As the United States turns plowshares into swords for a second Cold War, the lessons of the first can serve those who want to consider them. The American policy of peace by force, market-oriented economic growth and open trade defeated the Soviet Union. The emerging conflict with China, with the exception of the military threat against Taiwan, will for the foreseeable future be almost entirely economic. This will make it different from military conflicts with the Soviet Union and its proxies in Eastern Europe, Korea, Vietnam, Cuba, and countless global insurgencies. If the United States maintains peace by force, it can only lose this struggle by losing the source of its economic success: economic freedom.
China is currently extending government dominance over its economy and is suffering from a concomitant reduction in economic growth, tech stock valuations and employment. If President Biden and Congress have their way, Chinese-style industrial and antitrust policies will soon come to the United States. The America Competes Act is the House’s effort to surpass the Chinese Communist Party’s latest five-year plan. The 2,900-page bill would make an old Soviet commissar blush. The Senate version of the bill is better, but why would Republicans try to compete with China in a way they know won’t work when they are heavily favored to regain control of Congress in November?
America’s success in the global economy has never depended on industrial policy or government subsidies. It came from the relative absence of government planning and subsidies. This is hardly news. The US government supported the efforts of Samuel Langley, the foremost aviation expert of the 1890s, in his effort to make America first in powered flight. Its manned airfield collapsed into the Potomac River. It was the Wright Brothers, two unsubsidized but determined bike makers from Dayton, Ohio, who flew to Kitty Hawk, North Carolina, and changed the world.
There has always been an element in American society that sees government intervention in the economy as a source of progress. “I went to the future and it works,” muckraking Progressive-era journalist Lincoln Steffens proclaimed after a 1919 visit to the Soviet Union. New Deal socialists were similarly inspired. After postwar Japan enjoyed 20 years of extraordinary success, with an annual economic growth of 9.6% from 1950 to 1972, many American politicians sought to emulate the Japanese system, in which the government, the unions and business all sat down to plan for growth.
Now, as the Chinese Communist Party devastates China’s once-feared high-tech industry and sends capital into the abyss of government-sponsored industries, some Americans are once again drawn to the political power stemming from an economic system that does not does not work. No logical argument about efficiency will sway them, since efficiency has never been their goal. But what has greater government involvement in the Chinese economy brought? Only a dramatic deceleration in economic growth, a massive destruction of the tech industry – whose equity value plummets by around 50% – and a regulatory and antitrust approach based on the principle that only government should be big and powerful. .
Government did not build America. Thomas Edison, Andrew Carnegie, JP Morgan,
Bill Gates, Warren Buffett, and millions of investors, innovators, and small businesses you’ve never heard of have. No nation can stifle the genius of someone like Jack Ma and hope to become the world’s dominant economy. In all likelihood, China has hundreds of Jack Mas who will never be discovered as they try to do business under a system that one Chinese investor described as “restrict this, cancel that, regulate this , censor this”.
The greatest economic liberator in the postwar world was Deng Xiaoping, not Margaret Thatcher or Ronald Reagan. His reforms from 1978 transformed a stagnant and starving Chinese economy into an economic powerhouse. He did this by reducing the role of government in the Chinese economy, which allowed the natural entrepreneurial ability and genius of the Chinese people to generate an economic miracle. But as the freedom of the market grew to challenge the power of government, the Communist Party stifled freedom.
China can turn its back on its success, but the United States doesn’t have to follow its lead. If there is going to be a competition, then let it be on an American playground, not a Chinese one. Rather than fighting to pass the least bad competitiveness bill now, Republicans should focus on enacting a spending break to stop inflation and win the 2022 congressional election. Empowered by the American people, Republicans could pass a competitiveness bill next year that would make the 2017 tax cuts permanent, impose work requirements on able-bodied adults receiving welfare benefits, expand employment, fix the American supply chain and fund scientific research.
A more competitive America requires resuscitating and strengthening fiduciary standards to ensure retirement and mutual funds act in the best interests of investors, using appropriation riders to stop oppressive regulatory and antitrust abuse by regulators. of Mr. Biden, lifting H-1B visa quotas to allow more legal immigration by those with the skills America needs, and giving every foreign graduate in key business and technical fields cards green with diplomas. The country needs their hands, their minds and their hearts.
It’s time to revitalize the system that made America the global economic colossus, won the Cold War, and lifted billions of people out of poverty around the world, including hundreds of millions in China. No nation will ever be as productive as the United States as the American economy is fueled by limited government, economic freedom, and free markets.
Mr. Gramm is a former Chairman of the Senate Banking Committee and Visiting Scholar at the American Enterprise Institute. Mr. Solon is a partner at US Policy Metrics.
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