One Economy to Rule Them All

THE rIGHT IS THE lEFT:

Markets for the People (Glenn Hubbard, Summer 2024, National Affairs)

The advent of “Bidenomics” has resurrected decades-old debates about the merits of markets versus industrial policy. When President Joe Biden announced his eponymous strategy in June 2023, he blasted what he described as “40 years of Republican trickle-down economics” and insisted that he would seek instead to build “an economy from the middle out and the bottom up, not the top down.” He would achieve this through “targeted investments” in technologies like semiconductors, batteries, and electric cars — all of which featured heavily in initiatives like the CHIPS and Science Act and the Inflation Reduction Act. Yet despite the president’s professed support for a “middle out” economics, Bidenomics has thus far proven to be less of an intellectual framework than a set of well-intended yet ill-fated industrial-policy interventions implemented from the top down.

Some conservatives have joined Biden in embracing industrial policy. Writing recently in these pages, Republican senator Marco Rubio of Florida asserted that while it is difficult to “get industrial policy right, conservatives can and must take ownership of this space to keep the American economy strong and free.” Former president Donald Trump, for his part, staunchly advocates heavy tariffs to promote domestic manufacturing.

Conservatives who adopt their own version of protectionist tinkering with markets are missing an important opportunity. As mercantilism’s decline did for classical liberalism in the 19th century and Keynesianism’s misadventures did for neoliberalism in the 20th, Bidenomics’ failures offer an opening for the right to champion a new type of economics — one that puts opportunity for the people ahead of the economic rules of the game.

We’re far enough into human history that folks should long ago have given up on the idea they can outwit markets.

NO ONE HAS IT HARDER THAN THEIR FATHER DID:

The great wealth wave (Daniel Waldenström, 8/16/24, Aeon)

Recent decades have seen private wealth multiply around the Western world, making us richer than ever before. A hasty glance at the soaring number of billionaires – some doubling as international celebrities – prompts the question: are we also living in a time of unparalleled wealth inequality? Influential scholars have argued that indeed we are. Their narrative of a new gilded age paints wealth as an instrument of power and inequality. The 19th-century era with low taxes and minimal market regulation allowed for unchecked capital accumulation and then, in the 20th century, the two world wars and progressive taxation policies diminished the fortunes of the wealthy and reduced wealth gaps. Since 1980, the orthodoxy continues, a wave of market-friendly policies reversed this equalising historical trend, boosting capital values and sending wealth inequality back towards historic highs.

The trouble with the powerful new orthodoxy that tries to explain the history of wealth is that it doesn’t fully square with reality. New research studies, and more careful inspection of the previous historical data, paint a picture where the main catalysts for wealth equalisation are neither the devastations of war nor progressive tax regimes. War and progressive taxation have had influence, but they cannot count as the main forces that led to wealth inequality falling dramatically over the past century. The real influences are instead the expansion from below of asset ownership among everyday citizens, constituted by the rise of homeownership and pension savings. This popular ownership movement was made possible by institutional changes, most important democracy, and followed suit by educational reforms and labour laws, and the technological advancements lifting everyone’s income. As a result, workers became more productive and better paid, which allowed them to get mortgages to purchase their own homes; homeownership rates soared in the West from the middle of the century. As standards of living improved, life spans increased so that people started saving for retirement, accumulating another important popular asset.

NO ONE WILL MISS CHEVRON:

Cutting Red Tape To Spur Economic Growth: U.S. states that have implemented policies such as regulatory budgets that cut red tape tend to grow faster than states that have maintained the status quo (Patrick McLaughlin, Aug 01, 2024, Discourse)

[S}everal U.S. states have reformed their regulatory process in some way over the past few years. The movement was arguably inspired by the Canadian province of British Columbia, which in 2001 recognized a need to cut some of the regulatory red tape that had built up over time. British Columbia’s groundbreaking red tape reduction initiative succeeded in reducing the quantity of regulations on its books by about 40% within three years. Moreover, the red tape reduction caused the province’s economic growth rate to increase by more than one percentage point, thereby converting British Columbia from economic laggard to leader in just a few years.

Now that some U.S. states have taken steps toward cutting accumulated red tape as well, we can start to answer some basic questions about these policy innovations: How well are they working in terms of cutting red tape? And are reform states seeing increased economic growth as a result, like British Columbia experienced? The positive effect of reforming the regulatory process and cutting red tape should not be ignored: Seemingly, any jurisdiction that proactively avoids unnecessary accumulation and cuts red tape might be able to boost its economy as British Columbia did.

WHINGEING IS NOT HARDSHIP:

We’ve never been richer: But we’re still quite cranky about the economy (Matt Phillips, 6/7/24, sherwood News)

The latest quarterly numbers from the Federal Reserve show that the net worth of the U.S. household sector hit a new high of $160.8 trillion in the first quarter, after rising $5.1 trillion during the first three months of the year. Net worth was up 8.8% compared to the first quarter of 2023, handily outpacing 3.5% rise in inflation over that period.

Hard to be the hero of your own story when the living is as easy as it is today. So we pretend times are hard.

COVID FORCED CONTRADICTIONS:

Remote Work Liberated Us from Unaffordable Places (Scott Lincicome, 6/05/24, The Dispatch)

When we discussed remote work’s benefits and durability a few months ago, I omitted one other great feature: its potential to allow Americans to live where they want to live instead of simply where their jobs are located. That’s good on its own, but it also comes with a big policy bonus if workers exercise their newfound freedom in large numbers: Their moves can pressure state and local governments to improve costly tax, housing, education, and other policies, and they can rejuvenate some of the places that our modern economy (supposedly) left behind.

NO ONE HAS IT HARDER THAN THEIR FATHER DID: