Our Times

I've been reading Tyler Cowen's The Great Stagnation lately. It is a rather dour book for our rather dour times. It is impressively, lucidly argued, and I do think that Cowen is onto something about the disappearance of what he calls "low hanging fruit" or the easy wealth derived by the 19th and 20th centuries' defining innovations such as modern communications technologies that enabled many of our problems to be solved without too much sacrifice. Now in Cowen's argument we've entered a time of less innovation and therefore less easy wealth. It is therefore far more difficult for society to make the now comparatively tough decisions about how we will fund the solutions to our most vexing social problems, such as how do we pay for health care, or education. But I wonder too if it isn't a bit too easy to write a book like the Great Stagnation at a time like this. It's easy to see no way out of the hole when you've hit the bottom. I don't pretend to believe that it won't take us a while to get our economy back on track, but for a recent, hopeful example look at Germany. I was studying there 7 years ago when they began their labor market and government reforms that have now made them such a competitive economy with their strongest employment market in a generation. Those reforms were not easy. I can remember seeing lots of protests by students and workers against proposals to raise tuition and to cut back on worker benefits, and of course those reforms ultimately cost the SPD and Gerhard Schroeder their majority. But the reforms worked, and Germany is stronger for it. I don't think it's so hard to believe that the U.S. won't be able to find its own way out of the mess it's in right now. There are ideas out there about reforming the tax system by lowering rates but eliminating loopholes to increase the overall amount of revenue being generated (and also perhaps reducing the amount of taxes that go uncollected, in part because the system is too complicated), lowering the rate at which healthcare costs increase by reforming the incentive structure of doctors and health care providers, and by using the powers of the affordable care act to keep a tight leash on health insurance rate increases, modifying our patent system to better serve the new methods and modalities of our times, allowing innovators to enjoy the fruits of their inspiration but not stifle creativity and further innovation in the process, and so on. These ideas could help us get rid of a lot of the rust that has ossified our political economy.

America is at a turning point I feel. We're at a low ebb. We reached the height of our post-war economic boom during the late 1990s and we've been searching since then, or probably since even before that, for a new direction, a new unifying system to help drive our unrivaled run of prosperity into the future. There is no guarantee that we will soon find the answer, but as I said I think there are a lot of good ideas out there waiting. And so I can't feel as dour as I probably should reading Mr. Cowen's book, and perhaps that is a luxury I have that others do not. If you're part of the long-term unemployed right now it's hard not to feel like you've unknowingly signed up to eternally receive the short-end of the stick. I can know that without really knowing what it feels like, and so I am able to believe that we will get out of this, I have that luxury, the luxury of knowing that even if we never make it out I'll probably be alright. But I don't think that makes me wrong, I just think that makes me lucky, and I am most of all grateful for that.