There’s a stack of books on my desk, several of which would be sparking widespread discussion in ordinary times. Four stand out:
- Five Easy Theses: Commonsense Solutions to America’s Greatest Economic Challenges (Houghton Mifflin, 2016), by James Stone;
- Learning By Doing: The Real Connection between Innovation, Wages, and Wealth (Yale, 2015), by James Bessen;
- Move: Putting America’s Infrastructure Back in the Lead (Norton, 2015), by Rosabeth Moss Kanter;
- Concrete Economics: The Hamilton Approach to Economic Growth and Policy (Harvard Business Review Press, 2016), by Stephen Cohen and J. Bradford DeLong
As Cohen and DeLong write, “We need to recover [the] American tradition of pragmatic engagement with questions of economic policy and equitable growth.”
But of course these are not ordinary times. The presidential campaign insurgencies of Donald Trump and Bernie Sanders have made it hard to focus on practical suggestions for the next administration – never mind the Congressional gridlock that lies beyond the next election. The effect of the uncertainty surrounding the political circus is to rob these sober and well-reasoned tracts of their urgency.
Stone wants to restore fiscal balance by closing loopholes, increase the progressivity of taxation, overhaul education, adopt a single-payer health care system, and rein in financial markets. Bessen want to expand vocational education, alter Pentagon procurement policies, and reform the patent system. Kanter advocates a national transportation initiative that would dwarf the National Interstate and Defense Highways Act of 1956 – airports, trains, rapid-transit within cities and smart roads between them (why not a smart grid to distribute electricity?).
Cohen and DeLong agree that America needs another of the “redesigns” that they have been performed at intervals in its past. These are policy changes, they say, designed to shift the US economy into new directions, in hopes of taking advantage of new opportunities. There’s nothing uniquely American about such joint ventures of governments and entrepreneurs, the authors say: they are ubiquitous among cities and states throughout history.
Such redesigns are typically articulated by political leaders, implemented by the federal government, backed by powerful private interests and political forces, elaborated by entrepreneurs unforeseen directions, and held together by clearly communicated and widely–shared visions that are concrete in their details rather than ideological: high tariffs instead of infant-industry protection; railway expansion instead of technology policy. What might the next redesign involve? Cohen and DeLong don’t say. Instead they offer history.
Who is going to draw the new design, or even select the new design principles? A few guys who think they are smart, like us? A beltway think tank? A blue-ribbon commission? Of course not – that’s not how we did it in the past.
Thus Alexander Hamilton was the architect of the first and most important redesign, they say, promoting laws to favor industry, commerce and banking at the expense of agricultural interests. Infant-industry protection policies stayed in place even after Hamilton’s Federalist Party was replaced by the small government Democratic-Republican Party of Thomas Jefferson and James Madison. And by the time Abraham Lincoln was elected, it had become second nature for government to make big bets on emerging technologies: methods of weapons manufacture that became “the American system” of interchangeable parts; railroad expansion; the land-grant universities and the Homestead Act.
The Republican ascendancy came next, ultimately exemplified by Theodore Roosevelt with his trust-breaking, industrial regulation, bank supervision and income taxation. Starting out at the nadir of the Great Depression, Franklin Roosevelt undertook economic measures in all directions. Some of them stuck and others were discarded. Dwight Eisenhower embraced accepted what had become the central tenets of the New Deal – collective bargaining, the extension of civil rights to African Americans, the Social Security system, and belt-and-suspenders financial oversight – and advocated a vast new redesign of his own to cope with America’s role in the Cold War.
Meanwhile, following similar principles of periodic redesign, Germany and Japan transformed themselves in the nineteenth century; Japan (again), the smaller Asian “tiger” economies, and, finally, China, in the twentieth. I am not doing justice to the book with these telegraphic summaries. DeLong is among the nation’s leading economic historians; Cohen is a co-founder of the Berkeley Roundtable on the International Economy, an emeritus professor at Cal, and a visiting scholar at New York University. At 220 pages, Concrete Economics is a model of compression.
Since 1980, the authors say, the US has been embarked on another redesign – this one a damaging one. The vision accompanying deregulation was ideological, they say, even religious, instead of concrete. Much manufacturing was permitted to move abroad; new, higher-value industries into which the US should move were stimulated, including computers, communications technology, entertainment, and, of course, finance. Taxes were cut, managerial compensation soared, in the name of incentive realignment. “For the first time in American history,” they write, “the redesign did not work.”
This is, I think, a serious misunderstanding. It has to do with the authors’ failure to appreciate what Reagan accomplished. For support I turn to Jacob Weisberg’s compact biography, Ronald Reagan (Times Books, 2016), the most recent in the American Presidents series established by the late historian Arthur Schlesinger, Jr. Weisberg, author of In Defense of Government, the Fall and Rise of Public Trust (Scribner, 1996), is no right-wing ideologue. Yet he writes,
Ronald Reagan was a transformational president He left behind a different country after his eight years in office – wealthier, but less equal, more hostile to government, and facing a peaceful conclusion to more than forty years of Cold War. These changes grew out of ideas he developed as a Hollywood actor, as a spokesman for General Electric in the 1950s, and as a voice of the emerging conservative movement in the 1960s and ’70s. Yet today Reagan remains profoundly misunderstood, personally and politically, thanks to conservatives who adjust their beliefs to fit their ideology and to liberals who fail to appreciate his pragmatic and peacemaking instincts.
The Reagan redesign had international trade and global integration at its core. Deregulation and restructuring were designed to assimilate the crumbling economies of China and the Union of Soviet Socialist Republics into the global trading system and, in general, it worked. The luxuriant growth of the financial system was part of that loosely-articulated but coherent plan. We are now paying the price for that dramatic increase in the extent of the international division of labor now, in a dyspeptic presidential campaign unsurprisingly preoccupied with the short-term costs of those long-run gains. But that doesn’t mean the Reagan redesign wasn’t a good idea. Thanks to American leadership after 1980, incalculably more persons around the world are better off – wealthier, more equal, likelier to live their lives in peace.
Reagan himself signed off on the central reforms of the New Deal and after – progressive taxation, Social Security, Medicare, civil and social rights, governmental responsibility for macroeconomic stabilization. It is the more ideologically-oriented among his inheritors who have tried to turn back the clock – the wing of the Republican Party associated with Newt Gingrich instead of George H.W. Bush. The sooner that Democrats like DeLong and Cohen learn to incorporate the Reagan redesign inro their otherwise-persuasive tale, the sooner we can get on with the next redesign.