Ideas in Development

Individual development accounts, citizen-based trust funds, basic capital grants, broadened stock ownership, and other such ideas that are being refined, proposed, and discussed by today's asset building movement are not utterly unique creations. As the cliché puts it “There is nothing new under the sun."

Whenever you think that the debate over the merits and demerits of the Anglo-American economic model versus the Western European social democratic model has reached a consensus, it starts up again. The Future of Europe: Reform or Decline, by Alberto Alesina and Francesco Giavazzi, is the latest installment. It ends at a different place than the last book on the subject that I read, David Howell's Fighting Unemployment: The Limits of Free Market Orthodoxy. (Its conclusion was low unemployment can occur in wide variety of settings from the free markets of the US to the regulated markets of Scandinavia.) Instead, The Future of Europe argues that without comprehensive reform continental Europe's over-protected, over-regulated economies will continue to trail the US. This does not mean that all these or even any of these nations will become poor. Relative to developing countries, they will still be wealthy and relative to the United States, they will have a comfortable standard of living. But a slower rate of growth will definitely limit Europe's political influence. It might exacerbate European efforts to absorb their rising number of immigrants into their polity and society. And it raises large challenges in dealing with the pension liabilities and health care costs of an aging population in Western Europe.

BOOK REVIEWS OF THE INVISIBLE SAFETY NET AND ONE NATION, UNDERPRIVILEGED

Once every decade, Charles Murray, self-described libertarian, throws another Molotov cocktail at the left, liberals, and other defenders of the welfare state. In Our Hands, his latest policy incendiary, proposes to replace the welfare state with cash grants to all American adults. Rather than trying to fix bureaucracies or reinvent safety net service delivery, Murray suggests abolishing the entire system of social insurance payments, in-kind support, housing subsidies, and so forth, and creating an annual $10,000 grant, with only two requirements - you must be an adult and you must use $3,000 to buy health insurance. This means Medicare, Social Security, Head Start, Medicaid, food stamps - everything - would be terminated.

THREE RECENT BOOKS ON ENTREPRENEURSHIP

Carl J. Schramm, The Entrepreneurial Imperative. New York: Harper Collins, 2006. ($24.95)

Michael H. Shuman, The Small-Mart Revolution. San Francisco: Berrett-Koehler Publishers: 2006. ($24.00)

Bo Burlingham, Small Giants. New York: Portfolio, 2006. ($24.95)

Entrepreneurship is a pretty hot topic right now in the United States. In our currently cynical country (with regards to big business, big government, politics, etc.), entrepreneurs and small business owners also receive widespread respect. Both are sold as cultural icons, living the good life, setting their own hours, renewing the economy, being their own boss, and pursuing the American Dream.

I profess that I have a generally irritable disposition to books on leadership and management. Most start on a high note and some wonderful metaphor or story, which can successfully propel the book to the mid-point, where the reader finds the author repeating herself and offering advice, which is the equivalent of truisms, such as "buy low, and sell high", "find your ideal niche," and "those who truly lead empower."

The management bookshelf is also incredibly "fad-driven" and seeks to divert our attention and try to persuade us to taste "the flavor of the month".

A BOOK REVIEW OF THE PLAN: BIG IDEAS FOR AMERICA

First impressions of The Plan: Big Ideas for America, co-authored by Clinton White House policy stalwarts Rahm Emanuel (now a Congressman) and Bruce Reed (now head honcho at the Democratic Leadership Council), are positive. It's a decent book with a decent policy agenda by decent people. In this day and age, you can never have too many books and articles by Democrats that combat the widely asserted notion that the Democratic Party is bereft of ideas. The writing is clear and concise. For the most part, the ideas and policy platform are sound.

The 2006 Mid-term Elections have turned the American political and policy worlds upside down – or, may be right side up. Earlier this year, two of our friends and extremely bright economists authored two very accessible tracts on making the American economy a bit more just and decent. The chances of their proposals becoming reality are lots higher today. The first that I will discuss is Dean Baker’s The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer.

You might not normally think that books with the titles, The Economy Of Puerto Rico (2006) or Multinational Firms in the World Economy (Princeton University Press: 2006), would be mandatory reading for advocates of more accountable economic development programs in the United States. But they are. The Island nature of Puerto Rico and its ties to the United States make it a fascinating business climate “laboratory.” The latter study of multinationals includes data on transnational investments in both developed and developing countries, as well a comprehensive review of the foreign location literature.

A Book Review

MIT professor and expert on Asian economies, Alice Amsden, takes aim at different game in Escape from Empire: The Developing World’s Journey through Heaven and Hell: U.S. foreign economic policies.  Professor Amsden thinks that these policies have taken a turn for the worse.  In the recent past, she argues that the United States let other countries, unless they were communist or in danger of “going communist,” do their own thing.  (American-aided coups in places, such as Guatemala, Iran and Chile, were the response if you turned toward what U.S. policymakers regarded as the “Dark Side.”)  In general, however, the U.S. took a hands-off approach, offering aid and encouragement while putting some modest pressure on nations to lower tariffs or other traditional protectionist tools.   This practice allowed the Third World to explore scores of different economic development approaches, ranging from export promotion to import substitution, from state ownership to partnerships with Big Oil. 

Left-of-center policy wonks and the broader progressive community are quite excited about the effort, led by the Center for American Progress, to advocate for a national strategy to cut poverty in half.  The Center’s recent publication, From Poverty to Prosperity: Report and Recommendations of the CAP Task Force on Poverty, does a good job in articulating a strong rationale and describing an agenda for getting there.  Its 12-step program calls for:

1. Raising and indexing the minimum wage to half the average hourly wage;
2. Expanding the Earned Income Tax Credit and Child Tax Credit;
3. Promoting unionization by enacting the Employee Free Choice Act;
4. Guaranteeing child care assistance to low-income families and promoting early education for all;
5. Creating housing vouchers and promoting more equitable development in and around central cities;
6. Connecting disadvantaged and disconnected youth with school and work;
7. Simplifying and expanding Pell grants;
8. Helping former prisoners find stable employment and reintegrate into their communities;
9. Ensuring equity for low-wage workers in the Unemployment Insurance system;
10. Modernizing “safety net” benefits programs to obtain employment that provides a decent level of living;
11. Reducing the high costs of being poor by increasing access to mainstream consumer goods and financial services; and
12. Expanding and simplifying the Saver’s Credit to encourage saving for education, homeownership and retirement.

Daniel J. Fiorino’s The New Environmental Regulation is an important book for environmentalists and economic developers.  Following in the footsteps of James Boyd (Resources for the Future), Peter Barnes (author of Skytrust), Malcolm Sparrow (Kennedy School), Archon Fung (Kennedy School) and Daniel Esty (author of Green to Gold), Fiorino seeks to demonstrate that the United States has accomplished all the environmental protection that it can with its traditional approaches to regulation.

I do not want to imply that all is rosy in my recent articles regarding regulation.  Since the Reagan Presidency, the Law and Economics movement and the Public Choice school have dominated the intellectual argument regarding pollution prevention and control, worker safety, and consumer rights and, in tandem with increasing numbers of conservative judges have pushed regulatory law and practice in unprogressive, laissez faire directions.

A recent issue of the New Yorker (July 9 and 16, 2007) featured an excellent review of The Myth of the Rational Voter: Why Democracies Choose Bad Politics, a new book by a George Mason University economist Bryan Caplan.  Penned by the always thoughtful and literate Louis Menand, the review evaluates Caplan’s argument that “increasing voting participation is a bad thing.”  Why? 

A Book Review

The recent book by Sandra Burud and Marie Tumolo, Leveraging The New Human Capital: Adaptive Strategies, Results Achieved, and Stories of Transformation, is a terrific achievement.  The work includes excellent overview essays by big thinkers, such as Peter Senge, Mihaly Csikszentmihalyi, Robert Reich, and Rosabeth Moss Kanter.  The essays cover the following topics: the importance of relational capital, the new leadership and the need for a better balance between work and family, along with in-depth case studies of DuPont, Baxter International, SAS, and FIN.  The cumulative impact of these articles is quite persuasive, making a strong case that changing demographics and technology, the widespread emergence of the “knowledge worker”, globalization, faster product cycles and increased work hours are driving changes in human capital strategies.   This book confirms that people increasingly drive business success, but also that today’s workers have a dual focus—family and work—and strive to achieve a good balance between the two.

