Liberty

The New Challenge of Governments

February 28th, 2012 // 10:03 pm @ Oliver DeMille

Globalization is changing the demand on governments around the world. Since the advent of the nation-state in 1648, the purpose of national government has been to protect its citizens from attack by international forces and domestic criminals.

Local government has focused on providing the various needs of citizens as deemed appropriate by voters and constitutional by the courts, and together these two levels of government (national and state in the U.S.) have been responsible for certain limited roles; the rest was left to private institutions and citizens.

With the growth of internationalism in the twentieth century, many governments took on the additional responsibility of helping its citizens prosper through the use of diplomacy, military strength and multilateral decision-making abroad.

Such responsibilities included, for example, the safety of citizens traveling the world, the protection of international investments by domestically-owned corporations, and the maintenance of trade and low prices in important commodities (from sugar to petroleum).

Where internationalism added a few such roles to many national governments, globalism is rewriting the entire purpose of government.

And where internationalism assumes a world made up of various separate nations with individual sovereignty and diplomatic arrangements between equals, globalism is based on a different perspective.

In the globalist view, we live in one world, everything that happens everywhere affects us all, and government should care for citizen needs by taking action around the world as needed to protect and promote the best results for its constituents.

Basically nothing is off limits.

This adds numerous implied responsibilities to governments that embrace the globalistic worldview.

For people who believe government should be limited to the authorities explicitly delegated by the people in the Constitution (as I do), this is a disturbing development.

It is becoming a concern for everyone as time passes.

On a technical level, the U.S. Constitution allows the federal government to engage in and ratify treaties with other nations, and when this occurs these treaties become part of the de facto constitutional structure of our nation.

In the era of internationalism (beginning around 1913 and expanding ever since, especially after 1944), the treaty powers have been used to drastically change our Constitutional model.

This is part of the “fine print” of our Constitutional society, and it has been ignored by almost all ordinary citizens.

But the shift from internationalism to globalism is a significantly bigger change (in size and also scope) than the shift from nationalism to internationalism.

Under the new values and ideals of globalism, the role of government is, well, everything it deems desirable.

Literally.

This viewpoint is fundamentally the end of limited government.

Government in the global era is expected to survey the world, see needs, debate and vote about them, and pass legislation or issue executive orders to deal with whatever the government deems advantageous—the Constitution notwithstanding.

This includes taking action at the most local and personal level, including in peoples’ homes and family decisions, and also at the macro-level in any and every corner of the world.

This is big government gone über.

In this view, government should do whatever is needed to accomplish whatever it considers popular or important.

The courts are allowed to sort out whether or not such action was acceptable, but only after the fact. No checks stop such government action and no balances are required before the government can act.

This is more than big government; it is closer to the philosophy of governance that Hobbes called Leviathan.

No wonder the government hasn’t yet figured out quite how to respond to this changing sense of the state’s proper role.

Congressman Paul Ryan argues that the federal government doesn’t have a tax problem but rather a spending problem, but according to this new viewpoint of globalism the U.S. is going to have to spend a lot more—a lot more!—in the years and decades ahead to fulfill its proper role.

From this perspective, our federal spending spree is just getting started, and the only way to meet the need is to fundamentally reform taxation and get the upper and upper middle classes to foot the bill for a globalist government run from Washington.

In this outlook, we’ll need to keep raising the budget every year and the required spending is deeply underfunded.

Only massive increases in taxes can get us moving in the right direction.

The old debate between Conservatives and Liberals just doesn’t rise to the level of this new challenge, and the current energy in Washington is focused on a globalistic agenda that anticipates drastic increases in government for decades to come.

Georgetown University’s Charles A. Kupchan, wrote:

“A crisis of governability has engulfed the world’s most advanced democracies. It is no accident that the United States, Europe and Japan are simultaneously experiencing political breakdown; globalization is producing a widening gap between what electorates are asking of their governments and what those governments are able to deliver.” (Foreign Affairs, January/February 2012)

Globalism is leading to a natural decrease in the living standard of developed nations, and citizens of such nations are turning to government to help bring back the lifestyles they’ve grown accustomed to enjoying.

