There’s also a good sentence in this post from Also Sprach Analyst on why we should be cautious about taking too much solace in China’s GDP statistics:
…if a country is directing resources into investing something that cannot generate return in excess of the cost of funding, the country as a whole will be destroying economic value even though the country is generating GDP.
to which I would add that when that tactic is used over time the distortions it produces are likely to obscure the price signals that enable you determine whether what you’re doing is destroying economic value. You may think you’re increasing real GDP when you’re actually reducing real GDP and you can’t even determine that’s what’s happening.
As I said before in the context of income tax policy as economic policy, it’s a tactic that might work in combination with a broader economic plan. I think it’s just barely possible that China’s leaders could do that. I doubt it but I think it’s just barely possible. I think there’s no possibility whatever that we would do that here. We do tactics. We don’t do strategies. Indeed, our tactics have a remarkable way of becoming strategies, cf. cutting taxes.
We don’t have an economic strategy, a foreign policy strategy, an energy strategy, a transportation strategy, or any other kind of strategy. That’s worked for us pretty well so far. Not only have we enjoyed tremendous prosperity over a very long period of time, we’re the only major power that has the same government as we did 75 years ago. Germany, France, Russia, China, Japan, and Italy all have different governments than they had 75 years ago. Not just different administrations. Different governments. I guess it’s arguable that Britain has the same government as it did 75 years ago but 75 years ago Britain was a world-spanning empire governing nearly a half billion people—a quarter of all of the people in the world at that time. Now it’s a prosperous island. That sounds different to me.
What we have had is something better than a strategy. What we have had is an emergent phenomenon of the competing and even conflicting interests of the people of the United States. That has proved enormously durable. As I say, it’s worked pretty well so far but that’s no guarantee that it will continue to work as well for us forever. However, I strongly suspect that whatever we might adopt in its place will inevitably be worse.
“I guess it’s arguable that Britain has the same government as it did 75 years ago but 75 years ago Britain was a world-spanning empire governing nearly a half billion people—a quarter of all of the people in the world at that time. Now it’s a prosperous island. That sounds different to me.”
Now that’s talent. Bravo.
I guess it’s arguable that Britain has the same government as it did 75 years ago but 75 years ago Britain was a world-spanning empire governing nearly a half billion people—a quarter of all of the people in the world at that time. Now it’s a prosperous island. That sounds different to me.
Seventy-five years ago the USA was an isolated nation with a small army and a small government that largely ignored the greater affairs of the world. Today we have a large government, and our military is in something like 100 nations, doing this and that, war and policing and various other sundry duties. That doesn’t sound anymore like the same government we had 75 years ago than the government the British had 75 years ago sounds like the one that will host the Olympics later this month.
Either the Brits have the same government as they had then, or we don’t have the same government now we had then.
(I’ll also add that our current government allows for the President to rewrite laws as he sees fit, as he has done in recent weeks with immigration and welfare. If the SCOTUS had ruled against him he would have no doubt re-written the Medicare and Medicaid laws to do as he pleases. FDR never had this kind of power.)
Dave Schuler: We don’t have an economic strategy, a foreign policy strategy, an energy strategy, a transportation strategy, or any other kind of strategy. That’s worked for us pretty well so far.
Superhighway system, space program, nuclear energy policy, military bases around the world, monetary policy, support for friendly, often dictatorial, governments around the world, etc. Not sure if that is what you meant.
What’s the strategy? The moves that you’ve listed are tactical especially in the case of support for nominally friendly dictatorships. Were we supporting dictatorships as a matter of some national strategy? Nonsense. We don’t even support friendly governments that aren’t dictatorships as a matter of national strategy, cf. UK, Israel, etc. under this administration.
We react to moves by opponents. We select the alternative we perceive as better. That’s tactical.
The best case could be made for the Interstate Highway System. That was strategic for about 45 minutes after the National Defense Interstate Highway Act was enacted into law. It’s been tactical ever since.
We may not have a grand overall strategy that one is able to articulate in a simple matter….but we have been moving towards a situation where more and more resources are being controlled and allocated by government. So what you might ask? Well that removes another part of the hypothesis of yours Dave, a key part I’d argue:
Competition.
And there is no end in sight to the trend. People love the idea that we form strategies, that grand visions be implemented. Look at every single candidate from the last 4-5 elections. Each one claims to have a brilliant plan. And yet here we are. With growth rates that are anemic and even during previous booms were not that great. Good, but not great. And certainly not good enough to allow us to sustain our current set of obligations. But rest assured, if we just had a better plan….a strategy why everything would be rainbows and unicorns.