Friday, June 15, 2012

Our Age of Anxiety

David Brooks says Democrats don't understand that the Republican "extremism" that they perceive is, instead, a sense the liberal welfare state is on its last legs. It isn't, he argues, some kind of GOP "fever".

I guess I’d say Republicans don’t have an illness; they have a viewpoint. Let me describe it this way: In the 1950s, Dwight Eisenhower reconciled Republicans to the 20th-century welfare state. Between Ike and George W. Bush, Republican leaders basically accepted that model. Sure, they wanted to cut taxes and devolve power, but, in practice, they sustained the system, often funding it more lavishly than the Democrats.

But many Republicans have now come to the conclusion that the welfare-state model is in its death throes.

They just look at Europe, for one thing.


Brooks points to a "definitive" essay by Yuval Levin, who writes in the Weekly Standard:

To say that we are not, in fact, on the verge of the triumph of welfare-state liberalism is of course a gross understatement. We are, rather, on the cusp of the fiscal and institutional collapse of our welfare state, which threatens not only the future of government finances but also the future of American capitalism. But at the same time, American capitalism is not exactly ready to bloom once the shadow of Obama is lifted at last. While our welfare state has grown bloated and bankrupt, our economy has grown increasingly sclerotic—weighed down by a grossly inefficient public sector, the rise of crony capitalism, demographic changes transforming the workforce, and a general loss of focus on productivity and innovation. The American economy still has great stores of strength, but it is not well prepared to make the most of those strengths or to address its deficiencies as a global competitor

I think this is interesting, but he puts efficiency at the heart of his argument:

If we are to experience anything like the prosperity of the postwar era, our economy will need to be more productive than ever. Efficiency must be the watchword of our economic policy.

And one of the interesting things in the fascinating McCloskey book we have been looking at in the last week is that allocative efficiency does not really explain growth, at least historically. Innovation and efficiency are not the same. And institutional reform is not always just about introducing more market pricing.  

Levin is right, of course, that productivity is crucial to building wealth. And stagnation can ooze from ossified and outdated government structures. But this also rests on an assumption that productivity growth will flow through to the averge voter, as it did for most of American history. And that is not as safe an assumption any more.

The essay is right on diagnosis. We have stagnation and gridlock. Our current economic system is facing a much deeper problem.

But if you take the essay as a statement of the world view of more thoughtful Republican policy thinkers, it's still deficient in thinking through the fix. It's at most an evolution of the old twentieth century government v market debate I keep criticizing as stale and outdated. I may come back to the essay later.

However, if Europe really does hit the skids in the next six months (or six weeks) expect much more talk about the collapse of the liberal welfare state approach.



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