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  • Decline is Not Inevitable

    Posted by David Foster on November 5th, 2012 (All posts by )

    One of the most depressing things about the last several years is the degree to which many Americans have come to believe that our best years are behind us. Surveys show that a high percentage of people believe their children will live less-well than themselves. The belief is pervasive that our current economic problems are not a mere cyclic downturn, but rather that we have entered an era of sustained decline.

    I assert that American decline is by no means inevitable…and if we do wind up in long-term decline, it will be driven not by any sort of automatic economic process, but rather by our own choices–especially our own political choices.

    We talk a lot, here and elsewhere, about our problems as a society–and properly so–but let’s change focus for a few minutes and think about our assets.

    America has vast energy resources. For oil and gas, fracking really is a game changer. We have vast reserves of coal, and plenty of opportunities to employ nuclear energy safely and responsibly. (Solar and wind can also play a role, but these will be niche sources only for a long time.) And low-cost and widely-available energy greatly improves the economics of many manufacturing businesses, as I’ve pointed out in other posts. European manufacturers, for example, wish their countries had direct access to large supplies of low-cost natural gas.

    America has wide swaths of fine agricultural land, and many excellent farmers. These are not trivial factors in a world which is becoming increasingly wealthy, filled with billions of people who want and need to improve their diets. And agriculture’s impact is not limited to those who are actually on farms–agriculture also drives activity in transportation, in equipment manufacturing, in fertilizer production.

    And speaking of transportation: while there have been many concerns about “America’s decaying infrastructure,” America also has infrastructure elements which are very strong. America’s freight railroads are probably the best in the world, and represent a powerful economic asset. The country is cris-crossed by thousands of miles of pipelines which carry oil, natural gas, jet fuel, ammonia, CO2, and many other commodities, efficiently, silently, and safely. Our airports, air carriers, and air traffic control system combine to enable the transportation of vast numbers of passengers and considerable quantities of freight, reliably and safely. The Internet has emerged, in only 20 years, from being a limited experimental network to being a large-scale enabler of commerce and of new businesses.

    America has millions of people with entrepreneurial spirit–people who want to do new things, to put their personal stamp on the world, to make a contribution in ways that are not necessarily predefined by tradition or edicted by higher authority. Some will start the next Intel or Apple; for some, their scope will be limited to a well-loved local restaurant or to a home-based craft business. All are important.

    Our venture capital industry is an important enabler of high-growth new businesses, and our private equity industry plays a key role as well. “Crony capitalism,” while it has grown unhealthily, has not reached the levels it has in many other countries, and badly-managed or ill-thought-out enterprises can still go broke and be restructured (or disappear) without being bailed out by political pals, leaving the field clear for the new and better–and for talented people who are not among society’s “insiders.”

    Credentialism in the U.S. has indeed reached unhealthy levels, but it is still quite possible for people to succeed–and succeed in a big way–without the imprimatur of an “elite” college or an accent indicating an “appropriate” class position.


    Our universities do suffer from political correctness, from weak and weasely administrators, from too much of a “cafeteria” approach to knowledge, and from the bubble resulting in part from the simplistic view that higher education is and should be the one-path-fits-all solution to everyone’s personal and career development. But still, we have excellent institutions in science and technology, and even in the humanities and social sciences there remains a core of excellent professors on whom liberal education can be rebuilt after the bubble deflates.

    America has traditionally done well with the absorption and integration of immigrants, and this has been a major source of economic strength. You can move here from Africa or India and become “American” in a way that you could never become “Japanese” if you moved to Japan, or even “German” or “French” if you moved to one of those countries. Demographic problems, especially in Japan but also in some European countries, are amplified by the restrictions on immigration as a key element of their toolkit.

    America’s military did a great job of rebuilding itself after Vietnam, in the face of widespread social obloquy, and has proved itself again and again. It contains many dedicated, skilled, courageous, and intelligent individuals, at all levels.

    Underlying everything is the rule of law and the system of property rights. Long-term planning and investment are difficult to impossible without these things, as they are difficult to impossible in an environment of pervasive government corruption. And while there is far too much government corruption in the U.S., it has not reached the levels exhibited in, for example, China, in the case of its vaunted high-speed rail system.

    Mitt Romney understands the importance of the above elements of American success, and will work to strengthen them. Barack Obama either fails to understand most of these things or is actively hostile toward them.

