Economics

A Case for Innovation

May 3rd, 2011 // 2:21 pm @ Oliver DeMille

A Review of The Comeback: How Innovation Will Restore the American Dream by Gary Shapiro

There are two great modern visions of how to help our economy grow and flourish. One holds that the government is the center of economic prosperity, the other believes in innovation. The first attempts to tax and spend, the second believes in the power of free enterprise.

The Republican Party sometimes tries to present itself as the promoter of the second view, and at times the Democratic Party attempts to make this same argument a criticism of Republican policies, but in actual policy both major political parties tend to legislate for the first view. In contrast, Gary Shapiro’s important book The Comeback outlines what Washington needs to do truly bring the economy back. This includes:

Stop penalizing investments in start-ups.
Direct any public funding of start-ups by private investors, not by government bureaucrats.
Let any company fail, according to the rule of the free market.
Make economics, business and entrepreneurialism studies part of the public school curriculum.
Ensure that business tax rates are transparent and predictable.
Change tax laws to favor investment over debt.
Reform immigration to encourage entrepreneurial risk-taking.
Pass more free-trade agreements.
Reform education by allowing teachers to teach.
Measure all government spending by how well it is working.
Measure all government spending by how it meets serious national needs.
Link the compensation of our federal legislators to our annual national deficit.

Shapiro includes a number of other specific proposals for an American comeback. Not every reader will agree with every policy proposal. I found myself disagreeing with a number of points. For example, Shapiro’s argument that, “You can’t legislate progress” is clearly too narrow—just consider the legislative successes against racist and religiously-bigoted behavior.

On the whole, however, Shapiro’s voice is an important contribution to the ongoing debate. More citizens and government officials need to read and internalize his book. Shapiro shows a mature appreciation for the important role of the government in the economy, and simultaneously notes that without real economic freedom no significant American comeback is likely.

He ultimately pins the future of America on innovation, not on either major political party or on any government policy. The government can do much to encourage a flourishing economy, but the innovators will primarily determine our economic future. Shapiro writes:

“Innovation is America. It is our special sauce, our destiny, and our best and only hope for escaping the economic malaise…. Our best hope is for government to foster innovation by creating a fertile ground for innovation to flourish.

“Innovation is the natural by-product of the free market….

“Our nation is looking into the abyss. With a blinding focus on the present, our government is neglecting a future that demands thoughtful action. The only valid government action is that which invests in our children. This requires hard choices. We cannot leave the rising generation with a mountain of bad debt. This will require suffering in the present….

“America is in crisis. What is required is a commitment to innovation and growth. We can and must succeed. With popular and political resolve, we can reverse America’s decline…. America must become the world’s innovative engine once again; we cannot fail. Only then can I return to China and tell that Communist Chinese official that America is back.”

Shapiro’s voice is important, and the voice of innovation is vital to America’s future. Unless we find ways to reinvigorate our national penchant for innovation, the future of our economy and nation is bleak. More of us need to join Shapiro in discussing ways to refocus our nation on innovation. Government certainly has a positive role to play in successful society, and only by encouraging widespread innovation can we hope to see sustained growth and an economy that is the envy of the world. Two centuries of American leadership have proven that freedom works. It’s time to remember and more vigorously apply freedom in our modern economy.

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Oliver DeMille is a co-founder of the Center for Social Leadership, and a co-creator of Thomas Jefferson Education.

He is the co-author of the New York Times, Wall Street Journal and USA Today bestseller LeaderShift, and author of A Thomas Jefferson Education: Teaching a Generation of Leaders for the 21st Century, and The Coming Aristocracy: Education & the Future of Freedom.

Oliver is dedicated to promoting freedom through leadership education. He and his wife Rachel are raising their eight children in Cedar City, Utah.

Category : Blog &Book Reviews &Economics &Producers &Prosperity

Obama’s Economy

April 25th, 2011 // 2:09 pm @ Oliver DeMille

For the last two years the story in Washington has been the same: “President Bush got the U.S. into the worst economic downturn since The Great Depression, and the Obama Administration has been hard at work pulling our economy back from the brink of another collapse.” This storyline has provided the background for President Obama’s numerous policy proposals, most notably the huge government stimulus bailouts, the health care law, and a chilly attitude in Washington toward business.

