One person whose opinions on national and global affairs I tend to take quite seriously (and it is becoming increasingly rare that anyone from our chattering class can be taken anything close to "seriously") is Fareed Zakaria. While he may lean a little to the left (or is too liberal/progressive/socialist/et al., depending on who you ask), I find that his analyses and prognostications are often well thought-out, supported by worthwhile sources and historical comparisons. Yesterday I happened upon a very interesting article of his entitled How To Restore The American Dream, and it got me thinking about a number of things, things which I decided I wanted to commit to some sort of print medium if only so I could recall them later.
The article is absolutely worthy of a full read-through, as it touches on some very serious issues facing the United States, the foremost of which is the shifting structure of the global economy and America's place in it (or, more specifically, that of the American worker). The basic arc of it all is that globalization and technology have joined forces (or conspired, if the reader prefers), in a way not seen in the post-war era, to change global economic dynamics in a potentially irreparable fashion. Companies can make the same products (the article uses Coca-Cola as an example) at a much lower cost by opening up production in countries with developing economies, while simultaneously tapping the emerging markets of those countries. As a result, companies can become more efficient simply by embracing the lower costs of doing business in the developing world. Some of my more libertarian friends would put forth some variation on the theme that this is clearly due to draconian tax laws designed to perpetuate the American welfare state, and to the regulation of business geared toward the redistribution wealth to the masses. Zakaria delves considerably deeper than that, however, and I found myself agreeing with him at the very least on the scale of the problem. Yes, the tax code is a monstrosity, but the problem is far too complicated to merely espouse "cutting taxes on business" as a viable solution. After all, incomes were largely flat during the previous decade, even after the massive tax cuts were pushed through in 2001 and 2003.
Fortunately, America is still home to the most coveted market in the world. "None of [the global corporations] will ever give up on the American market — it is too large, too profitable and too central to their businesses," the article grants. However, Zakaria asserts that the mostly robust economic times that Americans enjoyed prior to the Great Recession were largely an illusion created by the availability of easy credit. He cites the eye-popping statistic that American household debt rose from $680 billion in 1974 to a staggering $14 trillion in 2008. Despite this massive increase in consumption, which has been the primary driving force behind the American economy for decades, incomes remained stagnant throughout much of this period. And in post-Recession America, neither is credit likely to be as available nor consumption to be as rigorous as before, and thus America's economy will continue to lag and sputter along, causing immeasurable pain for millions.
So what is the solution? How does America once again become the preeminent global economic leader? I'm sure I don't need to disclose that there is no silver bullet to this situation, and that it will require some particularly difficult decisions, which in turn will warrant considerable fortitude of political leadership, fortitude which I am resigned to saying our political class as a whole lacks, nay, abhors. Zakaria believes that one essential ingredient to any resurgence of the American economy is a massive expenditure for investment generally (in lieu of merely mass consumption), research and development more specifically. This makes logical sense: if the things Americans once did better than anyone else in the world are now being done better and more efficiently in so many other places, why not boost innovation to a high enough level that it allows the American business community to embrace unseen ideas and products, ones which have yet to be found anywhere else in the world? Other nations (South Korea exemplified in the article) are making huge investments in new industries like green energy technology; why shouldn't America?
To return to my libertarian friends for a moment, the response from that portion of the spectrum is sure to feature the phrase "free market" alongside some kind of argument that the government should stay out of the private sector and let business do what business feels is best. While I am certainly nowhere near liberal enough to instinctively reject that argument, I do wonder what would have happened in 1940 if FDR had decided to leave the rapid, massive (necessary) mobilization of industry up to the leaders of the private sector. Would they have been more concerned with the long-term security of the nation? Or their own short-term profit margins?
