Choosing the Path to Prosperity

Here is a bit from a good essay by Joseph Stiglitz in Project Syndicate that looks at the alternatives between the political left and right in terms of a "growth strategy":

A second major difference between left and right concerns the role of the state in promoting development. The left understands that the government’s role in providing infrastructure and education, developing technology, and even acting as an entrepreneur is vital. Government laid the foundations of the Internet and the modern biotechnology revolutions. In the nineteenth century, research at America’s government-supported universities provided the basis for the agricultural revolution. Government then brought these advances to millions of American farmers. Small business loans have been pivotal in creating not only new businesses, but whole new industries.

The final difference may seem odd: the left now understands markets, and the role that they can and should play in the economy. The right, especially in America, does not. The New Right, typified by the Bush-Cheney administration, is really old corporatism in a new guise.

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The right’s deregulation mantra was simply wrong, and we are now paying the price. And the price tag – in terms of lost output – will be high, perhaps more than $1.5 trillion in the United States alone.

The right often traces its intellectual parentage to Adam Smith, but while Smith recognized the power of markets, he also recognized their limits. Even in his era, businesses found that they could increase profits more easily by conspiring to raise prices than by producing innovative products more efficiently. There is a need for strong anti-trust laws.

It is easy to host a party. For the moment, everyone can feel good. Promoting sustainable growth is much harder. Today, in contrast to the right, the left has a coherent agenda, one that offers not only higher growth, but also social justice. For voters, the choice should be easy.

The tragedy with America's Republican party is that ignorance and ideological rigidity have become idolized while intelligent perspective and careful reasoning are laughed at. The political right happily sign "no tax increase" oaths without a minute's thought of what that means and how it constrains the future. That kind of simplistic reasoning is very dangerous for the US. A more intelligent, more nuanced approach to business and growth is needed.