The plotline changed in the November election of 2010, though it took a while for everyone to realize the full significance of this shift. The White House has reluctantly followed the Republican script in refusing to raise taxes so far, and Republican proposals for balancing the budget and dealing effectively with the national debt have fueled rebound plans from leading Democrats—including from the Obama team.

During all this, a major alteration has occurred in the American psyche: Obama, not Bush, now “owns” the economy in the popular mind. If the slow recovery of jobs and growth turns into real recovery, President Obama will get the credit. Republicans will argue that it was their anti-tax-raising and pro-business work that got the economy flourishing again, but only Republicans will listen. Democrats and the majority of independents will see lasting economic recovery as an Obama victory.

If, on the other hand, the economy continues to sputter or dips again, if unemployment stagnates or rises, Obama will get the blame. Most Democrats will likely still see the policies of the Bush era as the problem, and most Republicans will find ways to blame President Obama regardless of what happens, but the majority of independents have moved past blaming Bush.

Right here, right now, as most independents see things, it is up to the Obama Administration to steer the economy in the right direction, and independents will hold him to this responsibility. They won’t blame Bush anymore, and they won’t blame the new Republican majority in the House. If the economy booms, they’ll reward Obama; if it contracts, they’ll blame Obama.

It’s now Obama’s economy. That’s Big Political Trend Number 1. Number 2, to be clear, is that independents now determine presidential elections. Big Political Trend Number 3 is that we are likely to see inflation ravage the economy in the months ahead.[i] In fact, this third trend has the most potential to significantly impact and hurt most Americans. A Fourth Big Trend is that China is losing faith in the U.S. dollar and is looking to diversify its portfolio—meaning that it will likely stop buying as many U.S. bonds as it has and this will drastically hurt our economy.[ii] All of this is exacerbated by rising oil prices and the downgrading of the S&P rating of U.S. securities from Stable to Negative.

This doesn’t mean that a down economy will necessarily drive Obama out of office, however. Such an outcome will depend on who the Republicans nominate for the presidency. When the general election arrives in November 2012, most Democrats will probably vote for Barack Obama and most Republicans will likely vote for the Republican candidate. Independents will vote for…well…it depends.

If the Republican nominee is mainly a social conservative, most independents may well vote for Obama regardless of how the economy is doing. Since many of the Republicans who left the party to become independents in the last decade are most interested in economic issues, the relative strength of the social conservatives in the GOP has grown and social conservatives may emphasize social issues in the primaries and at the national convention. The Democratic Party faces its own challenges due to losses to independents, but it is almost sure to nominate President Obama. In short, it is not unlikely that Republican Party loyalists will appoint a presidential nominee who won’t appeal to most independent voters.

If, on the other hand, Republicans nominate an economic powerhouse who appeals to independent views on economic issues and can compete with Barack Obama on the tricky ground sometimes referred to as “the leadership thing,” the election of 2012 could be a close race. A Republican could win, or President Obama could win.

It is unclear if any of the current Republican field could be such a powerhouse. There are several Republicans who might make the case to independents for leadership and economic wisdom, and let’s not forget that someone new could arise—at this point in the last presidential election cycle most people in America had never heard of Barack Obama, and Hillary Clinton was expected to be the obvious Democratic candidate. To date, however, no potential 2012 Republican presidential candidate has caught on with independents—or seems poised to do so.

Regardless of what Republicans do, or don’t do—in the various policy debates of 2011 and 2012 and also in the 2012 election—a bad economy will probably convince most independents to lean away from voting for Obama. But only if the right kind of Republican is in the race. The larger point in all of this, a point which many Democrats and Republicans haven’t yet noticed, is that even in a bad economy most independents would still vote for Barack Obama over, say, Richard Nixon, Gerald Ford, George H.W. Bush or George W. Bush.

