More than three years after the financial system exploded, throwing the American economy into a tailspin worse than anything seen since the Great Depression, full recovery seems distant. Unemployment stands at 9.1 percent; millions have been out of work for six months or longer; as of late summer, America employed 6.6 million fewer workers than it did four years ago. The Obama administrations Keynesian economic policies, including the $787 billion stimulus bill of 2009, failed to ignite job growth. The presidents signature health-care law has made things even worse by imposing onerous new requirements on firms and making future costs hard for them to predict. A very un-American pessimism about the future darkens the public mood.
This extra-long issue of City Journal, Rebuilding the American Economy, lays out a clear, powerful set of policies that would jump-start job creation and lay solid foundations for long-term growth. It opens with Luigi Zingaless Who Killed Horatio Alger?, which describes how an era of get-rich-quick housing bubbles, bailouts of profligate banks, and declining economic mobility has tarnished the meritocratic ideal that long underpinned Americas dynamic brand of capitalism. Unless we embrace a fair pro-market, not pro-business, agenda, as Zingales puts it, Americans faith in free markets could be even further eroded and our opportunity society severely damaged.
Innovation is the key to economic prosperity, and we could be doing a lot more to encourage it. As Edward L. Glaeser argues in Unleash the Entrepreneurs, unemployment represents a crisis of imagination, a failure to figure out how to make potential workers productive in the modern economy—and the people best placed to figure out that puzzle are tomorrows entrepreneurs. Various levels of government, Glaeser says, need to demolish barriers to business innovation, which include underperforming schools; misguided subsidies that pull Americans away from the urban areas that spark creativity; and excessive regulations (whose cost Iain Murray and David Schoenbrod detail).
Another way to help innovators create jobs involves the more than 1 million patent applications grinding slowly through the U.S. Patent and Trademark Office, writes Guy Sorman in Patently American. A typical patent leads to five jobs; unclogging the process, then, could result in millions of positions for workers. Even greater job growth would follow if the U.S. could get foreign countries, especially China, to stop violating our intellectual property. Douglas Holtz-Eakin and Paul Howard add that medical researchers produce a particularly valuable kind of intellectual property. If approval for new drugs and medical devices could be accelerated and if Obamacare could be prevented from suffocating new treatments, medical innovation would be a growth dynamo.
A flourishing modern economy requires a nation to have robust human capital—that is, a strong investment in the acquisition and application of knowledge. Improvements in three components of that capital, explains Peter D. Salins in Capital Gains, will be essential for future American prosperity: education, workplace productivity, and immigration. Meanwhile, Joel Kotkins Wanted: Blue-Collar Workers shows how our schools and training programs are failing to provide the skilled laborers—such as machinists for factories and other workers—that the economy needs. And in The Excellence Gap, Sol Stern offers some easy steps to fix a grave problem: our failure to push top students to excel in the vital fields of math and science.
Theres much more on offer in this issue, including Steven Malanga and Wendell Cox on whats really behind Californias jobs exodus; Nicole Gelinass sharp take on how to avoid the coming retirement crisis; Josh Barros proposal of A Tax Code for Tomorrow, which would supercharge investment; Myron Magnet on what the Founders would think of our sometimes tyrannical society; Kay S. Hymowitz on How Brooklyn Got Its Groove Back; and Mario Polèse on the fatuousness of many urban-development theories. As the 2012 presidential race moves into full gear, wed like to think that the ideas on offer here will help shape a reform agenda that will get our economy roaring again.
Brian C. Anderson