Government

The New Grand Strategy for 2012

February 20th, 2012 // 2:50 pm @ Oliver DeMille

1.     Two Speeches

Several years ago I spoke at a seminar on international affairs and I predicted that in the next few years the United States would adopt a new Grand Strategy. I outlined America’s historical Grand Strategies, from Constitutionalism (1789-1820) and Manifest Destiny (1820-1900) to Nationalism (1900-1945) and later Internationalism (1945-2001).

I pointed out that our Grand Strategy is the way we define our major national goals for the decades ahead, and that after 9/11 we were on track for a new Grand Strategy. We discussed some possible Grand Strategies that could come, and we brainstormed things we hoped to see in the Grand Strategy of the 21^st Century.

The same year, in another speech on a different occasion, I showed how many of the predictions found in one publication, Foreign Affairs, keep ending up as official U.S. policy. I cited numerous examples from articles in Foreign Affairs and showed how within five years of publication their recommendations were adopted. I marveled that one publication could have such an effective track record, and recommended that everyone in attendance subscribe to and read this magazine.

Of course, as I said in the speech, not all the authors in Foreign Affairs agree on every detail, and in fact they engage in a great deal of debate. But, again, is it amazing how often policies recommended in Foreign Affairs end up being implemented in Washington.

Then, just this year, the messages of these speeches came together in an interesting way. In the January/February 2012 issue of Foreign Affairs, a new article outlines a new Grand Strategy for the United States. Although I don’t agree with many of the details in this latest Grand Strategy, the track record of Foreign Affairs promises that this will, in fact, be the Grand Strategy of the United States in the decades ahead.

I believe that this will be the major 21^st Century challenge for the future of American freedom.

2.     Grand Strategy Drives the Nation

The power of a Grand Strategy can hardly be overstated. When a nation adopts a Grand Strategy, it dominates national policy and influences all national choices over time. Few, if any, policies go against or are even allowed to compete with the accepted Grand Strategy.

And while not everyone knows what a Grand Strategy is, the intelligentsia of both parties tend to follow the Grand Strategy with the energy and passion of religious doctrine. They may disagree on many things, but they both adhere to the Grand Strategy.

So what is the new Grand Strategy of the United States? The answers are outlined in an article by Zbigniew Brzezinski: “A New U.S. Grand Strategy: Balancing the East, Upgrading the West”.  Students of American policy will remember Brzezinski as the U.S. National Security Advisor from 1977 to 1981 and as a long-time writer on U.S. international strategy.

3.     Our New Grand Strategy

Things have changed drastically over the past decade, Brzezinski assures us, and by 2012 a new Grand Strategy is overdue. The outlines of this new plan include the following:

• The “central focus” for the United States in the years ahead is threefold: (1) revitalize the U.S., (2) help the West expand, and (3) create a balance in the East that will allow China to successfully rise without becoming an enemy.

• The expansion of the West will create a democratic free zone from North America and Western Europe to a number of other nations, including Eastern Europe, Russian, Turkey, Japan and South Korea.

• In the East, U.S. power and influence will attempt to create a cooperative relationship between China and Japan and keep Chinese-Indian relations from turning to violent conflict.

• To accomplish all this, the U.S. must become a better “promoter and guarantor” of unity and simultaneously a “balancer and conciliator between the major powers of the East.”

• To have any credibility in these roles, the U.S. must effectively “renovate itself at home.” This requires, says Brzezinski, four things: (1) better innovation, (2) improved education, (3) a balance of American power and diplomacy, and (4) a better focus on quality political leadership in Washington.

• One of the most important changes ahead must be an effective improvement of relations between the United States and the European Union. The two sides of the Atlantic have been drifting apart since the fall of the Berlin Wall, but this trend must be reversed. Otherwise, growing conflicts between the United States, the European Union, and Russia could weaken the West and cause it to splinter and become increasingly pessimistic. This would also promote a more contentious China.

• The U.S. should decrease military power in Asia and emphasize increased cooperation with China.

• Taiwan will at some point have to reconcile in some way with China.

Unfortunately, there are a number of problems with this new strategy. If this is the outline of the years ahead, the U.S. will definitely face an era of deepening international confusion and tension.

Despite this reality, the historical track record of Foreign Affairs suggests that this is the Grand Strategy we will follow. If this occurs, voters will elect one party and then the other, and remain frustrated when the on-going Grand Strategy of our international affairs keeps our economic and other national policies going in the same direction.

Adoption of this Grand Strategy is a path of inevitable decline, regardless of what the experts say. Election after election, we’ll seek real change but see whoever is in the White House continually push our nation in the same negative direction.

4.     Significant Flaws

Specifically, this new Grand Strategy has at least the following major defects:

• An abandonment of support for an independent Taiwan, even through a subtle shift of attitude as suggested, amounts to a significant reversal of America’s historical loyalty to our allies. Such a change will undermine our credibility with other nations and further erode Washington’s credibility with American voters.
• The attempt to bridge differences between the United States and European nations in this Grand Strategy takes the tone of the U.S. becoming more like these nations—rather than influencing these countries to adopt more freedom-based values historically espoused by the U.S.
• Adoption of this new Grand Strategy may amount to a de facto appeasement of China. If China is, in fact, following a savvy strategy of replacing America as the world’s dominant super power and transporting its fundamental values around the globe, then this would be nothing less than a disastrous policy. And even if China is a good-faith seeker of more global participation, cooperation and open trade, it certainly wants to spread its central values and ideals—nearly all of which are antithetical to freedom.
• The emphasis on increased business innovation and improved education in this strategy seem to rely on increased government spending and intervention in our economy rather than policies that incentive increased free enterprise, innovation, hiring and entrepreneurialism. This is yet another attempt to move away from traditional American values and adopt instead the government-run mercantilist practices of European and Asian economies.
• The focus in this policy is a shift from internationalism (a policy of interactions between sovereign nations with America as a world leader) to globalism (where the United States submits its actions to the decisions of international organizations).
• Note that while we have changed the Constitution through Amendments less than thirty times in over two hundred years, it has been changed in literally thousands of ways through treaty (and these changes are seldom noticed by most Americans). While treaties were used to skirt the Constitution many times under the Internationalist Grand Strategy since 1945, this new Globalist Grand Strategy will make this the major focus of its policies, totally ending Constitutional rule in the United States. This is not an exaggeration but rather a technical reality.

In short, this new Grand Strategy is a de facto end to the traditional American Constitutional system. If it is fully adopted, and all indications are that this is what is occurring, our free system is in immediate jeopardy.

I am an optimist, and I believe that the best America and the world have to offer is still ahead. Yet in a nation of laws, in a society where the fine print of contracts, statutes, judicial dicta, executive agency policies and treaties are our higher law, this new Grand Strategy promises to rewrite our entire system in a few agencies dominated by unelected international experts and almost entirely out of the public’s eye. This is not a republic or democracy, but a true technocracy.

Again, the result will be elections where we vote our passions but where little changes no matter which candidates win each campaign.

In such a world, the fine print in our treaties will run the show, though few will realize what is happening or understand why our freedoms and economy are constantly in decline no matter which party we put in charge of Washington.

It is hard to overstate just how significant this current change is in our world. Freedom is literally at stake.

5.     Solutions

We don’t need better leaders or public officials as near as much as we need better citizens. Historically, the American founders knew that freedom could only last if regular citizens had the same level of education as our Governors, Senators, Judges, experts and Presidents.

When any nation is divided between, on one hand, a class of political experts who read and understand the fine print of what is really happening and, on the other hand, the rest of the people who don’t read or get involved in such intricate details, freedom is inevitably lost.

There are no exceptions to this in history.

We will either become such citizens, or our freedoms will be lost.

If this is too much to ask of modern citizens, then freedom is too much for us to handle. Just consider what Samuel Williams, a Harvard professor in the American founding era, said about the average education of American children in 1794:

“All the children are trained up to this kind of knowledge: they are accustomed from their earliest years to read the Holy Scriptures, the periodical publications, newspapers, and political pamphlets; to form some general acquaintance with the laws of their country, the proceedings of the courts of justice, of the general assembly of the state, and of the Congress, etc.

“Such a kind of education is common and universal in every part of the state: and nothing would be more dishonorable to the parents, or to the children, than to be without it.”

Such people were deep readers. And the freedoms they fought for and maintained showed it. The only way to get back such freedoms is to once again become such citizens. What is needed, regardless of what the experts in Washington do, is a widespread grassroots grand strategy of becoming the kind of citizens and voters who are truly capable of maintaining freedom.

(For more on how to become this kind of citizen and reader, see the book A Thomas Jefferson Education by Oliver DeMille.)

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

He is the co-author of 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 &Culture &Current Events &Entrepreneurship &Foreign Affairs &Generations &Government &Leadership &Liberty &Prosperity &Statesmanship

What to Look for in 2012

January 3rd, 2012 // 11:26 am @ Oliver DeMille

Here are some things to consider in 2012, several possible trends which could make significant changes in our world by the end of the year ahead:

1. Barring major events, the news of 2012 will most likely be all about the election, especially the presidential election.But the real potential for election change will be in the Congress.The most important determinant of how America will run after the 2012 election will be whether Congress remains split or if one party gains control of both houses—regardless of what happens in the presidential race.This won’t be the media focus, but those who understand American politics will keep their eye on the coming changes in Congress.
2. More Democrats are arguing for less government spending.[i]This shift in thinking is getting very little press because the election story is so dominant in the current media.Since few Democrats are using this frustration with government spending as a reason to vote for non-Democrat candidates, it receives sparse coverage.But it is a significant change, regardless.Many Republicans and most independents and moderates believe that Washington spends too much already.

   If more Democrats continue to adopt the same view, it may become a major story in the years ahead.