Obama has lessened the gap between himself and Bush by basically following the Bush agenda in Afghanistan, Iraq and Guantanamo. He has failed to implement his various campaign promises about these areas and he has significantly increased the number of troops in Afghanistan. “Bush or Obama? What’s the difference?” many are wondering.

In domestic policy, the differences are glaring—if you are a Republican or Democrat. Bush supported business and the free market, some conservatives argue, while liberals point out that Obama has significantly helped the most vulnerable and weak among us. Independents, however, are underwhelmed by either argument. In their view, Bush gave lip service to the free market while drastically increasing government spending above President Clinton’s levels, and all of Obama’s rhetoric about helping the “little guy” has led to more government spending on programs that arguably have done little to actually help the needy or anyone else. Both administrations, as seen from the independent view, have done much harm to our economy and nation.

The stimulus package and health care law are unpopular among independents, but not as unpopular as the corruption of Bush’s administration (from various “witch hunts” and investigations of political opponents to no WMDs in Iraq). Obama talks like a liberal, spends like a liberal, and leads like a liberal, according to the independent perspective, but Bush spoke like a conservative and then led and spent like a liberal. Independents are thus understandably skeptical of Republican candidates promising to be fiscally responsible. “At least with Obama, we know what to expect,” is a common independent refrain. A Republican nominee will have to convince independents that he or she will exhibit truly great leadership and economic wisdom, while President Obama must simply convince independents that the Republican candidate won’t do any better than a second-term Obama.

The common political wisdom is that with a bad economy the sitting president suffers in a national election. In 2012, a bad economy will be seen as “Obama’s bad economy.” But unless Republicans nominate a presidential candidate who can appeal widely to independents on both economic and leadership issues (especially in the battleground states), “Obama’s economy” will likely last until 2016.

[i] See, for example, “Let Them Eat iPads,” by Ken Kurson, Esquire, May 2011

[ii] See The Chris Matthews Show, April 24, 2011

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Oliver DeMille is a co-founder of the Center for Social Leadership, and a co-creator of Thomas Jefferson Education.

Oliver is dedicated to promoting freedom through leadership education. He and his wife Rachel are raising their eight children in Cedar City, Utah.

Category : Blog &Business &Current Events &Economics &Independents &Leadership &Politics

Quantity. Quality. Method.

April 12th, 2011 // 6:45 am @ Oliver DeMille

How much?

How well?

How?

These three aspects of success in any endeavor can teach us a lot about government, freedom and prosperity. Most importantly, they can teach us about government for freedom—since most governments in history have had different goals than liberty.

Good government—which maintains freedom and opportunity for all citizens—must meet the tests of quantity, quality and method. We naturally use all three in governmental analysis, often without noticing it. For example, terms such as democracy, aristocracy and monarchy emphasize the quantity of leaders—many, few or one. In contrast, we emphasize the method of governance in terms like communist, capitalist, commercial, and limited governments—these all describe the process which drives their respective societies. Words such as oligarchy, confederation, socialist, mercantile, militarist, federal, national and empire deal with the qualities of a nation’s governance, the attributes that make it what it is.

Quality, quantity and method are different ways to analyze any governmental institution, power, program or proposal. All three are important. Before we tackle how this applies to government, let’s learn a little about these three perspectives using a few examples. In the Great Books, for example, the discussion of quality centers on primary versus secondary qualities: attributes that cannot be separated from a thing are primary qualities, while attributes that can be changed without changing the thing—like color, taste, number or temperature, etc.—are secondary.

As for quantity, a big debate through written history has been the question of why mathematics doesn’t directly apply to the real world. Engineers, inventors and others who use math in the real world have to calculate for various non-mathematical realities in order to apply math to real things. This has caused many arguments among the great thinkers, from Aristotle to Buckminster Fuller. Newton invented calculus in order to bridge the gap between the mathematical and physical universes.