As the lower and middle classes of the world join the global economy, and as competition for investment and credit is spread around the globe, the special benefits that the middle classes in advanced nations have carved out for themselves are becoming unsustainable.

The middle class was created by generations who worked very hard to earn such benefits, but their posterity seems to prefer keeping these same perks without putting forth the same effort.

When this doesn’t work, they want their government to simultaneously block immigrants from “taking our jobs” and also find ways to maintain their parents’ lifestyle without having to earn them the same way earlier generations did.

Except for the entrepreneurial class—and government is increasing the barriers to entrepreneurship.

This is painful.

And it forces a choice at the voting booth: either more freedom coupled with harder work on the one side or higher taxes on the rich combined with more government benefits on the other.

The “government fix” approach is predictably more popular.

The real answer is to re-establish a truly free system, where the government limits itself to the authority outlined in the Constitution and the laws are altered to re-emphasize true free enterprise where the laws treat everyone (lower, middle and upper classes) equally.

Freedom works, and a refocus on freedom will once again make America’s economy the envy of the world.

Capital, investment and entrepreneurialism aren’t fleeing the United States because of globalism but because Washington’s policies have made the U.S. economy less profitable and attractive to business.

Unless the United States returns to a genuine free-enterprise model, our long-term economic trajectory will decline.

The battle has changed, though most people haven’t realized it yet.

Now it’s less about Left vs. Right and more the burgeoning issues of Free Enterprise vs. Globalism.

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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 &Current Events &Government &Leadership &Liberty &Politics &Statesmanship

Resolve to read this book.

February 25th, 2012 // 8:37 am @ Oliver DeMille

A review of Orrin Woodward’s game-changing new book, Resolved: 13 Resolutions for LIFE

by Oliver DeMille

The freedom of any society is directly related to the quality of books that are widely read in that society. That said, there are some books everyone should read, like The Federalist Papers and Democracy in America.* And in a society like ours where we are desperate for more leaders at all levels, truly excellent books on leadership are vital to the future of freedom.

I recently read a book on leadership that everyone simply must read. It is Resolved, by Orrin Woodward.

I’ve read Woodward’s books before, so when this one arrived in the mail I put away everything else and read it straight through. It kept me up most of the night, and it was so worth it!

This is a fabulous book on leadership. It outlines 13 resolutions every person should make in our modern world, and gives specific helps on how to turn them into habits. Indeed, this book could be titled The 13 Habits of Success and Happiness for Everyone. The stories and examples from great leaders of history and current events are moving and uplifting. I literally have never read a better book on leadership than this one.

Woodward’s book is on par with the great leadership works like:

It is truly a revolution in leadership books.

The 13 resolutions are exactly what we need leaders to adopt across our society. They are applicable to family and home leadership, community and business leadership, and societal and national leadership. They apply to the United States and other countries, and together they form a blueprint for renewing America and innovating a new and better Western Civilization.

The book is divided into three parts: private resolutions, public resolutions and leadership resolutions. Each of the 13 resolutions build upon each other, and together they create an effective and motivating system of becoming a better person and leader. They help the reader improve in career and in societal impact.

This focus on societal leadership is both timely and profound. In the 1950s we experienced a major “leader-shift” in society. Before World War II, most communities were led by professionals—doctors, lawyers, teachers, accountants, etc.—and before that by big landowners and even earlier tribal chiefs. The management revolution started by Edward Deming and popularized by Ray Kroc changed the focus of leading society from professionals to managers. This was captured in William Whyte’s great 1956 classic The Organization Man.

