American Prosperity

Philip Auerswald and Zoltan Acs' cover story at the new American Interest is the best piece on the economy I've read since the market crash of last October.

I've long maintained (1) that recent historical comparisons to the 1930s are deeply strained, since the nature of economic development and technology is virtually lightyears from the conditions during the New Deal, and (2) that the U.S. will come roaring back after the bottom shakes out of our current downturn. American dynamism and ingenuity will again lead the world through another cycle of spectacular growth, innovation, and human improvement:

Whatever lines pundits may like to draw from the present back to the 1930s, from the standpoint of the human experience, there is absolutely no comparison between the country that lay beyond the portico of FDR’s White House and the country into which Barack Obama sends his YouTube videos today. Without question, even in relative terms the magnitude of the Great Depression far exceeds anything experienced to date or, we dare to venture, anything that lies ahead. But what is certainly true is that the extent of societal advancement experienced over the past seventy years is so great that it has transformed America from what we would today refer to as an underdeveloped country into the most prosperous nation in human history.

The triumph of the Western idea—the “end of history” proclaimed by Fukuyama—has not, in fact, been called into question by the global financial crisis. Nor are future developments likely to reverse the judgment in favor of liberalism. Yet the institutional architecture of liberalism remains a work in progress. Continued institutional innovations will be required to ensure that democratic societies with market-based economies are as resilient in the future as they are prosperous.

For its part, this nation has little hope of realizing the potential of such institutional innovations until its leaders become as aware as its citizens are of the futility of trying to solve today’s problems with yesterday’s tools, all the while mistaking means for ends. Economic growth, or its absence, is merely an indicator on the dashboard of our ongoing national journey. The engine that propels American capitalism forward is entrepreneurship; the fuel is opportunity; the work of foundations recycles the energy of society, making progress and widespread prosperity sustainable. Yet, just as a Tesla Roadster is no Model-T, 21st-century entrepreneurship derives from a formula far more complex than the “1 percent inspiration and 99 percent perspiration” once cited by Thomas Edison. Far-sighted government policies are an essential element within this formula. Political leadership must do more than celebrate the “risk-takers, the doers, the makers of things” who create opportunity and extend the reach of prosperity. It must act in partnership with private foundations to ensure the existence of an environment conducive to their efforts.

Do yourself a favor and read the whole thing, here.