In a previous post, I questioned the narrative that says that you can describe the past three decades of economic change as resulting from a wave of deregulation. Instead, here are a list of drivers that I think played a major role in shaping the way today's economy differs from that of thirty years ago.
1. The personal computer's evolution
2. The Internet's evolution
3. The stratification of marriage, with college-educated people marrying one another and less educated women having children out of wedlock.
4. The fall of the Communism in Eastern Europe, and the rise of capitalism in India and China.
I cannot think of any U.S. government policies that have any significance in comparison to those developments. (Yes, I know that the Internet was started by the government, but its impact on the economy and society really took place when the private sector took it over).
Perhaps the same will hold true going forward. That is, the basic course of the economy will not be affected by government policy. That would be a comforting thought.
Monetary policy is very different from when Arthur Burns was telling congressmen; 'Inflation? Don't look at me, I'm just the Fed Chairman. Ask the businessmen and labor leaders.'
Dale Earnhardt?
The advances in medical technology and pharmaceuticals.
What about cuts in marginal tax rates and in the cap gains tax rate? And as a previous poster mentioned, the relative taming of inflation by the Fed.
interesting contrarianism. How do you think this can be tested empirically? Given that regulation could have retarded these 4 developments, why do you think deregulation didn't significantly contribute as well?
Also consider
The Reconquista - illegal aliens changing the fabric of America and overburdening the welfare state - leading to the balkanization of America
Look at Obama and McC pandering to La Raza (a federally funded hate group)
Yeah - 80 million illiterates who cannot and will not speak English really contribute to the economy.
Outsourcing, NAFTA, etc with most consumer goods being assembled by Chinese (slave)labor.
The dumbing down of America's youth - most people under 30 have the attention span of a housefly - creating a useless workforce.
If ever there was a dumbed down comment on this blog, that has to be it.
Telecom deregulation is huge. The shift from arbitrarily regulated tariffed rates to marginal cost has for example, pretty much eliminated the whole social concept of "long distance". Even my grandparents don't say "I'm on long distance with so and so" any more!
But I totally agree with (3). If you want to do anything about income inequality, you've got to start with capping the number of years of post high school education that can be brought into a marriage. Which is ridiculously silly, BTW.
Like the previous comment said -- the deregulation of telecommunications had a huge impact on the development of the Internet and distributed computing.
So to they extent that they've been a major driver...
Can it be argued at all that #3, though not a government policy itself, has been driven in some part by making income redistribution a government policy?
The government policies in the past thirty years that have affected our country profoundly (and negatively) are the continual escalations of the War on Drugs and the continued erosion of federalism.
I am aware that I keep harping on the same thing, but the governments inability to balance the budget over the last 30 years has done more to drive economic change than most people realize. And, yes the budget was balanced for a short period in the late 90's but for most of that period it was not. By encouraging spending over savings domestically, this created a long period of economic activity but drove out savings and capital formation. Because our own savings rate was low and dropping, most of the T Bills sold to keep the government deficit from becoming inflationary were sold overseas. This had the desired effect of pulling money out of the money supply but it was money that should have been chasing our exports. This led to trade deficits and the loss of many of our manufacturing jobs.
The result today is a large number of households that have too little equity in their homes and automobiles that are now turning to credit card debt to stay afloat. Unfortunately the governments only tool to fight bad economic times is to stimulate the economy, which is what has been happening for the last 30 years. We need to carefully do the opposite to unwind some of the debt but without losing too much economic momentum and the jobs that go with it. The good news is that by eliminating our borrowing from overseas, the money we were pulling out of the system will be available to buy our exports again. It will take someone with more economic understanding than anyone I know of to lead us through this, but it can be done.
In the mean time, what 30 years of overstimulation has done to our economy is being blamed on greedy capitalists and defects in market economics. We need a leader that truly understands economics, and that is neither Barack Obama nor John McCain.
Arnold Kling muses "going forward, the basic course of the economy will not be affected by government policy." I agree, and the key reason is that most of the government policymakers believe that the "hands-off" or noninterventionist policy is best. The spirit of deregulation, which entered the government mainstream in the late 1970s, is firmly still with us today. Once you accept that as fact, it's easy to go on to predict that government policy will have only supplemental, weak effects on the economy.
Arnold quotes somebody saying that for the past three decades the economy has been flourishing in a regulatory environmnent that may be called Reaganomics (or Thatcherism) meaning less statism, more market forces. That's right -- and it's not right for Arnold to twist and distort that into "the narrative that says that you can describe the past three decades of economic change as RESULTING FROM a wave of deregulation".
I have to agree with the previous posters that cited massive federal budget deficits and highly inflationary monetary policy as key points to include on the list. How much of our prosperity is either borrowed from future generations or the result of recklessly printing money - or both?
Alas, I see no near-term solution to either of these problems, so long as Helicopter Ben is running the Fed and McCain/Obama are driving fiscal policy.