By the 1980s another major leader-shift occurred, this time from management (“do things right”) to leadership (“do the right things”). The great transitional classic of this shift was The 7 Habits of Highly Effective People by Stephen Covey. It outlined 7 habits that leaders needed in order to help their companies excel, and these habits became part of the mainstream language: for example, “Be Proactive,” “Think Win-Win,” and “Synergize.” Another great classic of this shift was Synergetics by Buckminster Fuller. The leadership revolution brought a whole new vision of what is means to be a leader.

Today we are witnessing a similar leader-shift, this time from leadership of organizations (“do the right things”) to leadership of society (“move society in the right direction”). Woodward’s Resolved is a seminal classic in this change. In fact, some of the early books in this change include Launching a Leadership Revolution by Orrin Woodward and Chris Brady, The 8^th Habit by Stephen Covey, and Primal Leadership by Daniel Goleman.

Woodward is more than an author; he has actually put these 13 resolutions to work in his business leadership. For this leadership, Orrin Woodward was named the 2011 International Association of Business’s Top Leader of the Year Award. His book Resolved outlines how we can all become such leaders.

In Resolved, Woodward shares a host of ideas and effective means of using family, business and societal leadership to impact the world. For example, he shows how Gibbon and Toynbee taught the laws of decline that are now attacking our culture and modern free nations.

He shows the three types of freedom and why they depend on each other—and how the loss of one is actually a loss of all. He helps leaders understand how freedom and character are inseparable and at the root of all societal progress and therefore leadership. His model of “Leadership Legacy” alone is worth the price of the book, and adds a whole new dimension to leadership literature.

Woodward adds several other new models to the leadership genre. He shows how five important laws from science, economics and history (Sturgeon’s Law, Bastiat’s “Law,” Gresham’s Law, the Law of Diminishing Returns, and the Law of Inertia) are combing in our current world, and what leaders need to understand and do about these five laws—individually and collectively.

These five laws are already part of our mainstream culture, but the analysis of how they are working together and what future leaders must do about it is new, deep and profound. No leader can afford not to understand this cutting-edge thinking.

On a stylistic note, Woodward consistently uses fascinating quotes, ideas, stories, historical examples and even one equation in ways that make the reader see things in a whole new way. For example, he puts an intriguing new twist on Chaos Theory, the Butterfly Effect, a poem by Yeats, Systems Theory, the writings of C.S. Lewis and J.R.R. Tolkien, credit card usage, American Idol, the “TriLateral Leadership Ledger,” the IBM way, Aristotle on true friendship, and many other delightful references from every field of thought –all written in a highly understandable and enjoyable way.

After I read Resolved the first time, I placed it next to my work chair and each day I open it randomly and read the quotes or stories on whatever page opens. It is always uplifting. Here are a few topics I’ve studied in Resolved during such random reading:

Why courage isn’t pragmatism
Producers vs. Exploiters
A commentary on Jim Collins’ Hedgehog Principle
The common reasons 23 major civilizations in history declined, and how we can avoid their mistakes
The combining of mind, heart and will
Charles Garfield on Success through Visualization
Will Smith’s work ethic
Never whine, never complain, never make excuses—and what to do instead
Woodward’s 10 principles of financial literacy (Wow! Every American should study these.)
Five steps for effective conflict resolution—in family, business and beyond
How to really build business systems that work
Henry Hazlitt’s economics in one lesson—and how to really understand the economy
The conflict between creativity and realism in national leadership

There is so much more. In one example, Woodward quotes G.K. Chesterton after he was asked to write an essay on “What’s Wrong with the World?” Chesterton wrote simply: “Dear Sirs, I am. Sincerely yours, G.K. Chesterton.” This, in summary, is what Resolved is all about. The rest of the book, all 13 resolutions, teaches us how to effectively become the leaders the world needs—and that we were born to be.

This book has articulated the leadership motto of the 21^st Century: “It has been said that everyone wants to change the world but few feel the need to change themselves. Even a basic study of history, however, demonstrates that those who first focus upon self-improvement usually ending up doing the most good in the world.”