    Romney will liberate America’s energy resources; Obama will constrain them. The current President either has no practical understanding of energy, or, if he does, ignores it in favor of politically-correct fantasies. In his attempt to be one of the international Cool Kidz, he jumped on the wind and solar bandwagon, lecturing us repeatedly about how other nations were ahead of us in these fields, he has shown no interest in learning from the actual experiences of other countries–like Spain and Germany–and their problems with the attempted large-scale implementation of “renewables.” (See this piece for a view from Britain of the problems with wind farms, and the money-skimming that has tended to go along with their development)

    The attack on America’s energy supplies is now targeting the natural gas industry. See also this report about a 9th Circuit court ruling against a new $3B natural gas pipeline running between Wyoming and Oregon. “It doesn’t appear the decision will require the removal of the pipeline – at least not yet,” says the article.

    Can anyone doubt that a second Obama administration would be much more collusive with the legal and regulatory assault on natural gas than a Romney administration would be?

    People living in the NYC area can probably tell you how much fun it is to be without electricity and heat. And again, the cost and reliability of energy do not only affect people in their role as direct users of these things; they also have a very strong impact on the viability of American manufacturers. Nostalgia for the Golden Age of American Manufacturing will not save factories that are driven away, or closed, or never built in the first place, due to skyrocketing energy costs.

    Obama’s hostility to small business is palpable–indeed, he is hostile to all businesses, with the exception of those that fit the Cool Kidz model or otherwise enjoy special political favor. Michelle Obama’s charge to a group of women in Zanesville, Ohio: “Don’t go into corporate America,” in which she contrasts “the money-making industry” with “the helping industry” clearly reflects the Obamian belief that businesspeople are morally inferior. (What she doesn’t mention is that the “helping industry” has treated her pretty well. Her compensation at the University of Chicago Hospital, where she was a vice president for community affairs, jumped from $121,910 in 2004, just before her husband was elected to the Senate, to $316,962 in 2005, just after he took office. Most of the people she was speaking to in Zanesville, of course, would not enjoy similar benefits of political connections, should they pursue “nonprofit” careers, and she was doing them no favors at all by steering them away from “corporate America.”)

    But while Obama is hostile to business in general, the harm is particularly strong to smaller businesses, which lack the legal and lobbying resources to defend themselves in Washington. How many small manufacturers and homecrafters have been destroyed, for example, by the ill-starred “Consumer Products Safety Improvement Act”?

    Most Democrat’s claim to be Keynesians. Yet Keynes spoke of the importance of the businessman’s “animal spirits” in economic recovery and growth. How strong are the animal spirits of the businessman or the businesswoman likely to be when he or she in continually attacked and denounced?

    Obama is not going to fix K-12 education in the U.S., or make any material strides in that direction. He is too much under the thumb of the “blob”–the teachers’ unions, the administrators, the ed-school professors. His administration wants to establish what would effectively be racial quotas for disciplinary procedures, making the maintenance of an effective learning environment even more difficult than it already is. The problems with K-12 education are very deep, but they are more solvable with a man like Romney who is not in the pocket of those that did so much to create the problem.

    What is the economic cost of destroying the futures of generation after generation in dysfunctional public schools?…not to mention the human cost?

    Immigration, as I noted above, has been an important factor in America’s economic success. Yet the “progressive” Left’s focus on race and ethnicity makes the effective integration of immigrants into American society much more problematic. Keeping groups as separate as possible plays, of course, to the political interests of today’s Democratic politicians. The track they want to put us on will lead to an increasingly balkanized society and to an endless neo-Hobbesian war of group against group.

    The rule of law, and the minimization of governmental corruption, are absolutely critical factors in economic growth. These things are undercut by governance by czars and executive orders, by favoritism to selected companies, individuals, and industries, and by 2000-page-long laws of unfathomable complexity. They are also undercut by a legal/regulatory environment which encourages rampant litigation, with the law not as an instrument of neutral justice but as a club to be seized by one party to beat another party over the head with. And note also that today’s Democratic Party is a party of the lawyers, by the lawyers, and for the lawyers–and lawyers of a particularly damaging and exploitive type, at that.

    A second Obama administration means a continued American slide into an increasingly dismal economic future–with a real possibility of things eventually getting so bad that there will be widespread disruption and violence. (See Greece for an example.) But it doesn’t have to be that way.

