Sunday, July 4, 2010

Active Government And Entrepreneurial Market Economy

Brink Lindsey has an interesting review of Arthur Brooks' new book "The Battle: How the Fight between Free Enterprise and Big Government Will Shape America's Future." I have not read this book and most likely won't read it, but my interest here is not the book but a comment of Lindsey's that I think is worth pointing out:

The first is free markets; the second, small government. They need not be a package deal. Governments can effectively stifle enterprise and competition without spending a lot of money, while a large public sector and a vibrant private sector can go hand in hand.

Indeed they can. In my words, you can have an active government and a dynamic, creative market economy. These are not mutually exclusive. And I think that this is going to be the ultimate outcome of our political competition. In general the American people are entrepreneurial and support a free enterprise system, but they want government to provide rules for that system. The American people also want a government that can provide a variety of services from a strong military, to infrastructure and social services, to support for science, education and parks, but they want it done in a fiscally and socially responsible manner. And they don't want the burden of these government services to stifle free enterprise. The result will be some practical synthesis of these two positions. This of course will be completely intolerable to both the left and right, driven as they are by a pro-government, anti-market and pro-market, anti-government fundamentalism. The notion that you can be both pro-government and pro-market will not compute. But this combination has been with us since the beginning. America's Founders were not anti-government, they were anti-tyranny, and that's not the same thing. The Founders were creators of governments and their republican ideology gave them the belief that government service was patriotic and positive and that government should take action to improve republican society. Of course industrial age organization and the innovation of the welfare state were beyond their experience so we have no idea how they would have responded. But their republican and liberal ideals were not necessarily incompatible with the required innovations of later generations. After all they invented the modern liberal republic and were at the leading edge of social and political innovation of their era. What are the leading edge ideas of our time? That is where the Founders would be. They were not conservatives, "standing athwart history yelling stop!" Rather they were a rare generation living between the pre-modern and modern worlds, living on the edge of a continent, building a civilization out of nothing, they created the liberal modernity that would prevail 200 years later and prove to be the only sustainable mode of organizing a modern society.

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