Will Robert Reich Please Shut Up
Ronald Bailey | September 5, 2007, 10:07am
Former Clinton labor secretary and perennial industrial policy hustler, Robert Reich, is a leading negative indicator. Whatever he predicts, the exact opposite occurs. In the 1980s, Reich declared that the U.S. economic growth rates were in a permanent slump and that we needed to adopt the economic model represented by the once famed Japanese Ministry of International Trade and Industry. In 1982, Reich co-authored Minding America's Business with Ira Magaziner which recommended that the federal government start directing the economy. A few excerpts below:
"U.S. companies and the government [should] develop a coherent and coordinated industrial policy whose aim is to raise the real income of our citizens by improving the pattern of our investments." According to the two the governments of Japan, France and West Germany "understand that the only real alternative to developing a rational industrial policy that seeks to improve the competitive performance of their economy in world markets is for the government to cede the formation of policy to the politically strongest or most active elements of industry. Industrial policies are necessary to ease society's adjustment to structural changes in a growing economy."
The United States was failing because it had "an irrational and uncoordinated industrial policy," resulting in a "process of economic policy formation [that] remains decentralized and chaotic." They added: "Perhaps the most striking feature of the U.S. industrial policy apparatus is the absence of a single agency or office with overall responsibility for monitoring changes in world markets or in the competitiveness of American industry, or for easing the adjustment of the domestic economy to these changes."
They concluded: "The failure of U.S. industrial policy is not simply a failure of organization, of course. It is a failure of substantive strategy. The industrial policies of Japan, West Germany and France have been more successful than U.S. policies because they have explicitly and consciously aimed at improving the international competitiveness of their businesses."
Total unmitigated flapdoodle.
In 1982, the Reagan Boom was just beginning as his administration dismantled the disastrous "industrial policies" pursued in the 1970s, e.g., a period of wage and price controls and energy price controls. During the Reagan Boom, U.S. economic growth rate averaged 3.2 percent per year and GDP rose by almost 36 percent between 1983 and 1990. Fortunately, President Clinton paid no attention to the economically ignorant nostrums of his Labor Secretary, and the Clinton Boom sailed on, with an average growth rate of 2.3 percent and GDP rising by 33 percent between 1991 and 1999.
Meanwhile Reich's model of economic virtuosity, Japan, entered into more than a decade of economic stagnation, and growth rates in Germany and France slowed to a crawl and their unemployment rates soared. In fact, it was news earlier this year when Germany's unemployment rate declined this June to 9.1 percent for its lowest reading since March of 1995.
Now comes the insufferable Reich with an idiotic article in the current Foreign Policy (sub required) arguing that capitalism is undermining democracy around the globe. An example of his perspicacity is Reich's bizarre assertion:
"Many economically successful nations-from Russia to Mexico-are democracies in name only."
Economically successful? What can be he talking about? Both Russia and Mexico are oil oligarchies with-how shall we say it?--problematic political histories.
As usual Reich thinks that only more state intervention (more democracy) in economies can soften the blows of globalization. Of course, Reich's chief example of undemocratic capitalism is China. China, he writes,
"... is surging toward capitalism without democracy at all. That's good news for people who invest in China, but the social consequences for the country's citizens are mounting. Income inequality has widened enormously. China's new business elites live in McMansions inside gated suburban communities and send their children to study overseas. At the same time, China's cities are bursting with peasants from the countryside who have sunk into urban poverty and unemployment. And those who are affected most have little political recourse to change the situation, beyond riots that are routinely put down by force."
Well, yes. But China's history is not over. (And never mind that rural poverty is even more grinding than urban poverty.) As Freedom House points out the number of countries that qualify as free rose from just 44 in 1972 to 89 in 2005, even as capitalism expanded around the globe. It has been hypothesized that as incomes increase in a country (rise of a middle class), the demand for democratic governance becomes irresistible. This seems to have been the pattern in South Korea, Chile, and Taiwan. Will the same thing happen in China? As a negative leading indicator---whatever Reich predicts, the opposite occurs-don't be surprised if China becomes a democracy in the next decade.
Once what passes for his analysis is complete, Reich ends by grandly declaring that the next step,"which is often the hardest, is to get our thinking straight." Advice on how to "think straight" from a man whose grand policy pronouncements have proven to be always wrong-you've got to be kidding!
Sevenmack | September 5, 2007, 2:39pm | #
Actually Joe, Ron was asking you to prove a point. Let's reread the following comments:
"joe | September 5, 2007, 10:36am | #
You don't usually see someone going back a quarter century to find grist for an ad homenim attack.
And as precise an example of an ad homenim attack I rarely see. We shouldn't take seriously Reich's ideas about the interaction between capitalism and democracy, because of what he wrote about economic policy a long time ago.
