Big business, big gov't and the big balancing act

At its most simplistic level, this debate plays itself out as the choice between big government and small government, between regulation and deregulation, between European-style socialism and Anglo-American free-market capitalism. The one side takes its intellectual roots from Adam Smith, Karl Marx, John Maynard Keynes and the recently departed Paul Samuelson, the other from Adam Smith, Friedrich von Hayek, Joseph Schumpeter and Milton Friedman.

Over the years, the center of political gravity has swung toward one camp or the other in response to economic crises brought on by overdoing things in one direction. The pendulum has now begun to swing back from Reagan Republicanism to some still-evolving form of Obama Democracy.

Jim Manzi provides a perceptive analysis of these trade-offs in the latest issue of National Affairs, a new conservative journal published here in Washington. Although best known as a corporate executive and high-tech investor, Manzi actually began his career in a newsroom, and he hasn't lost his knack for clear writing and critical thinking.

“We are between a rock and a hard place,” he writes. “If we reverse the market-based reforms that have allowed us to prosper, we will cede global economic share; but if we let inequality and its underlying causes grow unchecked, we will hollow out the middle class — threatening social cohesion, and eventually surrendering our international position anyway. This, and not some 'world-is-flat' happy talk, is what the challenge of globalization means for America.”

Like many in the business community, Manzi is concerned that the pendulum is about to swing back too far, that the United States is on the verge of turning itself into France. In truth, those fears are as overblown as they are self-serving, and have less to do with reality than with the abiding disrespect the business community has for the political process.

But the debate, it seems to me, needs to go beyond simply determining where the pendulum should come to rest. For equally important is how effective the two sectors are in actually delivering all that social justice and growth-inducing innovation.

Americans understand that free markets are the best vehicle for generating innovative products and ever more efficient ways of producing them. But recent experience also reminds that innovation and the competitive dynamic are not always what they are cracked up to be.

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