    The American economy has vast assets and amazing potential dynamism. We need to get Obama’s foot off our air hose–together with the feet of his “progressive” associates–and the economy will be able to function effectively again. Or, to change the metaphor, release the brakes and open the throttle, instead of trying to have hundreds of thousands of bureaucrats push the train.

     

    18 Responses to “Decline is Not Inevitable”

    1. Jonathan Says:

      Spot on. This country will have a fantastic future if we can clear out the political and regulatory blockages.

      Poor education is a large part of the problem. Citizens who know something about science, business and history are difficult for ideologues and control freaks to push around. Too many people are, through ignorance, afraid of low-probability hypothetical risks such as global warming yet ignorant of the tremendous real costs of restricting business and technological development, for example in electrical power generation and distribution.

    2. veryretired Says:

      Several years ago, a study showed that if teens did 4 things, they would have a much better life—finish high school, don’t get arrested, no drugs, and no pregnancy. (I realize three are “don’t but the positive is easily deduced)

      This post identifies several key elements of future prosperity in much the same way.

      Real education for students, not a gravy train for educators and theorists.

      Energy, energy, energy.

      Reverse the takeover of social power by the legal profession, which now controls all levels and branches of government, and much of the economy.

      The state is not an enabler of productive work except in a very limited sense, and if it is a very limited state. The current cancerous growth of state intrusion into every facet of personal and social life is a disaster.

      It will take an extended period of difficult work and dedication to dismantle the leviathon state, and return it to the caretaker it was meant to be.

      It is the citizen who is primary and paramount. The servant state must be returned to the quarters above the garage where it belongs.

    3. Shannon Love Says:

      VeryRetired,

      I think the formula was:

      Graduate high school
      Don’t get Married before age 20
      Stay Married
      Don’t have any children outside marriage

      IIRC, that would give you only a 15% chance of your children ever falling below the poverty line for more than six months.

    4. Shannon Love Says:

      I note that a lot of problems such as “decaying infrastructure” are concentrated in the old industrial northeast. Not exclusively but mostly both absolutely and relative to the amount of local infrastructure. Those regions have destroyed their industrial base through unions, environmental laws and expensive power. They unionized government services which everyone pays more tax per unit of service. That means that only do they have less money for infrastructure relative to back in the day but also that they get less bang for their buck for every dollar they do spend.

      Worse, the political culture seems to be one of entitlement. I engage a lot of people from the Northeast online and often ask them why they think anyone would invest in the region or open a basic wealth generator like a factory. Not only do they not understand what they need tell potential investors to lure them to the region, they seem lack the basic idea that they should even have to do so. I don’t think most voters in the Northeast have a basic fundamental concept that an economy doesn’t “just happen.” I don’t think they even understand that things like taxes, regulation, unions, government consistency, energy cost and infrastructure quality have anything to do with whether they have jobs and a healthy community.

      Outside of the “rustbelt” I think the infrastructure is in pretty good shape. One of the reasons that Texas has become the biggest manufacturing state is that we can easily move stuff around the state and to ports. Roads and rail are cheaper to build and maintain e.g. no frost heave and a year round work schedule so we can make a lot of road and rail with little tax money and keep it maintained for less as well. Ditto for things like pipelines. Once they get that Panama canal extension done, we won’t even have to ship stuff across to California to get to asia.

      More and more it looks like the long term blue regions in the northeast and now California are becoming the millstones around the necks of the rest of us. I mean, if the entire country had the same basic political and economic culture and approach as Texas and other Western states, we wouldn’t really have many problems at all.

    5. veryretired Says:

      Shannon— we’re probably citing two variations of the same theme. The whole point is that stable, successful lives are not accidental, but the product of thoughtful action, including self-denial, and revolve around a carefully maintained family structure.

      At larger levels in the social fabric, these ideas remain valid, even as they are modified to fit a different context.

      Illegitimacy is a disaster. Lack of education is a disaster. Criminal behavior is a disaster, which includes, most emphatically, twisting the law to reward one side’s friends and punish the other side’s allies.

      And, above all, energy must be released, both in the mechanical sense, as in the various forms of energy which are now being blocked by obstructionist politics, and in the personal, creative sense.

      In the final analysis, the society which unleashes the creative energy of it’s people, and allows them to reap the rewards they are due, owns the future.

    6. Mike K Says:

      ” I don’t think most voters in the Northeast have a basic fundamental concept that an economy doesn’t “just happen.” ”

      Shannon, I think this is Obama’s view of such things. He is convinced that the economy will recover, no matter what he does to it, and he fears that Romney will “get the credit” when it inevitably recovers. Roosevelt had similar ignorance but he had the excuse that it hadn’t happened before. At the time, there was no chance that he could learn from Harding because the depression of 1920 was unknown. All they knew was the “roaring 20s,” which was a bad example for everyone. They were determined to prosecute Sam Insull, who had had a significant positive impact on the prosperity. All he needed was a guy like Romney to run his business.

    7. Jason in LA Says:

      “I think this is Obama’s view of such things. He is convinced that the economy will recover, no matter what he does to it, and he fears that Romney will “get the credit” when it inevitably recovers.”

      I’m still waiting for “Recovery Summer 2010″….I bought my concert shirt and everything. ;-)

    8. Mike Doughty Says:

      David, this is extremely well put.

      Many of these things are fairly easy to fix, but only if we as a country have the WILL to do so.

      Reducing the influence of lawyers is, I think, the most problematic.

      Thanks for the analysis.

    9. Jim Miller Says:

      One of the three things to do if you want to stay out of poverty that I’ve seen is: stay in your first full-time job at least a year.
      If I recall correctly, the other two were graduate from high school and have no children until after you are married.

      (But there may be other lists.)

    10. Jim Miller Says:

      According to this article, Isabel Sawhill of Brookings was the first person to come up with those three.

    11. Bill Brandt Says:

      This election reminds me so much of the Reagan-Carter race. Not that I think Romney is Reagan reincarnated, but that same pessimism was prevalent after 4 years of Jimmy Carter.

      After 2-3 years of Ronald Reagan that optimism was back.

    12. mr black Says:

      Personally, I think that choice was offered decades ago through the great society. America chose the easy and secure path, the decline has been building up speed since not long after the choice was made. A dictator could reverse that decline but a democracy of ignorant, entitled and scared people has no chance. It’s far too late to talk about recovery when you’ve already gone over the edge of the cliff, there is simply no recovery this far down, the debt cannot be paid. It’s default and ruin first, then maybe rebuilding.

    13. David Foster Says:

      Some worthwhile links:

      Robert Avrech–Days of Heaven:

      http://www.seraphicpress.com/days-of-heaven/

      Neptunus Lex, from last year–Fear and Envy:

      http://www.neptunuslex.com/2011/11/06/fear-and-envy/

      Who to call if you suspect vote fraud:

      http://pjmedia.com/tatler/2012/11/05/vote-fraud-who-you-gonna-call/

    14. David Foster Says:

      One more link.

      Sarah Hoyt–It’s all about love:

      http://pjmedia.com/tatler/2012/11/06/all-you-need-is-love/

    15. Ginny Says:

      Thanks, Foster. This is both thoughtful and bracing.
      We aren’t learning from history – but that is because history has been fragmented, students don’t see the patterns. However, Americans seem to hunger for that perspective – look at the popularity of books on the Founders, on Lincoln, on war, on the early years. That is a reservoir, too, that may be called on in the next few years.

    16. David Foster Says:

      Also–Election Day Thoughts, from Cassandra:

      http://www.villainouscompany.com/vcblog/archives/2012/11/election_day_th.html#comments

    17. Joe Citizen Says:

      ” I don’t think most voters in the Northeast have a basic fundamental concept that an economy doesn’t “just happen.” ”

      Hmmm..amazing then, isn’t it, that they somehow have managed to become the wealthiest, most successful area of the country…’

      “More and more it looks like the long term blue regions in the northeast and now California are becoming the millstones around the necks of the rest of us.”

      Sorry to be blunt, but this is just delusional. The Northeast and California are net contributors to the great federal wealth redistribution machine. The red states are, overwhelmingly, the takers. Do basic facts of economics not manage to intrude into your world view at all?

      What is it with conservatives and the “facts of reality”? What will it take for you folks to break out of your self-created bubble and rejoin the real world?

    18. Marid Says:

      Your IPhone is now a WePhone (there is no “I” under socialism). It will be redistributed to those who have less thanyou.
      http://www.isitdownjustforme.com