3. The credit rating agencies that downgraded the U.S. credit rating in 2011 are still very closely watching the U.S. economy and some indications are that further downgrades could be ahead if the economy continues to struggle.Along with this, for the first time in many decades, U.S. securities are less stable than some other investments,[ii]and money flow away from the U.S. is increasing—especially since the middle of 2011.If these trends continue, U.S. economic challenges could drastically worsen in the next twenty months.
4. Some leaders in Saudi Arabia have voiced concerns about how the U.S. handled Egypt, especially President Mubarak, during the 2011 Arab Spring.[iii]As the popular uprising grew, the Obama Administration eventually suggested that Mubarak step down.Regardless of whether or not this was the right approach, the sentiment among some Saudi and other Middle Eastern leaders goes something like this: “If that’s how the U.S. treats its allies, do we really want to trust Washington for anything?”Ironically, many in Israel are feeling the same emotion.Add to this the under-reported influence of Saudi investors in major European and U.S. businesses and banks, and this trend may be the most impactful in years to come.

   Western economic dependency on Middle East oil is well known, but the bigger danger may come from direct investment in businesses and banks.

   If massive sums of Petro Dollars were pulled from Western banks, for example, the term “too big to fail” would take on a whole new meaning.

5. We have been warned about cyber terrorism for some time now. Is 2012 the year?
6. Will Israel bomb an Iranian nuclear facility?[iv]If so, how will the Obama Administration react?
7. Ironically, a focus on jobs may finally become a focus in Washington during the election year of 2012. The bad news is that the parties are unlikely to work together to make real changes.Hopefully, this turns out to be untrue, but if current trends continue little will actually occur.

The good news in all this is that a relatively few changes would bring a drastic positive change in momentum and infuse the nation with positive innovative energy.

For example, four changes could establish a massive change of direction and rebirth of American success (like the shift in American perspective which occurred when Reagan took over leadership from Carter).

The four include:

1) a rollback of all federal policies since 2000 that have hurt small business and dis-incentivized innovation, growth and hiring

2) an effective long-term policy to fix the problem with entitlements, balance the budget and get control of our national debt

3) a restructuring of American education funding to support technical training, community colleges and other non-traditional methods to increase the competitiveness of our workforce

4) a move away from international invasions and wars abroad while maintaining a strong national security presence

I am not predicting that these will occur, but they would be greatly beneficial to the nation if they did.

Finally, each year brings its share of surprises.

For example, who could have guessed in 2010 that the year ahead would bring the death of Osama bin Laden or the refusal of the White House to take leadership in a serious jobs plan?

Whatever comes in 2012, America needs to get its financial house in order and re-incentivize business growth and hiring.

These are vital priorities.

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

He is the co-author of 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 : Current Events &Economics &Entrepreneurship &Featured &Government &Leadership &Politics

The Amazing (Ironic/Tragic) Debate

November 19th, 2011 // 2:15 pm @ Oliver DeMille

There is a truly amazing debate happening right now in the United States. It would actually be comical if it weren’t so potentially tragic for America’s future. This debate is not any—or all—of the Republican Presidential Debates. Nor is it some formal debate taking place on television, the Internet or a university campus.

It is a cultural debate, a large-scale argument playing out in millions of discussions online, thousands of opinions and rants from the talking heads in the media, and – most dramatically – fought indirectly between the Tea Partiers and the Occupy Wall Street crowds.

Most of this debate is taking place in emotional and passionately charged ways, rather than in clear, concise intellectual dialog. Still, a quick look at the two intellectual arguments is instructive.

Some say that the divide between the rich and the rest is increasing each year. More to the point, the structural division between the upper classes and the other classes is becoming less porous and less elastic. Social mobility—which was once the American keynote—is steadily eroding.

A majority of Americans now feel that their children will have a lower standard of living than they did; many feel that the rising generation in China will have more opportunity than our American youth. The American Dream is over in this view, and things seem likely to get worse before they get better—if they ever get better.

I wrote about this reality a few years ago in my book The Coming Aristocracy, and it remains one of the most significant challenges of our time. It is presently a major catalyst of current trends and of our evolving future. Unless things change direction, an aristocracy is coming to America. Indeed, it is already almost entrenched.

In a typical debate, the opposing view would argue that such a divide is not occurring, or that it is a good thing for America – or even that it is a minor trend that will be offset by some larger reality. But this is no typical debate. In an interesting twist, all sides of the current amazing debate accept this truth—the divide between the rich and the rest is real, and it is a major challenge in our century.

The debate is about how to fix this problem.

One side of the debate wants government to solve the problems, the other side wants government to get out of the way so the people can resolve things. It’s More Government against More Free Enterprise.

The More Government side argues for higher taxes, more government relief, increased government spending, more government jobs programs, increased government training options, improved government education, and more regulations. It is summed up in the title of Thomas Frank’s recent article in Harpers: “More Government, Please!”

In contrast, the More Free Enterprise side promotes fewer government regulations, reduced or at least no hikes in taxation, lower corporate rates to boost America’s competitiveness in the world economy in the, decreased government spending, less government borrowing and printing of money, and smaller government.

This side wants the era of big government to truly, finally, be over,[i] or, at the very least, for us to realize that our government must stop shutting down or undermining the free enterprise incentives that are the basis of all historical prosperity and freedom.

The More Government side tries to convince the nation that the Free Enterprise side “Hates Government,” or “Hates the Poor.” Too many on the Free Enterprise side characterize the ideas of the More  Government side as “Hating Freedom” or “Hating Small Business.” Both of these characterizations are flawed.

