A mindset based on economic development was once the cornerstone of American prominence, but is now ignored in the face of ideology. An economic policy that supports reasonable competition, promotes the growth of new markets and encourages investment is not unique to the left or right. A lack of focus on pragmatic economic policy, free from the constraints of ideology, undermines our ability to be competitive against those who may threaten the economic order we have long promoted.
Since the end of World War II, the United States has taken its allies in a direction of free trade, one that until recently faced few challenges. This doesn’t mean we don’t still levy small sanctions and take safeguard measures against countries who we think trade unfairly, such as the excises we impose on steel imports from China and Vietnam. Even in the Bretton Woods system of lowered tariffs and fixed currency exchange rates that lasted until Nixon took us off of the gold standard, trade may have been freer than ever before, but it was regulated by fixed exchange rates. This path of freer trade, however, seemed inevitable for those on both sides of the aisle.
In the past, we were less afraid to tax imports and use tariffs to make countries work with the US to maintain a US-led system or trade, such as Nixon’s import surcharge in the early 1970s. Before the 1970s, we took pragmatic steps to promote general prosperity and economic dynamism. This is not to say that all populations and parts of the country were prosperous at the same time, but history bears out our ability to industrialize, innovate and grow. This hands-on economic philosophy dating back to the era of Alexander Hamilton is a tradition that we only recently abandoned in our history.
Nowadays, we take a more hands-off approach. Only through interest rate manipulation (the moves of the Fed dictate the movements of practically every currency and interest rates globally, granted) and trade actions do we allow ourselves to make use of our country’s economic position, and we allow much less guidance for the economy on behalf of the government in ways that stimulate growth rather than promote it. We make ideological decisions that are rarely that pragmatic or actively development-oriented.
We should still apply Hamilton’s pragmatic and development-promoting attitude today. A few notable books in recent years detail the system’s accomplishments, books including “Concrete Economics: The Hamilton Approach to Economic Growth and Policy” (2016) and “The Entrepreneurial State” (2016), perhaps inspired by the success of the “Hamilton” musical. On the other hand, it could be discontent with the development from monetarism and radical deregulation. And that discontent is not baseless. The economy has begun to lose the dynamism it once had through a mess of poor regulation and a less effective state.
Neither party seems to discuss economic policy in terms of practicality or pragmatism; instead they wrap economics in pure ideology. When former secretary Hillary Clinton was campaigning, she touted her big infrastructure plan, a staple of the Hamilton school of development of a kind endorsed by Democrats and Republicans in the past. President Trump’s own version of an infrastructure plan sounds in the abstract like a more privately-implemented plan connected with tax cuts, while also openly ushering in somewhat protectionist ideas. Senator Bernie Sanders did not go so far as to propose taxes on imports, but his words concerning international trade deals also favored more regulated trade. This attitude encouraged Republicans to include a Border Adjustment Tax in the party’s official “Better Way Forward” tax plan, a tax which would operate similarly to a VAT (value-added tax) but only on foreign-produced inputs and goods. In late July and early August, the tax was phased out of the platform.
Developmental, concrete policies worked in postwar Europe with the Marshall Plan and in Southeast Asia in the 50s through the 80s. There is an abundance of scholarship about the central government ‘guiding’ the private sector, using pragmatic and concrete strategies to increase general prosperity, ideas pioneered by Hamilton and by the United States which fell out of fashion starting in the 1970s.
It is a shame to see that neither party looks back to this tradition to find solutions to our problems. Both parties have ideological goals that are not focused on American economic development. Democrats speak only of wages and healthcare, sometimes of regulating Wall Street. On these fronts, they’ve had few political wins since Dodd-Frank and the Affordable Care Act. The progressive wing would prefer these efforts reach unaffordable and unrealistic extremes, revealing their lack of pragmatism.
This is not to say regulation can’t be good or that the healthcare system should be changed. Supporting progressive economic goals despite their high cost, however, speaks to a lack of regard for American economic growth. Republicans have historically wanted to cut taxes and decrease regulation, only recently returning to the protectionist rhetoric they held before the 1930s. Like the Democrats, these Republicans are not necessarily wrong. What both parties refuse to do is speak in practical, bipartisan ways, acknowledging the economic facts of each other, aside from taxes.
Why not encourage innovation to create new markets like in the days of Big Science during the 50s and 60s? Why not take advantage of a large defense budget or increased funding to the NIH to promote innovations responsibly? Why not find ways to create markets and promote our domestically-produced products, similar to the ways other states buoy their state-owned enterprises?
A rational, flexible union between free enterprise and public capital investment is the best way for any economy to develop as rapidly as ours did in the past and how others have done so in more recent years. Our politics are too wrapped up in ideology to be rational. These irrational politics have resulted in the plummeting of corporation creation since the 1990s, mergers and acquisitions causing unhealthy market consolidation, the stifling of innovation due to too much market power among individual firms, our taxes and regulations not incentivizing industry and the government doing less effective work with our tax dollars to encourage innovation than it could.
America’s current ideological battle between democratic socialism and neoliberalism is not productive. Our economic policy ought to be bolder and more grounded in what works. We shouldn’t think of Hamilton only for his catchy musical, but as an architect of economic might and prosperity, divorced from baseless ideology. When economic policy is unlinked from strict party ideology, economies grow and succeed. Hamilton’s pragmatic, government-guided economic philosophy should be resurrected for the betterment of our economy, and by extension the health and wellbeing of the American people.
