reason, as China in particular has become a manufacturing power due to the adoption of ever freer markets.
These changes have generated enormous anxiety among Americans, fueling fear that our place as the dominant engine of economic growth in the world is threatened. Compounding those fears is the realization that with globalization inevitably some will be winners and others losers as the changes ripple through our economy. Change is almost always frightening.
These fears are nothing new. They mirror the anxiety that accompanied the change from an agricultural to an industrial economy, and more recently the change from a more dominant and insular American economy to one that needed to compete with Japan in the 1970’s and ‘80s. Millions of jobs were displaced during these economically tumultuous times. Millions more were created. Unfortunately, the solutions offered by politicians are usually the wrong ones to ensure future prosperity.
The imposition of more government control, more rules and regulations, more economic redistribution, and higher barriers to trade will do more to impoverish Americans than any competition from foreigners ever could. Like it or not, the rest of the world will not remain satisfied with living in poverty, and nor should it. China’s rise as an economic power is driven largely by the natural desire of Chinese to escape poverty, not some conspiracy of corporate interests who care little for Americans’ well-being.
The secret to America’s continuing prosperity is and always has been our ability to adapt rapidly to changing economic conditions. Americans find new ways to provide economic value where none existed before. The growth of government—of economic planning and barriers to change—threatens precisely these qualities that have helped America endure as the beacon of economic growth throughout the 20th Century. Imagine a world where the government tried to protect the jobs of those in the horse and buggy industry as automobiles took the world by storm.
It is our dynamism, our ability to adapt to change that has been the secret of our economic success. The growing economic populism that is the expression of our anxiety about change is precisely the wrong prescription for facing the challenges ahead.
We can’t bank our economy on keeping the jobs that exist today because in all likelihood many of them will not. Instead, we need to foster the economic conditions that ensure the creation of new jobs and new products that are as yet unimagined.
Change is the only constant we can count on. Dynamism and adaptability are the only tools that will help ensure that America stays on top of the economic ladder in the century to come.
Welcome to FR.
Buy American!
I think the “Biggest threat to U.S. Economy” is allowing a Democrat into the Whitehouse.
The biggest threat to our economy is we stop buying...for whatever reason...
That’s very true. The economy is not manageable. But people think that evil, corrupt politicians and inept,corrupt, bureaucrat madmen can somehow manage the economy.
That’s very true. The economy is not manageable. But people think that a FEW evil, corrupt politicians and inept,corrupt, bureaucrat madmen can somehow manage the economy.
Or allowing a “Democrat Lite” into the WH. Thompson/Hunter ‘08 is truly the best choice!
Anyone here familiar with that argument?
good post
Actually, for entertainment purposes, one should take bets on how one's local or state government is going to screw up any specific approach to an economic problem. This would also serve to educate the bettors.
For example, in many states a problem has arisen with people stealing copper and selling it for scrap.
The state governments are going to "solve" the problem, but it's certain they'll step all over people who are legitimately selling scrap copper.
Just pick the stupidest idea you can think of, and that's prolly the answer they'll arrive at...
The greatest prosperity our nation has experienced coincided with the accumulation of $9 trillion of debt. Deficit spending and perpetual debt must be good economic policy. The government controls all that.
The economy is booming at my house.
Those that would pull up the drawbridge and hunker down in fortress America (Buchannon) are idiots. Trade barriers and other isolationist ideas were some of the causes of the great depression.
I’ve read Buchanan’s arguments but in the light of what’s happening to the US economy, I don’t see how his doom and gloom makes sense.
Consider what happened in 2007 even in the midst of globalization ( source : American Enterprise Institute) :
The US trade deficit declined. As our trading partners become wealthier, they demand more of our products. At the same time, the weaker dollar has made U.S. exports cheaper. Exports have boomed, and the real trade deficit has narrowed, from $624.4 billion in 2006 to an estimated $562.4 billion in 2007.
Even in the face of the housing-market bust, economic growth was solid. If someone told me last December that construction of single-family homes would drop in 2007 by 27 percent, about the current estimate from Economy.com, then I would have expected the economy to be in recession. But a collapse of that scale did occur, and annual GDP growth, according to the latest Economy.com estimate, was about 2.5 percent. There are plenty of developed countries that would take that type of growth every year.
Job creation was robust. According to the latest jobs report, which covers data through November, the U.S. economy added 1.3 million jobs on net in 2007. The unemployment rate was 4.6 percent in January, and finished the year a smidgen higher at 4.7 percent. Both levels are very low by historical standards.
AND TO TOP IT ALL :
Households are wealthier. In part because of rising equity markets, household net worth increased in 2007, according to the latest numbers from the Federal Reserve. At the start of the year, net worth was $56.1 trillion. By the third quarter, this climbed to $58.6 trillion and probably rose again in the fourth quarter. If changes in wealth affect the economy through consumption, then the affect will be favorable.
Of course there will be winners and losers in globalization just as there will be in any capitalistic system. Hey, thousands of switchboard operators became redundant with the advent of computerized switching, the Pony Express became obsolete with the advent of the railway and cars. Surely Buchananites aren’t suggesting that we stop inventing new technology because it would displace thousands of workers are they ??
What we’re looking at is ON THE AGGREGATE -— Globalization has been good for BOTH America and the rest of the developing world ( even when there are inevitably going to be displaced workers who will be affected ).
It is the paranoid among us that feel they can’t compete with a destitute slave that are the biggest threat. If they gain enough control to enforce their world view on us we’ll have another depression.
“...economic populism...”
Whatever that is. Sounds like an alternative definition of socialism to me. I’ll buy that: socialism has brought nothing but penury and misery wherever, and whenever it has been implemented.
Same old enemy. Shiny new name?
As long as there is a Democrat Party, we will have millions of economically ignorant citizens. My Dem friends, family, co-workers truly believe among other things that the rich pay no taxes, Bush tells the oil companies when to raise and lower prices, and corporations are evil. I would bet that a majority of Democrat faithful believe at least one or all of the preceding statements.
You mean trade barriers like the Smoot-Hawley amendment of 1930 that exacerbated The Great Depression? Barriers and tariffs designed to help small segments of a nation's work force usually end up hurting the country at large.
The problem is that the very second a Democrat looks to win POTUS in 2008, many people will begin locking down their assets in "survival mode" as a reflex to the approaching tyranny to come.
Rats are bad for business. The election of one could definitely lead us into a recession. Particularly when they have a rat house and senate behind them. Think "Economic Armageddon".
Pat and others try to compare today to the Post WW 2 era.
At that time, the US held the competitive edge in manufacturing and had plenty of cheap oil. Under those conditions, multi-lateral foreign trade was the policy.
As the US lost its competitive edge to an industrializing world, and rising, imported energy costs, trade policy changed from only multi-lateral to include bi-lateral and regional. To trading in our own back yard. To trading with undeveloped nations.
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