Many who argue mainly for government solutions also feel deeply the need for government to be checked and balanced, while many who support answers mainly by private enterprise feel great pride and trust in the potential for good by our government and consider its success vital to society. Most people on both sides care about freedom and also want to help the underprivileged and struggling. Most people on both sides want government and business to be successful. Most people from both sides want the government to be fiscally responsible. They just have an honest disagreement about the best way to do these things.

Some want to label one side of the debate Democratic and the other Republican, but this simply isn’t the case. Government spending, government programs, and the regulatory load increased drastically—drastically!—under the Republican administrations of Eisenhower, Nixon, Ford, Bush and Bush and also under the Democratic leadership F. Roosevelt, Johnson, Carter, Clinton and Obama. Note that these things also increased under Truman, Kennedy and Reagan, but at least these three presidents made a loud and energetic case for proper limits on government. In short, both political parties have proven effective supporters of the More Government side of the debate.

The one big difference, the most fundamental divide, between the More Government and More Free Enterprise sides is this: one believes we need more government force right now, the other that we need more freedom and incentives right now.

For this reason, I am on the side of free enterprise.

The government has a vital role to play in our society. Without it, none of our freedoms will last. But government power must be wisely limited, and the best articulation of the right level of limits on our government is found in the U.S. Constitution. More to the point, the government today may or may not be too big, but its massive regulatory load and anti-business policies are clearly hurting the economy and fueling an increased class divide in society. They are keeping our economy down because they don’t incentive economic innovation or growth.

The reason I call this debate “amazing” is simple: It is both surprising and indeed shocking that anyone who has read history can believe that force is a more effective way to freedom than free incentives. One side of this debate seems committed to using government force to fix our economic problems, even though all through history free economies, minimal regulation and limited governments have consistently been the forerunners and partners of economic success and high economic mobility.

It is simply amazing that we still haven’t figured this out. Perhaps the most astonishing thing about this debate is that anyone still argues that more government force in our current model will spread more freedom, prosperity, or social mobility. There is no historical evidence for this, and overwhelming evidence of the opposite.

Freedom works. Why is anyone arguing that we give more support to government force? If the Republican Presidential Debates, and the ongoing responses from the White House, are about real solutions, they will be all about the government effectively incentivizing free enterprise. If the Tea Party and Occupy Wall Street events are about real solutions, they’ll promote ways to more effectively incentive free enterprise.

As long as government force is the dominant factor in our economy, things are going to get worse. The Bush-Obama economic environment we live in combines stifling regulations with massive government spending and uncertainty about what Washington will do next. This dis-incentivizes growth, hiring, and investment in the U.S.; meanwhile, business moves to foreign economies with better incentives.

Unemployment lingers above 9%, and the real number when we include all who are underemployed is pushing 20%. The mortgage bubble may not have reached its lowest collapse, and inflation or deflation appear imminent. In response, the White House now recommends more government spending, regulations and programs.

This is a truly amazing debate. The more the government regulates and spends, the worse the economy fares. As a result, the government seeks to spend more. And a lot of the American people think this is a good idea.

Many Americans were shocked into political activism by the Great Recession, where the average household lost 3.2% of its income.[ii] Since the Great Recession ended, during the so-called Recovery, the average household has lost an additional 6.7%.[iii] Are we simply scared into submission? Are we crying out to the government to fix things, because we are deeply terrified that nobody else will? Is that why so many people believe that government force is more likely to boost our economy than free enterprise?

The amazing question remains: Given all of history, how can anyone take the Force side of the current great debate?

Seriously?

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

He is the co-author of 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 : Aristocracy &Blog &Current Events &Economics &Entrepreneurship &Generations &Government &Prosperity

American Decline

November 3rd, 2011 // 3:00 pm @ Oliver DeMille

Is it Avoidable or Inevitable?

“We’re not going to bail our way out of this crisis, we’re not going to stimulate our way out of this crisis, we are only going to educate, ultimately, and imagine and invent our way out of this crisis.”
—Thomas L. Friedman, Meet the Press

 

“By 2020, the U.S. will be spending $1 trillion a year just to pay the interest on the national debt.
Sometime between now and then the catastrophe will come. It will come with amazing swiftness.”
—David Brooks, The New York Times

On the same week[i] the White House released its prediction that unemployment will get even worse every year in 2012, 2013 and 2014, Friedman and Mandlebaum’s book entitled That Used to Be Us focused the national dialogue on the deepening decline of the United States.

Fortunately, Freidman and Mandlebaum also outline a plan for how America can come back soon.

Harry S. Dent’s newest book, The Great Crash Ahead, further elaborates on this topic.

Friedman and Mandelbaum’s argument goes something like this: the United States is in serious trouble because of four great trends that are bringing massive change.

Our decline didn’t start with the housing crisis in 2008, but back in the late 1980s at the end of the Cold War.

Four Trends

First, according to Freidman,[ii]

“We made the worst mistake a country or species can make, at the end of the Cold War, when we misread our environment. We interpreted the end of the Cold War as victory…not understanding that it was actually the onset of one of the biggest challenges we’ve ever faced as a country.

“We had…unleashed two billion people just like us. But the nineties turned out to be quite a party thanks to the peace dividend, thanks to the massive productivity boost of the Internet and thanks, most importantly in many ways, to the collapse in oil prices, which was like a huge tax cut.”

Second,

“9/11 set us on a really bad course. We spent the last decade—in many ways necessarily, in many ways excessively—chasing the losers from globalization rather than the winners.

“And we made up for a lot of the fall behind…by basically injecting ourselves with steroids. Just as baseball players did it to hit home runs, we injected ourselves with credit steroids, creating a huge housing boom and construction boom to create jobs.”

Third,

“The number of people who can compete, connect and collaborate exploded in the last decade. You know,”

Freidman continued,

“I wrote a book in 2004 called The World is Flat, which was about this connecting of the world. We’ve gone from connected to hyper-connected…. When we sat down to write this book, I actually went back to The World is Flat, I looked in the index, and I realized that Facebook wasn’t in it.

“When I said ‘the world is flat,’ Facebook didn’t exist, or for most people it didn’t exist, Twitter was a sound, the Cloud was in the sky, 4G was a parking place, Linked In was a prison, Applications were what you sent to college, and for most people Skype was a typo…

“That all happened in just the last seven years. And what it’s done is taken the world from connected to hyper-connected. And that’s been a huge opportunity, and a huge challenge.”

Fourth, we’ve witnessed a huge generational shift.

“We went from the Greatest Generation, whose philosophy was basically to save and invest, and we are still living off their saving and investing, to basically the Baby Boomer generation, whose philosophy turned out to be ‘borrow and spend.’

“And we’ve really shifted from a generation born in the Depression, World War II and the Cold War—these were serious people, they wouldn’t think of shutting down the government for a minute—to a generation…that is much less serious.

“We’ve gone from basically the values of the Greatest Generation…to a Baby Boomer generation whose values are situational….

“You put them all together, and I think you really account for a lot of the hole we’re in right now…”[iii]

The book goes in more depth on each of these themes. More importantly, the book outlines some well-considered solutions.

For example, major employers, according to Friedman, are “all looking for the same kind of employee now: Someone who can do critical reasoning and thinking…who can adapt, invent, and reinvent the job, because in this hyper-connected world change is happening so fast. You know, there are companies now in Silicon Valley that do quarterly employer reviews…because their product cycle is changing so fast. You can’t wait until the end of the year to find out you have a bad team manager.”[iv]

Clearly, Freidman argues, education has got to change—it’s been too rote, and now it needs to prepare thinkers, leaders and innovators.

This is a hard job for an industry made up of mostly non-entrepreneurial, deeply security-minded types.

“What we argue in the book…going forward there really are just going to be two kinds of countries in the world: HIEs and LIEs: High-Imagination-Enabling countries and Low-Imagination-Enabling countries.

“Forget Developed and Developing….

“We’re not going to bail our way out of this crisis, we’re not going to stimulate our way out of this crisis, we are only going to educate, ultimately, and imagine and invent our way out of this crisis.”[v]

Friedman and Mandelbaum’s analysis is much needed in our current nation.

We train our youth not to take risks, and to get the “right” answer rather than the wise answer.

These two big problems are a serious challenge.

Without wise risk, prosperity and leadership are impossible.

Friedman’s 5 Pillars

The authors of That Used To Be Us note that the United States won at every major historical turn because we followed what Friedman called “the 5 Pillars”:

1-“Educate our people up to and beyond whatever the level of technology is…

2-“Immigration. Attract the world’s most talented and energetic people…

3-“Have the world’s best infrastructure…

4-“Have the right rules for incenting, capital formation and risk taking…

5-“Government-funded research.”[vi]

Note that these five form a powerful private society where the government maintains the right rules and incentivizes free enterprise.

All five have significantly decreased since the year 2000, really since 1989, and today the Right is strongly against 2 and 5 while the Left is adamantly against 4.

Both are caught in the trap of trying to accomplish 1 and 3 using the same old methods that haven’t worked for over two decades.

No wonder we’re in decline.

We’ve stopped doing the most important things that brought America’s original and lasting successes.

The Left pushes too strongly for government-only solutions while the Right rejects any government role.

As journalist Paul Gigot noted,

“The irony is, of the past thirty, forty years, that the prestige of government has collapsed most rapidly when government has tried to do…far more than it is capable of doing.

“Government prestige increased under Ronald Reagan, the great supposed enemy of government, because he showed when you focused on a couple of things and did it well, and got the economy growing, that people said, ‘You know what, they’re competent there. It’s working.’”[vii]

We need government.

We need it to protect equal rights for everyone and maintain a system where all are treated equally before the law.

This encourages free enterprise, economic growth and improved prosperity.

Societies without such governments have little freedom.

Of course, the danger is that good government can become overbearing and put a damper on economic growth and success.

Today we have government that has clearly over-reached in a number of ways, and a backlash from the Right that wants little or no government.

We need to adopt a middle approach, good government that is, in a phrase used in the American founding, “strong and limited.”

Actually, in The Federalist Papers the term was frequently “vigorous and limited.”

We want a strong government, and at the same time we want a limited government. That is what good constitutional government is all about.

Many from the Right may consider the Friedman/Mandlebaum book a push for too much government just as many from the Left will wonder that it doesn’t push for more government solutions.

American citizens should take a step back and consider the proposals on their merits, however.

I don’t agree with every suggestion in this book, but I find a number of them to be well considered.

On the big topic, the broad concept that both government and the private sector must work together in their proper roles in order to get our nation back on track, I think the book is right on.

On the subject of education, this book is especially valuable. In truth, as the authors affirm, bailouts and stimulus packages—as necessary as they may be in certain crisis situations—will not solve America’s problems.

Real solutions depend on wise policy from government and mostly from innovation and leadership in the private sector.

Indeed, the best government can do is remove the current regulatory pressure on small business and allow the entrepreneurial American spirit to get our economy growing again.

Another recent book addresses these same issues from a different perspective.

Doom-and-Gloomers

I have long been a fan of the work of Harry S. Dent because his predictions, like those of John Naisbitt and Alvin Toffler, have been strikingly accurate even though they have been more specific, and therefore more likely to fall short, than those from most other forecasters.

Dent argues in his latest book, The Great Crash Ahead, that “the great economic crisis of 2008 will likely return in 2012, or 2013 at the latest, and will be even worse.”

His analysis is alarming, but interesting. Note that Dent is not a doom-and-gloomer.

Remember, when multiple authors in the mid-1990s were predicting a major crash ahead, Dent published The Roaring 2000s, which forecast that the stock market would boom for the next decade.

He also said that the boom would increase until a shock and downturn in 2008.

For most of his career, Dent has taken on the doomsayers and offered a counter-intuitive forecast of economic boom ahead.

The fact that he said the cycles would turn in the other direction in 2008, and that now he says they’ll get even worse, should concern every American.

Dent wrote:

• “Debt and stimulus is like any drug: it takes more to create less effect.”
• “Deflation is the only possible scenario in the decade ahead.”
• “The U.S. Dollar will appreciate and be the safe haven—not gold, silver, the Euro or the Swiss Franc.”
• “Home prices will fall by 55% to 65% from the top before this crisis is over.”
• “Stock [will] crash to between 3,300 and 5,600 on the Dow by the end of 2013, or 2014 at the latest.”
• “Also, the crash will be worldwide, not just in the United States and Europe, as the dramatic China bubble comes to an end.”
• “The trends for the coming decade are crystal clear: we are going to experience a deeper downturn and deflation in prices, not inflation. We call this the Winter season; it comes predictably once in a lifetime, currently every 80 years, which means that very few people will understand what is happening.”[viii]

Whether we face massive inflation ahead, as Ken Kurson has argued,[ix] or the deflation Dent predicts, the economic future promises to be challenging.

As Dent notes, from 1775 to the year 2000 Americans accumulated $20 trillion in private debt.

From the year 2000 to 2008 (latest numbers), we accumulated $22 trillion more—for a total of $42 trillion.[x]

No doubt this trajectory has increased since 2008.

Since the economic difficulties ahead follow patterns that we haven’t witnessed since the 1930s, most of the current common wisdom on economics is lacking or just plain wrong.

“Unlearning is the key to times of change and transition,” Dent wrote. “What worked in a boom does not work in a downturn.”[xi]

Here are some of the things which have changed:[xii]

• “It is your father’s economy”!
• Don’t buy a bunch of new stuff—get out of the spending habit.
• Make do with what you have.
• Expect lower wages and lower prices.
• Realize that debt is going to get a lot more expensive than it used to be.
• Realize that assets and savings will be worth more over time.
• Start thinking in terms of multiple streams of income.
• “In the new world, management is the problem, not the solution.”
• Entrepreneurship is in: “the coming decades and century will be seen as the age of the individual and the entrepreneur.”
• Keep your business “lean and mean.”

Dent’s charts, arguments and analyses are a great read.

Add to this view the following thoughts from Friedman and Mandelbaum’s book, and we have an important look at the probable future in the years just ahead:

“No one should ever have to say ‘I am moving from America to Singapore because it is more hospitable to innovation and entrepreneurship.’ Just the opposite should be true. ‘You will know you’re successful,’ said PV Kannau, the India outsourcing entrepreneur, ‘if new companies in China and Brazil say, ‘We want to move our headquarters to America because that is the best place in the world to do business.’’

That’s not happening right now, because our regulatory and tax scheme is far from the best in the world….

“Twenty years ago, even ten years ago, a report such as this one would never have been commissioned. The United States was the best country in the world for business of any kind, the one with the largest and most open market, the most transparent legal system with the strongest property rights, the biggest and most efficient financial system, the most modern infrastructure, and the most dynamic ongoing research and development in almost every field. It was a magnet for capital and talent. No company of any size, indeed no company that merely aspired to international growth, could afford not to operate there, and none needed a consultant to tell it that.

“Now, alas, things are different. Over the past decade especially, American has changed, and not for the better.”[xiii]

How many more voices need to say the same thing before Washington listens?

Until we free up the American economy, reduce the red-tape and taxes on small business, and become the most inviting economy on earth, our economic problems will continue.

Many believe they will get worse—much worse.

The real tragedy is that all this is avoidable.

Free enterprise works.

America knows how to incentivize and encourage business growth. It’s time to get serious about restoring our free-enterprise economy—and soon!

The United States has one of the highest business tax rates in the developed world, and one of the most burdensome regulatory schemes.

Of course we can’t compete in such circumstances.

The question every American should ask is simply, why?

Why would the country that stands most for freedom in all world history now turn its back on the principles of freedom that made it great?

Why would we put our trust in bureaucracy, regulation and government rather than the proven dynamism of American enterprise?

We Can Only Ask, “Why?”

Whatever the answer, unless we make changes quickly the economic forecast ahead is dismal.

Friedman said America is like a nation turned upside down.

At the bottom is an enterprising people passionately seeking to overcome economic challenges with innovation, ingenuity and tenacity, while at the top is a government consistently blocking the entrepreneurial efforts of its people.[xiv]

Again, we can only ask, “Why?”

When Paul Kennedy wrote The Rise and Fall of the Great Powers over two decades ago, many scoffed at his prediction that American hubris was leading to our eventual downfall—in the way so many great nations and empires of history have declined.

Even the leading voice of anti-decline, Joseph S. Nye, has suggested that many of Washington’s policies are making it difficult for the U.S. to remain the world’s economic leader.

Hopefully the solution won’t be as drastic as Friedman, Mandelbaum and Dent predict.

“Shock therapy,” they suggest, may now be the only effective way to change our country.

If this is true, we are in for rocky times ahead.

One thing is certain.

Friedman and Mandelbaum rightly argue that the best way out of this is not so much to study the fall of Rome, the Ottoman Empire, or other historical examples of what not to do, but to make a national focus of studying what worked best in our own American history.[xv]

We know the answers, because they are part of our national heritage.

It is time to put aside our modernist sense of superiority and admit that we want what past generations had economically and learn what worked for them.

It will work again, if we are willing to learn and make the needed changes, because the principles of freedom are timeless and powerful.

Decline is not inevitable, but only a wise people well-studied in the principles of historical success can avoid it.

We must become such a people.

[i] September 1-7, 2011

[ii] Meet the Press, September 4, 2011

[iii] Ibid.

[iv] Ibid.

[v] Ibid.

[vi] Ibid.

[vii] Ibid.

[viii] From Harry S. Dent, The Great Crash Ahead.

[ix] See Ken Kurson, “Let Them Eat iPads,” Esquire, May 2011.

[x] Op. Cit., Dent.

[xi] Ibid.

[xii] Ibid.

[xiii] Thomas L. Friedman and Michael Mandelbaum, That Used to Be Us.

[xiv] Op. Cit., Meet the Press.

[xv] Op. Cit., Freidman and Mandelbaum.

Category : Aristocracy &Business &Citizenship &Constitution &Culture &Featured &Government &Leadership &Liberty &Politics

Capitalism vs. Free Enterprise

October 10th, 2011 // 11:18 am @ Oliver DeMille

The New Culture War

During the Cold War, people came to equate the three ideas of democracy, capitalism and free enterprise.

This made sense at some level, since the whole world seemed inescapably divided into authoritarian, totalitarian, socialist and communist nations on the one hand and democratic, capitalistic and free enterprise nations on the other.

In the decades since the Berlin Wall fell, as CNN’s Fareed Zakaria has pointed out, there has been a growing divide between the nations emphasizing democracy and those focused on capitalism.

The differences between these two groups are both interesting and significant to world events.

But an even more nuanced and impactful division is the difference between capitalism and free enterprise.

I wrote about this in my book FreedomShift, but it is a point of great magnitude in our current society and bears repeating.

Unfortunately, very few people have considered the differences.

Most still equate capitalism and free enterprise, even in the post-Cold War era.

This is a weighty mistake with a high potential for negative ramifications in the 21^st Century.

A simple defining of terms points out the crucial importance of the distinction between these two brands of economics.

To summarize: capitalism gives special government-supported benefits to capital and those with capital (wealthy individuals, families and business entities).

This is the opposite of socialism, which promotes special government-supported benefits to those without capital—the proletariat, as Karl Marx put it.

In contrast to both capitalism and socialism, free enterprise establishes good laws and government policies that treat the rich, middle and poor the same.

Some people may believe that this is the system we live under in the United States today—that the law treats all the same.

Such an assumption is incorrect.

The U.S. commercial code has numerous laws which are written specifically to treat people differently based on their wealth.

For example, it is illegal for those with less than a certain amount of wealth to be offered many of the best investment opportunities.

Only those with a high net worth (the levels and amounts are set by law) are able to invest in such offerings.

This naturally benefits the wealthy to the detriment of wage earners.

This system is called capitalism, and it is a bad system—better than socialism or communism, to be sure, but not nearly as good as free enterprise.

In a free enterprise system, the law would allow all people to take part in any investments.

The law would be the same for all.

If this seems abstract, try starting a business in your local area.

In fact, start two.

Let the local zoning commissions, city council and other regulating agencies know that you are starting a business, that it will employ you and nine employees, and then keep track of what fees you must pay and how many hoops you must jump through.

