The Democrats Can’t Think Outside Their Box

If you’re looking for a little weekend reading that will challenge you a bit then you could do much worse than Walter Russell Mead’s post on why the Democratic Party’s model won’t work in the 21st Century.

He tackles the conundrum as to why at a time of economic distress the Democratic Party’s traditional big government fixes are seemingly falling on the deaf ears of the electorate.

The trouble is that most of the 20th century Democratic solutions won’t work very well in the vastly changed economic landscape of the 21st century.  Whatever one thinks of Keynesian economics, the benefits of deficit spending were clearly greater in the 1930s (when the US was essentially a closed economy) than they are today.  If Americans have more money to spend, they are likely to go down to Walmart and buy something from China.  The multiplier effect of government spending is weaker than it used to be.

Worse, the disastrous growth of public sector labor unions and years of political pandering by shortsighted and selfish politicians have made government a much less effective tool than it used to be.  Per-pupil spending no longer bears much relationship to educational outcomes; if we double spending on teacher salaries we are not likely to double, or perhaps even to improve, educational standards.  The extraordinary cost of government in union-dominated, politically dysfunctional states like California, New York and Illinois imposes crippling tax burdens on local economies.  Firing state employees and slashing the wages and pensions of those who remain will do more for these states, sadly, than bulking up state spending on exciting new programs.

Government investment to promote economic growth is also less promising than it used to be.  The accelerated pace of technological innovation makes it harder to predict where the economic future lies; think of the French investment in the once famous ‘Mini-tel’ system, destined to be destroyed and made worthless by the rise of the Internet.  Government planners, even Harvard-educated ones with Truly Gigantic Brains, are simply not able to predict what technologies will really matter twenty, ten or even five years down the road.

In fact, the only real economic policy today that has any chance of working in the United States today is to promote the emergence of small business.  Many of those businesses will fail; some will become thriving though never large enterprises; a few will become world-changing giants like Microsoft and Google.

Mead goes on to offer his economic strategy. It’s pretty simple and to my mind pretty reasonable. I’d like to copy and paste the whole thing but his post deserves a complete reading. Take a minute and do so.

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