James Pinkerton gets the core of my economic argument correct—that properly trained talent and the economy’s capacity and willingness to take risk—constrain growth in today’s knowledge-intensive economy, not savings or labor and that these constraints have implications for trade and immigration. He also recognizes that, as an advocates of free markets, I call for compromise with Reagan Democrats eager to support Trump to build a winning majority. However, he overstates my conclusion. In my estimation, it’s not “globalized trade” and “immigration” that “has cost jobs and hurt ordinary workers’ incomes;” more specifically, it’s perennial trade deficits and low-skilled immigration.
by James Pinkerton
October 3, 2016
The Curious Case of the Inspiring Edward Conard
Thus as we make our peace with FDR’s Four Freedoms—all the while, trying to perfect them, even as the simultaneous evils of oppression and anarchy are trying to subvert them—it’s perfectly reasonable for liberty lovers to ponder new ways by which to advance liberty.
So now we might ask: What comes next? In particular, libertarians might ask themselves: What’s the next frontier for freedom? And, hopefully, could there be more than one?
We can start by realizing that in the political realm—and it’s hard to think of anything that happens in the real world without the interplay of politics—there will always be tradeoffs. That is, if libertarians want something, they must figure out how to get it done, and what it takes. As noted, politics is the art of the possible.
And here, I will freely confess, even proclaim, that I have been influenced by Edward Conard, a former partner of Mitt Romney’s at Bain Capital and, most recently, the author of The Upside of Inequality: How Good Intentions Undermine the Middle Class. In this book, Conard wrestles with that key aspect of politics—the art of the possible.
Conrad himself is an unabashed free-market capitalist who first burst into prominence in 2012, declaring his full-throated support for Romney, Bain, and the capitalist system. Yet as we all remember, in 2012, that didn’t work out so well. Not only did Romney lose, but since then, the rise of Bernie Sanders and his socialism tells us that neither private equity funds nor capitalism itself are popular.
In his new book, Conard shows that he has moved with the times. He puts forth an interesting and original argument: The real cause of the slow-growing economy of today is the shortage of human capital—that is, smart and skilled people who can apply the arts of innovation and entrepreneurship to existing problems.
Conard makes a good point: The economy has changed. In the past, what economists call the “factors of production” were typically defined as land, natural resources, and capital. It was these tangible inputs that, when combined together by brainy and hard-working people, created new kinds of output. Yet today, much of the economy has been virtualized, and so the old tangibles have been supplanted by new intangibles; indeed, one could even say that the most important factors of production today are highly intangible: IQ, adrenalin, and caffeine.
Of course, no advance in productivity happens automatically. Thus, as Conard argues, it’s vitally important to allow the processes of innovation and entrepreneurship to continue—and, indeed, for the sake of economic growth, to accelerate them. Which is to say, incentives matter. As Conard writes, “Taxation . . . appears to have large detrimental effects on risk-taking, innovation, productivity, and growth over the long run.”
Okay, so that’s Conard’s ultimate view, which will get no argument from me: We need low tax rates to encourage productive risk-taking. And without a doubt, Conard’s assertions, so far at least, are music to the ears of all freedom-lovers. Ayn Rand, for example, was all about the power of individual genius, and von Mises wrote a book called, simply, Human Action.
Of course, Romney thought the same thing, and we know what happened to him. And Donald Trump, too, thinks tax rates should be reduced—and at the moment, he’s behind in most polls.
And yet here’s where Conard gets interesting: He is far more than just a libertarian pamphleteer; while his own ideology is clear enough, he has also thought deeply about the art-of-the-possible point. And so he has some fresh suggestions as to winning over a skeptical public to his point of view.
In particular, Conard is willing to concede two big points to the populist-nationalists: Namely, that globalized trade, as well as immigration, has cost jobs and hurt ordinary workers’ incomes. And so Conard endorses Trumpian measures to close the border and limit trade deficits.
As Conard explained in a tweet, “Enough middle ground btwn @realDonaldTrump voters & free-marketers 2 ↑ working-class wages w/compromise.”
The point is that Conard is making a political-economic offer to the Trump voters, as well as blue-collar Sanders voters: We will protect you against the gale winds of globalization, even as capitalists create more jobs here in the U.S. And in return, you must protect us against anticompetitive and unproductive confiscation. In other words, we need each other to fight the real enemy: the socialists, as well as the anti-growth greens and the anti-American multiculturalists.
Thus we can see the outlines of an attractive political platform: jobs for workers, profits for owners. Why, one could even say that it looks a lot like America at its zenith, in the middle of the last century, when we not only won World War Two, but also drove the unemployment rate down to one percent—only this time, with much lower tax rates!
Thus in the person of Edward Conard, we can see a little bit of that FDR spirit—the spirit of charting a practical course that could generate a critical mass of support that will in turn stave off the crazies.
Conard’s heterodox views have raised eyebrows on the right. That is, conservatives and libertarians who were with him on tax-rate reductions found themselves pulling back when they got to his prescriptions on immigration and trade. Indeed, Conard’s platform is downright hateful to orthodox libertarians who want the “whole enchilada”—that is, all the policy prescriptions to be found at, say, the Cato website.
And yet in the real world, down below the ivory tower, most Americans, whether or not they support Trump, have already embraced such views. For example, according to a new poll from Harvard University, 54 percent of Democrats believe that free trade has lost more U.S. jobs than it has created, as well as 66 percent of independents and 85 percent of Republicans. Indeed, the same poll found that only eight percent of Republicans, 11 percent of independents, and 19 percent of Democrats think free trade has led to higher wages for American workers. We can sum up those findings: A huge majority opposes the free-trade status quo, judging it to be harmful to American workers and their incomes. (As an aside, we can marvel at all the billions that have been spent on behalf of favored libertarian causes, and how little effect such expenditures have had.)
It remains to be seen how Conard’s policy prescription will fare in the ongoing battle of ideas: To his fans on the right, he’s a champion of practical policies that might enable the prime goal, the preservation of incentives, to survive. And yet to his foes on the right, he’s a squish and a sellout. And of course, to the resurgent left, he’s just another rich fat-cat who should be soaked.
Still, most Americans, were they to hear of Conard’s pragmatic synthesis, would probably respond favorably.
Okay, so now, in that same spirit of pragmatism, let’s consider some other possibilities. Specifically, let’s think about some new freedoms that are worth fighting for and that, indeed, might attract support for the center-right position from across the ideological spectrum.
Yet before we can proceed, let’s first get something out of the way: Let’s resolve to give up on the no-win war against Social Security and similar programs, especially earned entitlements, including Medicare. As we have seen, the national decision has already been made—we will be our brother’s keeper. And as the last 80 years demonstrate, the ideological right can huff and puff all it wants, and still, the House of FDR still stands.
So let’s stipulate that we accept FDR’s Four Freedoms—all four of them. Let’s say to those who wish to fight losing battles: Do it on your own time, away from the center-right mainstream that seeks to win elections, enact reforms, and, yes, advance freedom in the future.
So now let’s consider prospects for freedom in the future.