American economy wrapped definition from history

American economy wrapped definition from history

THIS week, we review two books with differing takes on the status of the American heavy equipment economy. Dan Gross' new book "Better, Stronger, Faster" makes the case that America's economy is well-poised for a period of surprisingly strong and innovative growth. Ed Luce, by contrast, argues that if America doesn't soon get its act together a long and steady decline looms. Do read the review, but I think it's worth discussing the broader debate in a bit more detail here.

As both authors note, Americans have been fearing for their imminent decline for as long as they've been around. There is always plenty to complain about, and now is no exception. It is important to maintain a perspective about this, however, in two different ways.

First, while it is important to try and address flaws in the American economy, one shouldn't overreact to them. It is very easy to tell stories about broken government, sclerotic bureaucracy, and corrupt politicians, and Mr Luce does so quite effectively. It is harder to illustrate that things are dramatically different than they used to be.

For much of the country's early history, it was a horribly governed and remarkably unjust place. Neither senators nor the president were directly elected, suffrage was limited to white men, and much of the population was held as property. America slowly addressed these problems, but new ones arose. The end of officially sanctioned discrimination against women and minorities is actually quite a recent phenomenon and one with important and positive economic consequences. At the turn of the century, the regulatory state was miniscule; it was a grand time for free markets. And yet labour and environmental conditions were awful, wealth was becoming extraordinarily and dangerously concentrated, and macroeconomic management was abysmal. At times in its history, America welcomed immigrants with open arms; at others, it threw up impenetrable obstacles to people, goods, and capital from abroad.

After the Second World War, things were in many ways worse. Jaw crusher entrepreneurs were saddled with confiscatory marginal tax rates, it was difficult to impossible to move capital around the world, and many of the day's most important industries were regulated within an inch of their lives. I like to point people to Marc Levinson's fantastic history of the shipping container, titled "The Box". He describes in remarkable detail the extent to which the postwar freight industry was awash in costly rigidities that took decades to unwind. Powerful unions controlled the docks. Government regulators strictly limited which firms could run which routes at which prices. It isn't enough to condemn this or that economic policy.