Nobody commits their lives to public service hoping to accomplish nothing. Yet, too many of our well-meaning public servants have become essentially incapable of arriving at effective policies on some of the world’s biggest economic and security problems. They seem endlessly gridlocked, pandering to voters’ expectations that are ever more conditioned by the constant flow of gimmicky, sound-bite-length media fragments.
But sound-bites rarely offer sophisticated solutions; they’re fodder for superficial, polarized polemic. Facile tactics are substituting for thoughtful analysis, leaving complex problems careening with intensifying urgency, and voters increasingly anxious about un-stated and un-addressed challenges.
Look at the current U.S.political landscape: The break-out appeal of Donald Trump, Bernie Sanders and even Joe Biden shows how desperate American voters have become for any sign of authenticity through the banal plasticity they’ve been fed for years now. Will this help steer gridlock politics in the direction of nuanced compromises? Toward elevating strategic leadership over tactical bickering? Let’s hope. Because, with very few exceptions the 2016 election cycle so far remains dominated by the usual one-liners like “We can pay for it all because we’ll tax the rich.”
The U.S. economy barely escaped the fallout of the last financial crisis. Since the government’s stimulus plan combined with the Federal Reserve’s large-scale bond plan stabilized markets in 2009, Congress has been frozen in dead lock from enacting any further fiscal reform, other than regulations like Dodd Frank and the Volker Rule, which actually made things worse by limiting or outlawing financial institution activities. Instead of addressing the root cause of the financial crisis (excessive leverage), these policies created a new cohort of too-big-to-fail banks with too-few-to-prosper business lines, quite possibly sowing the seeds for the next financial crisis by impairing banks’ capacity to perform what have historically been critical market-making and liquidity-providing functions.
Our leaders and markets persist in hanging on every Fed utterance, while silent anxiety about the lack of policy leadership and uncertainty about the future are slowly bubbling toward toward the surface. The same is true for Europe: while many politicians claimed economic leadership, it was the European Central bank that dictated the terms of behavior.
The unspoken truth is that economy isn’t recovering to its pre-crisis strength — and that can no longer be blamed on the Great Recession. Nor can central banks alone do any more to fulfill their job-growth and price stability mandates, because the economy is facing deep structural headwinds to both. The engines of economic growth in the developed economies are undergoing a historic transition from manufacturing and services to information technology. Technology is efficiency-creating, cost-reducing and displacing both unskilled and skilled labor, leaving the new wealth of the tech economy ever-more concentrated in the hands of relatively few tech innovators and financiers, with the middle class (and ultimately its consumer demand) lagging behind.
Many economists blithely assume that the jobs and inequality problem is temporary; that workers will eventually find good jobs in the information economy, just as they did when technology moved the economy from the farm to factory in the last century. Maybe true, but the dismal participation rates in the jobs market, especially impacting the young, leave the discourse begging for more specific vision about exactly how this is going to come about in the current economic transition. And we had better find the vision while there’s still time to to preempt the throw-away calls for tax-and-spend redistribution. Have we not at least learned from the collapse of socialism globally over the past quarter century that governments lack the incentives and the resources to efficiently allocate and manage capital in the micro-economy?
An effective strategic response to the inequality challenge will need to be focused on equalizing opportunities rather than outcomes. Of course this too is a one-liner, but who in the United States or Europe is even actually saying it? At the very least, removing barriers to social mobility will require important tax, regulatory and educational reforms to give people the qualifications and liberty to improve their lives in the new economy. There is even a role for renewed public/private investments in the developed world’s crumbling infrastructure. That could create hundreds of thousands, if not millions, of new jobs, while reducing the friction and inefficiency in everyone’s lives. Where are the candidates, dialogue and compromises around this?
Our thought leaders, including central bank officials, might actually take some lessons from China, whose economy is hardly “melting down,” as our Twitter-level discourse would have us believe. China’s leaders are in fact demonstrating historic strategic discipline, taking all the right steps to transition its growth model from one focused on government investments that are no longer necessary to one centered on consumption. The country is – at least in this context – on the right path: wages have risen up to 17% annually, prices are being freed from market control, and state-owned enterprises are being reformed and ready for privatization. A growth rate of 5% backed by consumption is much better for China and the world than the 14% of a few years ago, which was, in the end, unsustainably backed by investment in “bridges to nowhere.” China’s continuing strategic transition is one of the most important economic stories of our generation.
It’s high time for some thoughtful solutions to long term problems. This doesn’t mean leaders voters have to give up our beloved social media. We need to start using them more constructively. Social media works in both directions; they can actually be used to facilitate the give and take of conversation and collaboration, leading to deeper analysis and more durable solutions.
There might ground for optimism, after all, that the shallow and cynically polarized environment will eventually yield to a level of discourse that starts rising effectively to the challenges. Then, of course, this elevated dialogue would bring real progress to problems across the span of issues even beyond economics, including social policy and national security.
Daniel J. Arbess is CIO of Pridelands Investments, a private investment firm, and a co-Founder of No Labels, a U.S. political organization promoting collaboration across the political spectrum.