Perhaps the most interesting point about all this is that the discussion of method, as opposed to quality and quantity, runs through the Great Books and great conversation of history at nearly every turn. Almost every topic covered by the great thinkers and leaders from ancient, medieval and early modern (1800s) times deals extensively with competing ideas of method. Amazingly, this significantly slows in modern times, especially after 1900. Somehow the general acceptance of scientific experts as the true authorities on almost everything caused, or at least coincided with, a reduction of the common people asking questions about method.

Consider some examples that most moderns have experienced. Let’s say you decide to lose weight or get in shape. One diet approach, the most frequent in the United States, is to focus on “how much” food you eat. The formula is simple: Cut Calories + Exercise More = Lose Weight. This view attempts to change your body by decreasing how much food you eat and increasing the amount of exercise you get. Quantity is the focus.

Another viewpoint emphasizes the quality of what you eat (e.g. no sweets or fats, more raw vegetables, fewer carbohydrates, etc.). This perspective holds that if you eat the right kinds of foods and cut out the “bad” foods you’ll get your desired result. Likewise, it suggests effective exercise, like certain weight-training routines, interval cardio workouts, or changing your exercise to keep your body constantly adapting. The emphasis here is on “how well” you eat or exercise rather than how much.

A combined perspective emphasizes both how much and how well you eat, exercise, study, sell or whatever you are trying to do. Most modern “how to” literature combines these, and there are many thousands of management, sales, health and other books and programs in many fields of life.

Only a few programs exist from the third perspective: method. This viewpoint cares less about “how much” or “how well” than about “how”. For example, it might recommend eating whatever you want, as much as you want, but chewing each bite 20 times and fully enjoying each mouthful. The fact that those who do this tend to eat a lot less (you get full with less food) and better food (when you really taste them, many junk foods lose their appeal), isn’t the point. The focus is on process or method. Again, this is less common than the quality and quantity approaches.

Another example is provided by college sports. One team might focus on getting the most fans (quantity), and consider this the measure of a successful sports program. More fans often means more money for the school, more donations, better community relations, and so on. Another school might emphasize getting the best, most talented, coaches and players (quality). A third might focus on the process of great practices, training, conditioning and preparation—trusting that doing the right things will bring the desired outcomes (method).

The most successful programs—like the most effective sales techniques, educational systems, and governments, etc.—will encourage all three: quantity, quality and method. If a team becomes the best recruiter in the nation but puts very little work into conditioning or practice, it will likely not win very often. On the other extreme, teams which ignore recruiting probably won’t flourish either. All three perspectives are needed.

Two more quick examples: Imagine a school or church which focuses only on numbers without regard to knowledge or truth, or exclusively on truth while refusing to share it with anyone. Few modern institutions seem to focus on greatness—on the methods and processes of, say, being a great student, a great teacher, or a great believer. The scientific method lends itself to experts, and it seems that in the wake of accepting this reality our society has decided to leave most issues of method to the specialists.

There are many examples of all three perspectives in business, science, art and beyond, and method remains a small minority in most fields. Quality and quantity rule the day. As stated above, this is the opposite of nearly all recorded history.

Let’s consider how these concepts apply to government. One way to measure the effectiveness of a government is how big or small it is (quantity). If it is too small, it is naturally weak, and it if it is too big it is naturally tyrannical—so argue the authors of The Federalist. A second viewpoint asks how “good” our leaders are, or how “effective” a government program is (quality). Both of these are legitimate ways to analyze our government.

A third perspective is to analyze government by process (method). For example, does it have a written constitution? Does this constitution separate the legislative, executive and judicial powers in a way that all three are independent, generally equal with each other in power, and effectively checked and balanced? Does this constitution separate (or fit into a separation of) national, provincial and more local governments—with most sovereign powers left to the lower governments and the people? Was this constitution ratified by the people? Do the regular people deeply understand this constitution today? Does the government always follow the constitution?

Any nation that does not follow these methods will not long maintain widespread freedom or prosperity. Free citizens who expect to remain free must carefully analyze and lead their government utilizing all three of these perspectives.
Unfortunately, nearly all current discussion of government centers around one thing—debates about the quality of our elected leaders and the effectiveness (or not) of various government programs. The quantity and method questions are seldom mentioned by anyone.

