The Economics of Despair

Back in the 1840s, when De Tocqueville was writing about America, there was no disagreement about its future, only about the best route for getting there.  It would span the continent, build better ships and mouse traps, provide new homes for the huddled masses of Europe, and grow.  The advice of the day was to go west and grow up with the country.  De Tocqueville noted that the essential formative influences on the American character were the wide open spaces and unbounded resources of the new continent; the main requirement for success was confidence.  Political disputes focused on social issues like slavery, on expansion issues like the Mexican War and on who would build things, not whether they should be built.  Would America be different in the future?  Of course it would.  So what?  The common vision was that it would be better for all. But the times have changed.

It is interesting that the entire recent hullabaloo in Washington has focused on the politics and economics of despair versus confidence.  Ted Cruz and the Tea Party say we have two years to get things right (meaning back to the elm-lined streets of the early 20^th century or to a 19^th century fantasy that never actually existed except in plantation houses) before we go over a cliff – to an unknown future?  What’s new about that?  The liberals say we need to build new things like infrastructure and green technology to meet the challenges of that future.  What’s new about that?  Henry Clay was saying much the same sort of thing back in the 1840s.  What is especially interesting is that the people who avow that they seek to preserve the values of the past, the conservatives, are the ones who despair, while the liberals, facing forward to the future, are the ones who exude the primary American value of confidence.  The conservatives are really lamenting a lost culture of the past, but in their vain denial of cultural change, they risk denying the potential for a brighter future.

Two side-by-side opinion pieces in the Washington Post, one by Robert Samuelson and the other by Larry Summers, reveal the economic roots of those differing visions.  Samuelson gloomily looks forward to a future of slow economic growth marked by increasingly bitter class disputes about how to split an ever shrinking pie.  He attributes that to shrinking labor force participation, lower high school and college graduation rates, lessening capital investment and lessening innovation.  He sees little or no prospects for the rapid growth of the past.  He fails to see that all those factors he cites are byproducts of a loss in confidence in an expansive future, occasioned both by the recession and by the unwillingness of the one percent to promote growth.  I suspect he also unconsciously believes growth requires adding space and is haunted by the vision of a lost frontier.

Summers instead focuses on the need for growth strategies, lamenting the undue concentration on budget deals which serve only to limit growth.  He points out that, in addition to solving real challenges like failing infrastructure and climate change, growth strategies reduce or eliminate budget deficits, improve the educational base of the work force, create jobs and make the rewards of the economy less unequal.  His is the “go west and grow up with the country” call of the 21^st century.  He points out that “If even half the energy that has been devoted over the past five years to ‘budget deals’ were devoted instead to ‘growth strategies,’ we would enjoy sounder government finances and a restoration of the power of the American example.”

It’s more than time for conservatives to give up their despair, and to pick themselves up, shake themselves off and regain the American confidence in the future they have lost.  As Summers points out, ideas for resuming growth can come from all sides.   All can profit.  That is the American example to which Summers refers.  The future is there.  It may not involve more space, though the planets are there for our pioneers, but it will involve more community.  The shape that future takes depends on what we do now, and the confidence with which we proceed.  It requires primarily that renewed focus on growth about which Summers writes.  Our future will be limited only by our vision.