Can we restore America's spirit of growth?
One of the more disturbing possibilities is that our economic stagnation is not just the outcome of bad policies, but the result of a decay of the morals and spirit of risk and innovation. This is the subject of Tyler Cowen's new Complacent Class, reviewed here in the Wall Street Journal.
The decline in the percentage of working Americans between the ages of 25 and 54 begs serious consideration of whether this is the result of lack of opportunity, incentive, or willingness.
We should not let the possibility of structural and other causes for stagnation and low productivity be used to dismiss sound policy changes and reform. Both liberal and conservative forms of thinking have a stake in reviving economic growth. For conservatives, growth is its own reward for all people, regardless of inequality. For the left, growth is desperately needed to fund the welfare state.
The left is in a quandary. If we are just to accept low growth, then we must curtail expenses on the welfare state, unless taxes are substantially raised on the middle class, a political nonstarter. Despite the rhetoric of inequality and social justice, there are not enough of the wealthy to fund the progressive wish list. Simple math trumps ideology.
The structural changes of the digital, sharing, information, blockchain economy are just too new to predict. Deidre McCloskey in Bourgeois Equality cautions against rendering a final judgment of such shifts and changes after only the "first act." Subsequent periods spread the benefit to everyone and lower the costs. If dignity and respect continue to be afforded to the middle class, it will continue to innovate and propel progress forward.
Economic progress comes as much from lowering costs as from increasing income. Either avenue increases the bottom line. Luxuries become necessities; products afforded by only the wealthy become easily affordable to the middle-income and the poor. Lower energy costs, more efficient transportation, expanding computing power, and the possibility of the elimination of costly diseases all point to brighter horizons.
The remarkable increase in human betterment (McCloskey's preferred terminology) happened during two devastating world wars and a series of economic collapses. One would think this trend of human improvement could survive a spell of shortsighted and wrongheaded policies.
The challenge of social policies is to help without disincentivizing the changes needed to adapt to the economic changes afoot. In the past, people relocated from low-opportunity to high-opportunity areas and careers. The consequences of poor personal choices were not shared beyond one's family. We have largely succeeded in the elimination of abject poverty but have too often substituted dependency. The most destructive marginal tax rates are inflicted not on the wealthiest but on the poorest; the loss of benefits from entering the workforce can effectively mean a 100% tax rate.
We must assume that the spirit of growth remains and work to unleash it not just among the investor class, but in all the others as well.
Henry Oliner blogs at www.rebelyid.com.