Have your agent announce to the same agencies that a separate company, a big corporation, is bringing in a large enterprise that will employ 4,000 people (or, in a more urban setting, 24,000 people)—all of whom will pay taxes to the local area and bring growth and prestige.

Then simply sit back and watch how the two businesses are treated.

In most places in the United States, one will face an amazing amount of red tape, meetings, filings and obstacles—the other will likely be courted and given waivers, tax breaks, benefits and publicity.

Add up the cost to government of each, and two things will likely surprise you: 1) how much you will have to spend to set up a small business, and 2) how much the government will be willing to spend to court the large business.

Of course, I don’t really suggest that anyone announce such a fake business.

But imagine, theoretically, what would happen if you did.

Our current mentality in government is to treat big business better than small business.

This is the natural model in a capitalist system.

Capital gets special benefits.

In free enterprise, in contrast, the costs and obstacles would be identical for the two businesses.

In free enterprise, the operative words are “free” and “enterprise.”

Note that American business and ownership stayed mostly small—with most people owning family farms or small businesses—until the 1960s.

It was debt (often promoted by government) which wiped out the farming culture that dominated the South and Midwest, and the rise of big corporations over family-owned businesses came after the U.S. commercial code was changed by law to a capitalist rather than a free enterprise model.

If we altered today’s laws at all levels so that government entities treated all businesses and citizens the same, regardless of their level of capital, the natural result would be the spread of more small businesses.

Note that nearly all major growth in America’s economy since 1985 has come from small business.

Today, small businesses are struggling under a veritable “mountain” of regulatory red tape—the result is economic downturn.

And, while some in government hold an anti-business attitude, even many of those ostensibly promoting pro-business policies are more aligned with Wall Street corporations than the needs of small business.

Capitalism, sometimes called “Corporatism”, is not the same thing as free enterprise.

Both are certainly preferable to socialism or communism, but free enterprise is considerably more conducive to freedom and widespread prosperity than capitalism.

History has proven the following: 1) Under capitalism, the divide between rich and poor naturally increases; 2) In a free enterprise system, the prosperity, freedom and dignity of nearly everyone in the society inevitably rises.

Alexander Solzhenitsyn pointed out that while modern American capitalism was clearly better than Russia’s twentieth-century communism or Europe’s contemporary attempts at socialism, the U.S. implementation of capitalism left much to be desired.

For example, he noted, under American capitalism the question of, “is it right?” became less important to many people and companies than, “is it legal?”

Likewise, the culture of capitalism frequently asks, “is it profitable?” before (or instead of) asking, “is it good?”

American capitalism, Solzhenitsyn said, created a nation more materialistic than spiritual, more interested in superficial success than genuine human progress.

Note that Solzhenitsyn was adamantly anti-communist and anti-socialist.

But he also found capitalism lacking.

In every particular, however, Solzhenitsyn’s criticisms of capitalism don’t apply to the free enterprise model of economics. When the law treats all people and businesses the same—regardless of their size, connections, power or wealth—an interesting consequence occurs.

Put succinctly:

• In socialism the government ignores, downplays and literally abuses prosperity and freedom to the point that both are lost for nearly everyone.

• Under capitalism, the laws promote the wealth and license of a few above the freedom and prosperity of all, with the cultural result of valuing attainment of wealth above almost everything—including virtue, compassion, and the liberty of all.

• In free enterprise, the laws treat everyone the same, thereby incentivizing freedom, prosperity and enterprise (as long as such enterprise doesn’t violate the inalienable rights of others). The application of this model is rare in human history, but the results when it has been applied are nothing less than spectacular (see Ancient Israel, Athens, the vales period of Switzerland, the Saracens, the Anglo-Saxons, and the United States—which by 1944 had 6% of the world’s population and produced over half of its goods and services).

The lesson?

Freedom works.

Enterprise works.

And the outcome when the two are combined is breathtaking.

We are capable of so much more than we’ve accomplished so far, and free enterprise is the most powerful economic system yet to be tried by mankind.

Isn’t it time for an end to the outdated debate about socialism versus capitalism and a national return to the free enterprise system which made America great?

During its first century-and-a-half of application, free enterprise brought us major wealth, a standard of living for most citizens that rivals or surpasses the lifestyles of history’s royals, world power, major technological and medical advancements, and the end of slavery.

It also brought the repudiation of racism, male dominance, religious persecution and a host of other ills that have existed for millennia.

With all these areas of progress, imagine what we could do if we re-adopted the free enterprise values and culture in our time.

Laws that give special benefits to wealth and capital while withholding such opportunities from the rest can never bring the progress, advances, freedom and prosperity that free enterprise will.

It’s time for a change, and the first step is for all of us to start using the phrase “free enterprise” a lot more.

We need to study it, think about it, discuss and debate its various applications, and make it a household topic rather than an obscure economic reference.

The future of America is inextricably linked with the future of free enterprise.

We will sink or swim exactly as it does, whether we realize it or not.

Isn’t it time to admit this reality and make it the leading topic in our national dialogue?

***********************************

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

He is the co-author of 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.

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