The Economy of the Living Dead

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The Economy of the Living Dead

Just as some people foolishly believe we need fewer people in the world, some people still cling to the false assumption that we still need lots
of government regulation, high taxes, and more government-run entities.  These people are like "economic zombies" who keep trying to bring "dead ideas" back to life.

The reality is that continued growth in per capita income arises from improvements in productivity, which in turn drives higher standards of living.  More rapid growth of the economy provides more resources, which in turn can help us to face the coming challenges, such as poverty, an aging population, and energy and food needs. 

As pointed out in a recent issue of The American,1this growth comes from the private sector — from entrepreneurial efforts in a capitalist free-market system.  But those efforts are influenced, for better or worse, by rules, incentives, and the basic infrastructure that the government puts in place.  This is the primary reason that confiscatory taxation, excessive regulation, and proactive income redistribution are a recipe for disaster in the coming years. 

What we need most urgently now — and going forward — is a government that understands the engine of growth.  The new administration must ensure that the entrepreneurial revolution that was started in America continues into the future.  The key to this is recognizing what has driven growth in recent decades. 

After World War II, growth came from big, established firms, such as steel, oil, auto manufacturers, and the old monopolistic telephone company.  But the unprecedented growth in productivity in recent years came from companies like Microsoft, Google, Intel, Apple, and Sun Microsystems — companies that seemed to come out of nowhere. 

However, they didn't come out of nowhere.  They came out of a system that encouraged and rewarded entrepreneurial risk taking.  As the economic environment began changing in the 1970s, with higher energy costs and more globalization, the traditional firms with rigid bureaucracies could not adapt quickly enough. 

Foreign competition — newer and more nimble — began taking over.  Analysts at the time urged big companies to copy the policies of Europe and Japan, even as they missed the most important movement in the United States:  entrepreneurial capitalism that was rapidly renewing the vigor of the U.S. economy. 

An example of how not to approach the future is given in Timothy Smith's book, France in Crisis,

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