There are many examples of how this drastically impacts our freedom and prosperity. Consider taxes. Following the modern trend, most current debate about taxes centers on quantity (e.g. How much is too much?, How can government tax the people more?, or, Don’t we need to raise taxes to pay down our deficit?) or quality (e.g. Should we tax the wealthy or everyone equally?, or, Are income, sales or other kinds of taxes best?).

In contrast, the American founding generation used a method approach to taxes: Many kinds (quality) and levels (quantity) of taxes were constitutional, but the federal government could only assess taxes from the state governments—never from individuals or households. When we changed the method, we saw the rise of government that is too big, too inefficient and increasingly out of control.

This same argument (that we are mostly ignoring the method approach to government and that all three approaches are important) can be applied to many of our most pressing current issues, from education or health care to energy policy, immigration, fiscal and monetary decisions, the national debt and deficits, etc.

Quality government matters, certainly, but the quantity and method questions (especially method) are ultimately more important to the freedom and prosperity of the people. If the regular people want to remain free, they must understand and act on this.

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Oliver DeMille is a co-founder of the Center for Social Leadership, and a co-creator of Thomas Jefferson Education.

Oliver is dedicated to promoting freedom through leadership education. He and his wife Rachel are raising their eight children in Cedar City, Utah.

Category : Aristocracy &Blog &Citizenship &Constitution &Culture &Economics &Education &Entrepreneurship &Government &Politics

A Tale of Two Economies

April 11th, 2011 // 5:56 am @ Oliver DeMille

The United States currently houses two economies, and they are drastically different. The regular people have to deal with the following realities:

Energy costs are still going up, and may skyrocket in the wake of nuclear problems and the impact of the Arab uprisings on oil prices.
The price of crude oil is up 25% since the beginning of 2011, and it is still rising.
Food costs are rising accordingly.
Unemployment remains high and may increase again.
The real estate bubble is not yet over, and many experts are concerned about another major dip.
Many state governments are facing massive shortfalls and/or bankruptcy.

In contrast, millionaires increased their wealth approximately 16% during the Great Recession, and big business has likewise upped its wealth. Ken Kurson wrote in the April 2011 issue of Esquire:

“American corporations are sitting on an unholy pile of cash. About $2 trillion. It’s an all-time record, and as a percentage of total assets, it’s the highest in more than 50 years.”

These two economies do share one thing, however: a widespread fear of the future. Kurson continued:

“I would argue that this wad of dough actually greatly exceeds even the pile-up of the late 1950s, because of the reason it exists. Past cash hoardings were strategic in nature. They funded the expansion of product lines, plant building, technological innovation, and hiring that we witnessed in the mid-’60s, for example, after President Kennedy dramatically lowered the personal income tax. This time is different. The current stockpile isn’t strategic; it’s fearful. Companies are afraid to expand because of uncertainty about costs, and a lack of lending partners.”

Kurson suggests that this choice by the corporations is probably unwise—the government may use it as an excuse to find ways to take this money and spend it. More likely, corporations will invest it abroad.

Dante Chinni and James Gimpel point out that disparity between those with increasing wealth and the rest applies to both individuals and whole communities. In the April 2011 issue of The Atlantic these authors outline the twelve types of communities in the U.S.: Monied Suburbs, Minority Urban Centers, Campus Communities, Industrial Metropolises, Immigrant Communities, Service Worker Tourist Hubs and Midsize Cities, Emptying Nest Communities, Evangelical Epicenters, Mormon Outposts, Military Bastions, Tractor Country, and Boomtowns.

Of these, only four have annual median family incomes over $50,000 a year: Monied Burbs, Campus Communities, Boomtowns and Industrial Metropolises. Interestingly, these four and Military Bastions are the only communities where median family income is higher in 2010 than it was in 1980. As most people in the middle class have seen their standard of living stagnate since 1970 and significantly decrease since 2008, the top 7% of earners have greatly increased their wealth during the major global economic downturn.

