Economic Growth – Page 44 – artdiamondblog.com

Leading Clinton Economist Advocates a Schumpeterian “Dynamism”

Source of book image: http://www.amazon.com/gp/product/product-description/0743237536/104-0088216-5679944

Today’s review of the new Gene Sperling economic policy book in the New York Times Book Review, begins by emphasizing Sperling’s importance in the Clinton administration:

(p. 16) If you were inclined to identify Clintonism with a single person other than the big man himself, that person might well be Gene Sperling – a top campaign adviser in 1992; a tireless advocate of fiscal discipline during the first term; an inveterate policy wonk throughout all eight years of the administration. So it’s little surprise that this book-length vision for a Democratic economic strategy can best be described as Clintonism 2.0.

NOAM SCHEIBER. “Clintonism 2.0.” The New York Times Book Review, Section 7 (Sun., January 22, 2006): 16.

Here is the opening paragraph of Sperling’s chapter one, which is entitled ” Growing Together in the Dynamism Economy.”

In the 1990s, a new economic era was created when a period of intense globalization collided with an information technology revolution. Yet precisely defining a "new" economy is less important than understanding the nature of the change. I believe a more descriptive label is the “dynamism” economy. Of course, dynamic change in market economies is hardly new. The mid-twentieth-century economist Joseph Schumpeter identified the process of “creative destruction,” positing that a healthy market economy is continually moving forward, replacing old capital, old industries — and existing jobs — with more productive alternatives. Yet, what feels most “new” for average citizens is the breakneck speed at which the increased globalization, rapid technological advance, and the explosion of the Internet are putting fierce competitive pressures on the economy and accelerating change not only in products and services, but also in entire job categories and industries.

Part of the first chapter is viewable at Amazon.com. The book citation is: Sperling, Gene. The Pro-Growth Progressive: An Economic Strategy for Shared Prosperity. Simon & Schuster, 2005.

“Dynamism” as a descriptor for the good society also appeals to libertarian economics columnist Virginia Postrel, author of The Future and Its Enemies and webmaster of dynamist.com.

Rioting Caused by Economy Closed to Creative Destruction

Source of photo: WSJ online version of article quoted and cited below.

The French rioters face very high unemployment. French restrictions on the labor market, and the economy more generally, cause the high unemployment. For example, the French make it hard for firms to fire employees, so as a result, firms are more reluctant to hire workers in the first place, resulting in higher unemployment. Although they do not know it, the rioters are rioting because France is closed to creative destruction. The following commentary is on point:

(p. A16) Like other Americans, immigrants often dramatically improve their quality of life and economic prospects by moving out to less dense, faster growing areas. They can also take advantage of more business-friendly government. Perhaps the most extreme case is Houston, a low-cost, low-tax haven where immigrant entrepreneurship has exploded in recent decades. Much of this has taken place in the city itself. Looser regulations and a lack of zoning lower land and rental costs, providing opportunities to build businesses and acquire property.

It is almost inconceivable to see such flowerings of ethnic entrepreneurship in Continental Europe. Economic and regulatory policy plays a central role in stifling enterprise. Heavy-handed central planning tends to make property markets expensive and difficult to penetrate. Add to this an overall regulatory regime that makes it hard for small business to start or expand, and you have a recipe for economic stagnation and social turmoil. What would help France most now would be to stimulate economic growth and lessen onerous regulation. Most critically, this would also open up entrepreneurial and employment opportunity for those now suffering more of a nightmare of closed options than anything resembling a European dream.

For the full commentary, see:
Joel Kotkin. “Our Immigrants, Their Immigrants.” The Wall Street Journal (November 8, 2005): A16.