Friday, July 08, 2011

You Gotta Do What You Gotta Do

A significant fraction of American economic capacity is going unused. We not only aren't getting the goods and services this capacity could produce, but more importantly we're losing future capacity because of flagging real investment in plant, personnel, and technology. The private sector is sitting on piles of money right now and could invest, but won't because it doesn't make any sense to produce goods and services nobody is buying or can buy—all the surveys of business people list absence of customers as the prime reason for decisions not to hire. Under the circumstances, I don't see the alternative to public investment.

The notion that resources put to work by governments are somehow not productive is obviously false. Indeed, the most obviously needed capital investments are just the kinds of things that governments have traditionally undertaken or subsidized: transportation infrastructure, research, education, environmental remediation. They are also the investments that the roaring new Asian economies are undertaking as they outstrip us. Does somebody actually believe that the Erie and Panama Canals, the land grant universities, the railroads, the interstate highway system, or the Internet weren't productive investments? Really?

The Conservatives, who favor policies that promote income and wealth disparity, should think twice before blocking projects that put the country back to work. America has consistently tolerated levels of inequality that led to popular revolt elsewhere in the world because economic expansion gave the have nots hope that they would eventually become haves. Absent renewed growth, it will soon become apparent to anybody who hasn't already figured it out already that America is not only stratified but that its class divisions are becoming set in stone. The philosopher Hegel once remarked that the French Revolution would never have taken place were the forests of Germany still empty. By the same logic, we never had a revolution comparable to the French Revolution in this country because in the 19th Century we had a still open frontier and in the 20th we had several episodes of dramatic industrial growth. If the Republicans don't want to end up with their heads on pikes, they might want to reconsider their opposition to the public investments essential to a fresh burst of economic expansion. Ironically, restoring a realistic sense of hope to people of middling means is essential to maintaining America's tolerance for inequality.