In this crazy political season, which seems increasingly permanent, two narratives are being established on both ends of the political spectrum and both are misguided. This new book, Concrete Economics: The Hamilton Approach To Economic Growth and Policy, has a very important contribution to make.
On the right, the narrative that has been established for some time is that government is the enemy of business. It regulates too much. The only answer is to get government “out of the way.” That means slashing financing support for different programs like the Export-Import Bank. That’s corporate cronyism, this camp argues.
On the left, the narrative in vogue is that it’s up to government to protect everyone from rapacious wrong-doers in the business world, starting with Wall Street and the investment banker/hedge fund/private equity complex. Government has the answers; the private sector is evil.
But Stephen S. Cohen and J. Bradford DeLong challenge both those views and argue, persuasively, that U.S. economic history is marked by collaborations between government and business, which have created enormous wealth for millions of people. As I argued in my 2011 book, “The Next American Economy: Blueprint For A Real Recovery,” there are right ways and wrong ways for government to engage with the corporate sector. “In successful economics, economic policy has been pragmatic, not ideological,” the authors argue in their introduction. “It has been concrete, not abstract.”
The two professors are from Berkeley, which marks them as left-of-center in the eyes of some, and it is clear that they are not fans of Ronald Reagan, who took office in 1980. But their arguments are strong and seem to me to transcend ideology.
They argue, for example, that the U.S. government has consistently opened “new economic space” that private corporations and individuals have prospered from. It was Alexander Hamilton who recognized that the United States needed to become a manufacturing powerhouse and ease its dependence on Britain. His thinking has now shaped the economic policies of our major competitors in the world, Japan, Germany, Korea and China.
The U.S. government was responsible for canals, railroads, dams and land grant universities in the old days. President Eisenhower built the interstate highway system. More recently, the government’s research funding created the Internet and the biotech industry.
The conclusion of Cohen and DeLong is that we need to refocus our national growth strategy with pragmatic policies that create wealth based on new ideas. We need to take our economic debate out of the ideological realm. That was precisely the point of my book. I am pleased that some economists agree.