As America struggles to manage through an Obama administration that has stewardship and responsibility for an economic crisis of spiraling budget deficits, burgeoning public debt, a declining U.S. dollar, unprecedented unemployment rates and ever-increasing global competition, it finds itself between the proverbial rock and a hard place. Striving to avoid a pending socio-economic earthquake America finds itself on a political and public policy fault line.
On one side of that fault lies the philosophy that an American free-enterprise democratic-capitalist society will create economic growth and employment through innovation and a laissez-faire public policy. On the other side is an Obama-led ideological philosophy of a European-style welfare state that applies governmental intervention and regulation over corporate America to create societal cohesion. America’s socio-economic safety, preservation and hegemony hangs in the balance.
- the inherent conflict between the creativity and change involved in free-market capitalism and the innate human propensity to avoid risk and change.
- ever-increasing international competition.
- the growing disparity in behavioral norms and social conditions between the upper and lower income strata of American society.
“Reconciling these competing forces is America's great challenge in the decades ahead, but will be made far more difficult by the growing bifurcation of American society. But a dysfunctional political dynamic has prevented the nation from addressing it well, and has instead given us the worst of both worlds: a ballooning welfare state that threatens future growth, along with growing socioeconomic disparities.”
“The wealth-creation engine of the post-war world was designed in America, but available to other nations too — and so in time those that had more advanced economies before the war (predominantly Western Europe and Japan) re-industrialized to the point that, by the 1970s, they began to challenge America's position. This revived competition, along with the oil shocks of the '70s, dramatically changed the global circumstances that had allowed the United States to have it all: high rates of economic and wage growth along with a high degree of economic equality.”
“it is important to see that this robust growth means only that America has not lost ground in global economic competition, not that it has gained much. From 1980 through today, America's share of global output has been constant at about 21%. Europe's share, meanwhile, has been collapsing in the face of global competition — going from a little less than 40% of global production in the 1970s to about 25% today. Opting for social democracy instead of innovative capitalism, Europe has ceded this share to China (predominantly), India, and the rest of the developing world”.
“Seen together, these initiatives — shifting government spending away from defense and public safety toward social programs; deeper direct involvement of the government in the operation of large corporationsacross a substantial portion of the economy; energy rationing in the name of managing climate change; more direct government control of health-care provision; and higher tax rates that probably include a VAT — point in a clear direction. The end result would be an America much closer to the European model of a social-welfare state, which prioritizes cohesion over innovation.”
To avoid this dangerous systematic policy shift toward American socialism by the Obama administration, Mr. Manzi identifies some clear solutions. Solutions that will avoid “throwing out the baby with the bathwater”. Preserving America’s system of democratic-capitalism while solving for a more socially cohesive American society to benefit from such a system.
- promote innovation through a return to a free-market economy allowing the private sector to both fail and succeed in their natural form without government intervention along with a reformation of social entitlement programs. Relinquish government ownership (not oversight)of industrial assets such as the automotive, banking, insurance and health care industries and roll back Obama stimulus packages to retain fiscal responsible spending levels.
- the financial markets are too interconnected for investor protection. A modernized version of “New Dealish" type financial regulation should be implemented focusing on creating walls that contain busts, rather than on applying brakes that hold back the entire system. Mr. Manzi advises reforms that should establish "tiers" of financial activities of increasing risk that are open to any investor. The government should provide protection for investors in the lower risk tiers and should permit failure in the higher risk tiers. Investor protective regulation would address some of the problems of social cohesion by allowing more Americans to participate in our market system without being unwittingly exposed to the effects of market collapses.
- deregulation of the public school system is essential for social cohesion and innovation. The creation of a real marketplace among ever more deregulated publicly financed schools wherein there is a market in which funding follows students, and far broader discretion is permitted to those who actually teach and manage in our public schools. A public school system that is decentralized, entrepreneurial, and flexible.
- re-conceptualize immigration as recruiting and assimilation. We should think of immigration as an opportunity to improve our stock of human capital. Once we have re-established control of our southern border, and as we preserve our commitment to political asylum, we should also set up recruiting offices looking for the best possible talent, from Mexico City to Beijing to Helsinki to Calcutta.