Gandhi taught the same sentiment when he said that we must be the change we wish to see in the world, and Woodward quotes Confucius in saying that those who want to improve the world must ultimately focus on bettering themselves.

Buddha is credited with saying that our purpose in life is to find our purpose in life, and then to give our whole heart and soul to accomplishing this purpose. Perhaps no generation more exemplified such leadership by example than the American founders, and Woodward discusses them and their words (especially Washington and Franklin) at length in showing us how to become the leaders we meant to be.

Woodward also shows examples of effective leadership from such greats as Sam Walton, John Wooden, Ludwig von Mises, and Roger Bannister, among others.

I could go on and on. Resolved really does, in my opinion, mark a leader-shift to a whole new level of leadership training for the new Century. If you are only going to get one book on leadership, this is the one. What a great book. Our whole society needs to study more about leadership, and apply what we learn.

*Links to book titles provided for your convenience in reviewing and purchasing referenced books. Any purchases on amazon initiated from these links result in amazon sharing a portion of their profits with TJEd. Thanks so much for your support!

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Oliver DeMille is the 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 &Book Reviews &Business &Entrepreneurship &Family &Leadership &Liberty &Mini-Factories &Mission &Producers &Prosperity &Service &Statesmanship

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.

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

The Big Debate on American Education

November 4th, 2011 // 4:39 pm @ Oliver DeMille

Home Schools, the New Private Schools, and Other Non-Traditional Learning

The current national commentary on American education is split by a major paradox.

On the one hand, nearly all the experts are convinced that our schools must find a way to effectively and consistently teach the values and skills of innovation and initiative.

If we fail in this, everyone seems to agree, the competitiveness of U.S. workers and the economy will continue to fall behind other nations.

As Gary Shapiro wrote:

“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…

“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.”

And education is the key.

On the other hand, many of the top education decision-makers seem committed to only making changes when there is a consensus among educators, parents, experts and administrators.

They adamantly criticize any who take bold, innovative initiate to improve the situation.

In the meantime, they wait timidly, albeit loudly, for a consensus which never comes.

Because of this view, the innovative success of many parents in home schools, teachers in small private schools and other non-traditional educational offerings go unnoticed or undervalued by the national press.

The reality is, as Orrin Woodward put it: “If everyone agrees with what you’re doing, it isn’t innovative.”

The growing Global Achievement Gap in our schools, as outlined by Tony Wagner’s book of this title, presents an ominous warning for Americans.

We can change things if we choose, Wagner says, by adopting the following values and skills in our school curriculum: critical thinking, agility, adaptability, initiative, curiosity, imagination and entrepreneurialism, among others.

Secretary of Education Arne Duncan quoted Wagner in Foreign Affairs:

“…there is a happy ‘convergence between the skills most needed in the global knowledge economy and those most needed to keep our economy safe and vibrant.’”

He also foreshadowed the decades ahead by quoting President Obama:

“The nation that out-educates us today is going to out-compete us tomorrow.”

It is difficult to imagine our public schools meeting these lofty needs if our teachers are expected to be anything but entrepreneurial, innovative and agile, when they in fact work in an environment that discourages and at times punishes precisely such behaviors.

It is even more impossible to make the needed changes to our education system if we must wait for everyone to agree on a consensus of action.

Change always comes with a few courageous souls taking the lead, showing what can work, and helping others follow their innovative path.

The only way we’re going to see a burst of innovation and initiative in American education is to start paying attention to the myriad exciting educational innovations already occurring.

As Malcolm Gladwell suggests, the leadership right now in many arenas—including education—is occurring outside the mainstream, led by “Outliers” who just forget the experts and create new and better ways of doing things.

If you are one of these educational innovators—at home or in the classroom—keep taking the lead. You are the future of American success!

Category : Education &Family &Featured &Leadership &Liberty &Mission

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.