Despite all the evidence, there are still those who consider many current government proposals “socialist.” This is at best a myth. At worst, it is a threat to our freedoms because if the regular people misunderstand the problem they are sure to fall short when they try to apply solutions. Yes, one symptom of socialism is massive government spending and taxation of the middle class to pay for state programs. But socialism is, as I have mentioned a number of times, a transfer of money from the middle and upper classes to the lower class. And we have not seen this in recent American administrations—Bush, Clinton, Bush or Obama.

What we have seen, in policy after policy, is a transfer of wealth from the middle classes to the upper class. Bailout money came from the middle class and was largely deposited in upper-class and big corporate bank accounts.
Unfortunately, we are living in a strange era of Orwellian doublethink. Liberals inaccurately call this great transfer of money from the middle to the upper class “conservative” while conservatives incorrectly label it “socialism.”

Let’s cut through the name calling and just call it what it is: Using government power to transfer money and wealth from the middle classes to the upper class is aristocracy, pure and simple. Aristocratic conservatives and aristocratic liberals have greatly benefitted from this trend, and they keep the rest of the nation from doing anything about it by arguing among themselves. Conservative and liberal aristocrats point fingers at each other, accuse and call names, and tell us to send more money to one side or the other.

The rest of the people, the non-elites, foot the bill because they get caught up in the arguments promoted by the two kinds of aristocrats. We are witnessing—and this is not an overstatement—a fundamental shift from our roots as a limited federal democratic republic to an aristocracy where the Commercial Aristocrats battle the Governmental Aristocrats for ascendency and the rest of the people see their freedoms and prosperity dwindle with each passing decade. Aristocrats make up one economy (one that is flourishing at record levels in both wealth and power), while the rest of the people make up the other economy (one that is deeply struggling).

Let’s call a spade a spade. We are moving toward aristocracy, and it is time to stop following or supporting aristocrats—regardless of which party they promote. We need America’s “second” economy, the regular people, to start increasing their leadership.

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Oliver DeMille is a co-founder of the Center for Social Leadership, and a co-creator of Thomas Jefferson Education.

Oliver is dedicated to promoting freedom through leadership education. He and his wife Rachel are raising their eight children in Cedar City, Utah.

Category : Aristocracy &Blog &Culture &Economics &Prosperity

What type of government does America have today?

March 26th, 2011 // 10:17 am @ Oliver DeMille

“It’s a Republic; if you can keep it…”

Property Rights

Free democracies protect the property of all.
Socialist nations protect the property of none.
Monarchies consider all property the estate of the king.
Aristocracies have one set of property and investment laws for the very rich and a different one for the rest.*

Taxation

Free democracies assess tax money fairly from all the people to cover vital, limited government roles.
Socialist societies take money from the rich and redistribute it to the poor.
Dictatorial monarchies take money from everyone and give it to the dictator.
Aristocracies take money from the middle and lower classes and give it to rich bankers, owners of big companies (“too big to fail”), and other powerful and wealthy special interests in bailouts and government contracts.*

Information

In free democracies it is legal for the people to withhold information from the government (e.g. U.S. Fifth Amendment, right to remain silent, etc.) but illegal for the government to withhold information from or lie to the people.
In socialist societies, dictatorial monarchies, and aristocracies, it is legal for the government and government agents to lie to the people but illegal for the people to lie to the same government agents.*

Success

In free democracies, the measure of success and the popular goal of the people is to be good and positively contribute to society.
In socialist societies, the measure of success and the popular goal of the people is to become government officials and receive the perks of office.
In dictatorial monarchies, the measure of success and the popular goal of the people is to please the monarch.
In aristocratic societies, the measure of success and the popular goal of the people is to obtain wealth and/or celebrity.*

Right to Bear Arms

In free democracies all the people hold the right to bear arms.
In socialist nations and monarchies, only government officials are allowed to have weapons.
In aristocratic societies only the wealthy and government officials are allowed to have many kinds of weapons.*

Immigration

Free democracies open their borders to all, especially immigrants in great need.
Socialist and dictatorial monarchies build fences to keep people in.
Aristocracies build fences to keep people out, especially immigrants in great need.*