The main idea of this book is not that much to describe problems with current economic order of USA, as to analyze its causes that author identifies as suppression of small business by coalition of government and big corporate business and, most important, propose a very specific program of ideas how to bring America back to its original “bottom up” approach to economic order with small businesses again becoming the engine of growth and prosperity.
Here author starts with reminiscence of his childhood in Baltimore and his outgrowing inherited loyalty to Democratic Party due to its rejection of working and lower middle class and embrace of bureaucracy, welfare dependency, and international corporatism. It follows by brief review of economic history of USA over the last 40 years with stress on failures of the first years in XXI century. At the end of introduction author states his believe that we are at the infliction point and only Main Street could save us from mediocrity and continuously degrading economic future.
1 Growth Is (Almost) Everything
Here author refer to his earlier work “The world is curved” that was stressing dangers of globalization and disputed position of “Flat world” promoted by Washington’s Elite “thinkers”. He discusses financial crisis and massive state intervention that first created it and then somewhat eased economy out of it in process practically killing economic growth. This follows by panegyric to the growth that could fix practically any problem and call to return to Main Street innovative capitalism – the only economic system that could provide such growth. The next part of chapter reviews political affiliations and lack of bipartisanship. Author refers to the last significant period of economic growth during Reagan and Clinton presidencies and how in these two cases despite bitter political struggles both party found the way to be enough bipartisan in economic policies, making growth possible.
2 The Illusion of Certainty
This is about complexity and unpredictability of economy. It provides a bunch of funny examples of complete inability of experts to predict future economic development. It follows by discussion of Wall Street well rewarded failures and overall financial part of economy. The final part is somewhat of a lament of big platform corporations like Amazon creating a new form of monopoly based on lawfare use to suppress in the bud all potential competitor startups and, in cases when it fails, to buy them out. The end result is ossification of economy and lack of growth.
3 The Economy’s Turbocharger
This starts with an interesting anecdote about author being low-level staffer at Capitol who was promised a photo opportunity with Reagan as reward for overtime work. It took a few months, but he did get his picture. The point is that opportunities come and go so one had to catch them. These fast flying opportunities especially important in high tech area as it represented by Silicon Valley. Author stresses new jobs potential for Main Street created by innovation industry. There is a duality in this development: on the one hand new technology eliminates old jobs, but on the other hand it frees people and capital from old activities and allows investing them in the new ones. He refers to “mass flourishing” ideas of Edmund Phelps. Author believes that this dynamic process is the most promising option to maintain prosperity, but he clearly sees decline in the levels of innovation in USA and discusses reasons for this decline. These are:
- System rigged in favor of big against small
- Huge levels of public and private debt
- Political system frozen by partisanship preventing required reforms
- Globalization made world a frightening place with no one in charge.
4 Top-Down Frustrations in a Bottom-Up World
This chapter is about comparison of small economic entities vs. big where author provides multiple examples of inefficiencies and ineffectiveness of the big highly centralized economy and discusses contemporary political and economic conditions when government creates massive advantages for the big corporate entities. It hurts economic development because it practically removes the only way to find out what needs to be done to achieve economic success: unabridged competition between economic entities with failure being not only an option, but frequent occurrence.
5 The World’s Greatest Wager
This is about debt and bad consequences of it. One of the most important bad consequences is “learned helplessness”, which if applied to accumulation of debt means inability of society to balance spending and revenues. As it is usual for people disturbed by high debt author brings in children who will be overburdened by inherited debt. Author discusses 3 solutions for the debt problem: Inflation, Default, and Innovation / growth of economy. He believes that the only acceptable solution is growth and only reinvigorating Main Street economy could do it. Finally author discusses demographics and need for entitlements reform to get out of debt.
6 It’s Nobody’s Century (or Maybe Everybody’s)
In this chapter instead of concentrating on American political gridlock and ways out of it, author looks at alternative political-economic system that many Western leftists admire now – China’s. This starts with the description of author’s encounter with Chinese diplomat who was dismayed when question come to China’s financial system, debt, and cooling off of investor’s enthusiasm. It looked like these issues where perceived as a serious threat to Chinese advancement. From this discussion followed the question of which country or countries are really could be global controllers in the future with author concluding that usual consensus of the future China dominance or, at best, two-polar world of USA / China competition of equals, is incorrect and China will fade away similarly to previous candidates to end American century: USSR, Germany, and Japan. He seems to believe that China’s multitude of problems would lead to such development.
7 Americans Are Fighters
This is an interesting combination of litany of American decline and expression of believe in America and hope that it will be fine based, at least partially, on author’s experience in 1970s and then in 1980s when he participated in implementing Reagan’s tax cuts and dramatic economic recovery that followed. His current proposal is guarantied investment at child’s birth from government and matching by private funds. Overall author seems to believe that mass participation in investment would go long way to eliminate problems of inequality caused by increase of return on capital and decrease of return on labor (reference to Piketty).
8 A Nation of Dreamers and Discoverers
The final chapter refers to the past cases of recovery and presents 14 points program that author believe would initiate the new recovery for our time:
- Bipartisan Congress actually capable to legislate
- Allow companies repatriate money without taxing
- Global Debt summit to avert crisis
- Reform taxes to make financial services less profitable and job producing enterprises more profitable
- Invest in Youth
- Recreate global financial Architecture
- Encourage new Enterprises
- The 3.5 Solution: manage US government non-financial assets to achieve 3.5% return
- Raise minimum wage
- Increase worker mobility
- Welcome foreign geniuses
- Temporary suspend new regulations
- Fund Adult Technical Education
- Reform the patent system and modernize Civil Service
MY TAKE ON IT:
This book contains a good dose of critic of contemporary America, but it is most interesting parts are author’s specific proposals to improve situation. Unfortunately these proposals range from very unrealistic like bipartisan congress to mainly meaningless like “fund technical education”. I think that a lot of negative staff discussed in this book comes from natural development of welfare state as it was established in USA in 1930s and then greatly expanded in 1960s. The system of welfare state was a very reasonable response to industrialization that increased productivity to such level that significant number of population could not offer on the free market goods and services including labor that would provide returns proportional to expectations, leaving multitude of individuals without proper place in economic order of society. Welfare state kind of solved this problem by providing less energetic, uneducated, and passive individuals with welfare check, so they could survive, and creating multitude of well compensating bureaucratic positions for more energetic, educated, and active individuals who could not find good returns on free market. The big issue now is that we moving into the final stage of productivity growth when human labor would not be required anymore and, in order to survive, society will need complete restructuring of resource allocation and economic relationship between its individual members. The solution should be on the scale of the problem, which is comparable to switch from hunting/gathering to agriculture / militarism to industrial production / financial resource allocation. The author’s suggestions are by orders of magnitude below this level of requirements.