A number of years ago, a contentious, brilliant philosopher, political theorist and ex-Marxist wrote down the following rules for democratic discourse:

Economists often claim that they are the only genuine social scientists. Not everybody buys this line.

Instead, skeptics argue that the economics that dominates the teaching of undergraduates and graduate students is only a single school of economic thought – generally, described as mainstream economics or neo-classical.

This appears to be the virtual consensus among those practitioners of the “dismal science,” if one turns to the advice of three fairly recent books on the subject:  William Baumol, Alan Blinder and Edward Wolfe’s Downsizing in America: Reality, Causes and Consequences (2003); Pierre Cahuc and Andre Zylberberg’s The Natural Survival of Work: Job Creation and Job Destruction in a Growing Economy (2006); and Clair Brown, John Haltiwanger and Julia Lane’s Economic Turbulence: Is a Volatile Economy Good for America? (2006). We should note that some of these authors could be regarded as liberals (for instance, Blinder and Wolfe).  I am making this point so that the reader will not assume that these books are all written by conservatives and libertarians.

Blessed Among Nations: How the World Made America is a fun, fascinating read. The author, Eric Rauchway, knows how to assemble his evidence and how to tell a story. The book is an examination of an earlier period of globalization. The country was in a unique position, from the Civil War to World War I. During this period, it was the place to invest and a massive amount of foreign capital flowed into the U.S., as its population soared and the Western frontier was developed.

The U.S. federal government was rather weak and there was little regulation of commerce, few protections for the working man or women, intense and violent conflict between labor and management, and constant additions of immigrants to the workforce, who were subjected to cruel exploitation and terrible working conditions.

Another way to get a sense of the costs and benefits of other economic development and employment programs relative to the use of business incentives is to follow a hypothetical example created by Professors Alan Peters and Peter Fisher at the University of Iowa.  They reason as follows:

A Book Review of “State of the Unions”

Philip Dine’s “State of the Unions” has a subtitle that says it all: “How Labor Can Strengthen the Middle Class, Improve Our Economy, and Retain Political Influence.” 

Dine has covered the union beat for the St. Louis Post-Dispatch for more than two decades.  His new book is a well-written, fairly comprehensive look at trade unions, who have now shrunk to 12% of the American workforce, but are making some progress in reaching  white and blue collar workers, ranging from doctors and nurses to janitors and catfish processing workers.

A Book Review

Edited by Alan Jenkins and Brian Smedley, All Things Being Equal: Instigating Opportunity in an Inequitable Time, is the first publication of a new organization that they run, The Opportunity Agenda.

Oxford University Press’s International Migration: a Very Short Introduction is the place to begin.  The author, Khalid Koser, does an excellent job of tackling the big issues:

French Economist Daniel Cohen

French economist Daniel Cohen’s books on today’s economy deserve wide readership among policy makers, activists and intellectuals.

Hardly a household name or common feature of the American talk show circuit, (or is the proper word “circus”?), economist Daniel Cohen has authored a series of readable, challenging and illuminating works. He is a master of the book-long essay and is big on irony.

Cohen’s core arguments and diverting digressions offer little ideological solace to right or left. Both views are found wanting. Solutions that he proposes tend to draw from each side of the political spectrum.

Edited by Stephanie Greenwood and with an introduction written by David Cay Johnston, author of a great exposé of the U.S. tax system, 10 Excellent Reasons Not to Hate Taxes is a much needed liberal manifesto.  Short and lucid articles provide the case for charging equitable and sufficient “dues” for this club to which we all belong: the U.S. of A.

Now, here are the reasons, absent evidence, rhetoric, or polemic: