Presidents have little effect on the economy.
That isn’t me speaking, that’s every professional economist who’s ever remarked on the subject. At best, they can influence things like federal spending, tax policy and trade policy. That’s about it. So why did the USA enjoy an economic boom in the 90’s under Bill Clinton and a recession under George Bush?
In the 1980’s a revolution swept through American business. The following were a few key changes.
1. Heavy investment in information technology: Cheap, powerful computers and the software applications written for them were applied to every aspect of business. From computer controlled five-axis milling machines to desktop email, computers revolutionized the American business place. I saw it. I experienced it.
2. A wholely new committment to the production of quality products: It was driven mainly by competition from quality obsessed Japanese firms. By 1980, “American Made” had become synonymous with poor quality. Japanese companies were eating their American counterparts alive. American companies either had to change or die. And change they did.
3. The demise of the power of labor unions: Already dying as a result of their own greed and misguided work rules, competition from harder working, lower paid labor from overseas put the long overdue final nails in the coffin of the AFL-CIO and the like. Those unionized companies that reformed and adjusted to the new realities survived. Those that didn’t died.
4. Management reform:
A) Risk averse middle managers were ruthlessly trimmed from company bureaucracies. Decision making, long pushed upward by managers in an effort to avoid responsibility, was pushed downward instead; to the lowest possible level at which the decision could be made. It was a minor revolution.
B) The ‘team’ concept, an idea that pre-dated but was lost in the industrial revolution, re-emerged. A new appreciation for the results gained from combining the knowledge of the experienced crafts-people with other multidisciplined professionals. They were given both decision making power and responsibility. They got amazing results.
5. A new entrepreneurism: Many, many people risked their homes and life savings to start small businesses. Small businesses are the biggest source of jobs and economic growth. They are also often the source of innovative ideas.
All of the above factors put in place by American business people and entrepreneurs (not politicians) between 1980 and 1990 bore their incredibley bountiful harvest in the 1990’s. It boomed like it hadn’t for 50 years. Bill Clinton inherited that economy. He had nothing to do with building it.
As for the recession that followed, it was coming anyway. The American economy has been on a 10 year ‘business cycle’ since the 1920s. The boom had played itself out. We’re were going to have a recession whether Bush or Gore was president. Blaming either one for it is absurd.
Which brings me, finally, to my point. Presidents, by constitutional design, are America’s face to the world. Their powers and responsibilities are mainly in the area of foreign policy. So the real question in a presidential election is not the economy, it’s foreign policy.
What are the foreign policy questions facing us?
* The war on terror, for one. To wage it or not. And if to wage it, how? Where? At what cost? What is effective and what is not? What is an immediate necessity and what is the long term strategy?
* Trade policy. Do you support free trade? If not, what are the options? Tariffs? Closed borders?
* Immigration policy. How many immigrants are enough? What should be the requirements?
* International relations. Are Bush and his diplomatic team doing a good job? Should we care?
* International institutions. Is the UN a viable institution? If so, why? If not, how should it be changed? Can it be changed or should it be replaced? Is the International Monetary Fund (IMF) doing a good job? Should its policies be reformed?
These are questions for and about the presidency. It’s a pity the media doesn’t explore them.