Since Bailey book "Global Warming and Other Eco-Myths" is of much more recent vintage, I guess that means we should ignore him, too.
joe | September 5, 2007, 10:42am | #
And, of course, here we see why Reich's observations must be wrong: As usual Reich thinks that only more state intervention (more democracy) in economies can soften the blows of globalization.
Didn't learn a thing from those two decades of denying global warming because you didn't like its policy implications, did you, Ron?
Someone proposes a policy solution you don't like to solve a problem; ergo, there must not be a problem."
The first thing you were doing Joe, since you don't actually read what you've written, was complain that Bailey was making an ad hominem attack based on the fact that he pointed out that Reich was trotting out the same old arguments, this time for a different issue. Then you made a snide remark -- referring to Bailey's changes in position on global warming -- that because Reich got it wrong long ago, he remains wrong on everything. Bailey's response -- making the point that you don't know what you're talking about (and you don't) was to ask you whether you've actually read anything Reich has written.
Bailey was essentially demanding you to prove your argument. You didn't. Enough said.
Neu Mejican | September 5, 2007, 8:49pm | #
prolefeed,
A small point.
A normal curve is a natural distribution.
Like all things in nature, there is no moral dimension to it. The same is true, in a sense, of the basic daily needs to sustain life.
The normal curve includes those that would naturally get less than is necessary to sustain life.
The question of morality (justice) results from contemplating the natural course of affairs, the natural distribution of resources and rewards and reframing our perspective on the distribution away from the group to the individual. From this perspective it is clear that there is usually enough of a resource for every individual in the group to get that which is necessary, without depriving the other individuals of their rewards, or hampering the groups ability to thrive.
Hayek endorsed the basic logic I have clumsily sketched here.
The question becomes pragmatic when applied to policy questions.
Unequal distributions of resources can result in resentment among the have-nots that results in damage to the larger group when the have-nots rise up in revolt. A safety net for the have-nots can be just, pragmatic, and positive for the long-term health of the group.
If, however, too much is taken from the haves in the group, to the point that they revolt, you again have a potential for harm to the group.
It is the balance that matters.
China is far from finding that balance.
The US has traditionally done a fairly good job, but I don't know that it has ever been ideal.
Mark Bahner | September 6, 2007, 2:15pm | #
d with modern cars.Yeah, what super-highways they have. I just read in Popular Science that the most popular car in China is a knockoff of the Chevy Aveo(?) that costs about $5000. Of course, the crash test results of the knockoff are substantially worse (both occupants killed in the knockoff).
At the rate its growing, in three decades China will be the largest economy in the world.
Leaving aside whether China will continue to grow as fast as it is now, or whether the U.S. economy will speed up, there's the tiny fact that China has 4 times as many people as the U.S. economy. Of course, there was no need to remind his audience of that...it might get in the way of the point he was trying to make.
It already graduates more computer engineers every year than the United States.
Again, China has four times the population of the U.S.! It's curious that he uses *percentages* o assess the "dynamism" of China's economy, but then doesn't uses an *bsolute value* to assess its computer engineering capabilities. (And notice how he doesn't mention how many Chinese graduates in computer engineering actually come to the *U.S.*, or to Europe, to get their degrees!)
It's easy to use numbers to make one's point, if one doesn't have any particular interest in telling a complete story.
Communist, as in communal? Are you kidding? The gap between China’s rich and poor is turning into a chasm. China’s innovators, investors, and captains of industry are richly rewarded. They live in luxury housing developments whose streets are lined with McMansions. The feed in fancy restaurants, and relax in five-star hotels and resorts. China’s poor live in a different world. Mao Tse Tung would turn in his grave.
So a man who is arguably one of history's greatest mass-murderers may be turning in his grave...because ALL Chinese aren't destitute, the way HE left them? And we should care about this, why??? (Because Robert Reich apparently would also prefer that all Chinese be poor, rather than some poor, and some rich.)
For years, we’ve assumed that capitalism and democracy fit hand in glove.
Speak for yourself, Robert Reich! Any even casual observer of history can see that countries like South Korea, Taiwan, and Singapore were capitalist long before they were democratic.
What history HAS taught is that capitalism will lead more quickly to democracy than socialism will.
So what is Robert Reich's point? That China will never become democratic, because China doesn't "need" democracy? If that's his point, would he like to place a bet on "Long Bets" to that effect?
I doubt it. He wouldn't be interested in the possibility that history would judge him to be clueless.
P.S. Here's a prediction. If China doesn't go to war with Taiwan in the next 23 years, then by 2030 China will be ranked by Freedom House as at least "partly free" in both political and civil liberties freedoms.
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