A superb interview of Michael Lind. God knows how thebrowser.com can keep getting such interesting guys to talk.
This interview is on US history and has some amazing things to say. First something on US president Obama. Interestingly, we all expected him to be like FDR who will come out with another New Deal to revive the US econ. He says he was more like Hoover:
You’ve touched on an issue that I was going to ask you about – the extent to which history offers a route out of the current economic malaise. You talk about reforms, but where are the reforms going to come from today? Three years into the Obama presidency, not much has changed.
I think you have to get the timing right. The Civil War started in 1860-61 and the period of reform came to a conclusion in 1877 with the end of reconstruction, so it came about over a 15-year period. It’s the same with the New Deal. Most of the New Deal reforms came in the late 1930s, and in some ways the great society reforms of the 1960s were simply the finishing touches to the New Deal, so there you had a 15- to 30-year reform period. A lot of people thought that when Barack Obama assumed the presidency he would be in the position of Franklin Roosevelt in 1932. But, arguably, he was more like [President Herbert] Hoover. In other words, the real wave of reform will come after him. I may be mistaken about this, but I think that no matter who wins the next election – even if the Republicans recapture the White House and control both houses of Congress – their stated programme simply will fail. Even an all-Republican government will have no alternative than to undertake some alternatives to this programme of tax cuts for everybody. It helps them when they’re out of power, but once they’re in power it is not a governing programme.
This is interesting. Most econ history criticises Hoover for his laissez faire policies which deepened the depression. However, this piece showed Hoover was anything but Friedman kinds. He infact tried to stimulate the economy but failed to do so.
Jury is still out on Obama but most think he tried but could not thanks to Republicans. It will be interesting to see whether Obama can become FDR in his second term if he gets a second term. Can Romney become FDR?
Back to US history. He says Amaerica did not become a powerhouse by free market policies. Instead it was govt. which played a great Role alongwith pvt. sector:
Your latest book is a sweeping economic history of America. In a nutshell, how did America become such an economic powerhouse?
Well, it did so as a result of collaboration between the government and the private sector and, increasingly in the 20th century, the non-profit, academic research sector. It’s quite a different story in reality from the tale that is sometimes told of how capitalism grew up without controls in the United States, and then with the New Deal it came under regulation. In fact, the government both at the federal and the state level was deeply involved with projects for promoting the industrialisation of the United States and the creation of a capitalist market from the administration of George Washington onwards.
One of the ways it did so was through investing in infrastructure. We’ve had a series of ambitious infrastructure projects – the early canal system and then the transcontinental railroads that were funded by the Lincoln administration and Congress at the beginning of the Civil War, through to the interstate highways system. But government contribution to the economic growth wasn’t just limited to that – it included funding basic research. For example, Congress gave a grant to Samuel Morse, who developed Morse code and the first American telegraph [in the 1840s], and the government role in R&D [research and development] became central in World War Two. This continued after 1945, with Department of Defense procurement and the National Institutes of Health and other forms of basic federal R&D.
There were 3 industrial revolution in US:
One of the things I argue in my new book is that American economic growth has not been continuous – it’s been very discontinuous and even cataclysmic. Here I follow the school of economists known as Schumpeterians after Joseph Schumpeter – the Austrian-American economist, who in the 1930s identified waves of technological change and successive techno-economic paradigms. With other historians of the US economy, I argue that we’ve had three successive industrial revolutions. The first one began in the late 18th century and was based on steam power and produced the locomotive and steam-powered factories. In the second industrial revolution the key transformative technology was the internal combustion engine, which gave us automobiles, airplanes and electricity. The third industrial revolution, of which we are still in the early phases, is the information or the computer revolution. Each one of these has transformed the economy while, at the same time, the political institutions that were designed for a different stage of economic and technological development have grown increasingly anachronistic. The basic argument of my book is that periodically there are cataclysms like the Civil War and reconstruction like the Great Depression and World War Two, and I believe today’s Great Recession is the beginning of another historic change. In these periods you get waves of reform in which the political and social institutions of the country are remodelled to catch up with the economic structures that have already been transformed by technology.
Then this is real important. He says in US ideology is not divided on basis of liberal or conservative but Hamilton and Jefferson.
In fact, one of my arguments is that through all of these waves of change, the two big traditions are not liberalism and conservatism – which are loose phrases that change their meaning in different periods – it’s the Hamiltonian and the Jeffersonian tradition. These two views go back to Alexander Hamilton, who was the first secretary of the Treasury and to some degree was prime minister for George Washington during his administration, and Thomas Jefferson, Hamilton’s bitter enemy. Around these two figures, from the very early years of the republic, coalesced two views of the proper role of government in the economy. Neither view is laissez-faire. Both the Hamiltonians and Jeffersonians are willing to use government for their particular purposes, but their purposes differ.
The Hamiltonians are nationalist – they see the nation as more important than the states and the cities, which are just components. Hamilton, Abraham Lincoln, the two Roosevelts, through even to Eisenhower and Nixon, want government, business and banking to collaborate often on a very large scale for national economic development. And in different periods they are denounced by the left or the right or the centre – so this isn’t a liberal or conservative thing.
The Jeffersonian vision is not a vision of an unregulated free market, it’s a vision of local communities made up of small banks, small businesses and small government. And so the Jeffersonians, a category which includes William Jennings Brian in the late 19th century and a lot of populist conservatives today, are perfectly willing to have the government intervene to protect small businesses and small banks against big businesses and big banks. One of the major forms of protectionism and privilege throughout American history – which continues today – is the popularity of special privileges for small businesses, even though they may be very inefficient from a Hamiltonian point of view in terms of the national economy.
Throughout most of American history we were not that inventive. In the first and second industrial revolutions – the steam era and the electricity era – all of the major technologies were invented in Britain, Germany and France, for the most part. For example, steam engines were invented in Britain, as was the locomotive. Electricity and electrical motors were developed primarily in Europe. Thomas Edison and others adapted the technology and made their own incremental improvements on it, but essentially it was European technology. The automobile was invented in Germany and then was perfected in France. What the United States did all the way up to World War Two was that it took foreign-invented technology and then applied it on a massive scale, in the same way that China is now doing with technology invented in the United States.
The other point I would like to make is that not only is the period of American R&D leading the world fairly recent – it only goes back to World War Two and the 1950s – but that it was consciously modelled on the research venture capital system of imperial Germany, of all places. In the Kaiser’s Germany before World War One the government began funding research institutes as distinct from universities. You also had in Germany the development of research universities. Americans were inspired by this to create new institutions like MIT, which was devised on the German model. If you look at MIT and Stanford – these two German-inspired research universities – they’ve contributed disproportionately to America and world inventiveness. So just as the American System started out as the French system of manufacturing with interchangeable parts, we essentially took the German idea of the research university and we integrated it with government and venture capital funding in a highly successful way, and it continues to be the most successful part of the innovation ecosystem in the US. But it doesn’t mean that we can be content with that alone. The idea grew up during the tech bubble that we could invent things and then outsource all the manufacturing. That may have worked in consumer electronics and a few other things, but in the long term, most innovation actually comes from the factory floor or people closely working with it. You cannot specialise in invention alone. There’s a circular flow between manufacturing and invention and you really need both.
Read the whole thing. Superb stuff all through. Though, one must be careful reading history. There are many versions of history and one needs to read both sides to form their own perspective..