How the War on Government Led Us to Forget What Made America Prosper
By Jacob S. Hacker and Paul Pierson
This book is about an uncomfortable truth: It takes government - a lot of government - for advanced societies to flourish.
But Americans have never been good at acknowledging government's necessary role in supporting both freedom and prosperity. And we have become much less so over the last generation. We live in an era of profound skepticism about government. Contemporary political discourse portrays liberty and coercion as locked in ceaseless conflict. We are told that government is about "redistribution" and the private sector about "production," as if government only reshuffles the economic deck rather than holding many of the highest cards. We are told "free enterprise" and "big government" are engaged in a fierce zero-sum battle ( one side's gain is the other's loss), when, in fact, the modern partnership between markets and government may well be humanity's most impressive positive-sum bargain (making both sides better off). We are told the United States got rich in spite of government, when the truth is closer to the opposite: The United States got rich because it got government more or less right.
We suffer, in short, from a kind of mass historical forgetting, a distinctively "American Amnesia."
Like other advanced democratic nations, the United States has what economic analysts call a "mixed economy." In this public-private arrangement, markets play the dominant role in producing and allocating goods and innovating to meet consumer demand. Apple brings us iPhones, and it earns sizable profits by doing so.
Alongside companies like Apple, however, government plays a dominant or vital role in the many places where markets fall short.
Although the modern robber barons can be found in many parts of our economy, three stand out: health care, finance, and energy. Other sectors have barons, but none rivals these big three in the scale of the tolls they extract or the scope of their political influence.
No doubt the United States is doing something with the extra trillions it has poured into the medical sector over the last few decades. On the available evidence, however, what it is mainly doing is paying higher tolls to the robber barons.
To reverse this spiral, we must reestablish a government with the capacity to foster broad prosperity. We need to ensure that ordinary voters and diffuse interests are capable of triumphing over concentrated interests, And we need to rescue the ideal of the mixed economy from the mists of American Amnesia. Many changes have swept the American economy since the 1970s. Yet our biggest problem is not a lack of attractive policy options. Our biggest problem is our politics. The mixed economy is as necessary as ever - indeed, in a world of increased interdependence and complexity, more than ever. And despite all the changes of recent decades, it is still within our grasp. We need better policies to restore its potential. But above all, we need a better politics.
But we should also recognize just how valuable the mixed economy is, how fundamental the role of government is within it, and how badly we are served by the misleading juxtapositions that dominate public debate: markets versus the state, freedom versus tyranny, free enterprise versus big government. From a more realistic and historically grounded starting point, we can have more vigorous, reasoned, fact-based debates that reflect the diversity of our values and priorities as well as the inevitable uncertainties about the best ways to tackle complex problems. We can seek positive-sum bargains and broad consensus about how to improve the mixed economy and address new challenges, learning over time how to adjust the nimble fingers of the market and the strong thumb of government to best grasp our future.
A government that effectively promotes human flourishing is a government worth fighting for. More than ever, the problems we face demand a sustained and principled defense of a vital proposition: The government that governs best needs to govern quite a bit. Americans must remember what has made America prosper.
Comment by Don McCanne
When you read this exceptional book by Jacob Hacker and Paul Pierson, it becomes clearer why we have such an expensive health care system that is only mediocre in its performance.
They remind us how half a century ago we had a well-functioning "mixed economy" wherein both the government and the private sector fulfilled their appropriate roles in facilitating a vibrant economy.
In recent decades there has been a shift toward believing that we need to cut back on big government and rely more on the marketplace. But in health care, the market works very well for the modern robber barons (higher costs) but not so well for patients (mediocrity). Conservatives, neoliberals and an accommodating press perpetuate the conviction that private insurers, private Medicare Advantage plans, and private Medicaid managed care plans all ensure better care than the government is capable of providing. Although the government still remains the largest source of health care funds, the "concentrated interests" (plutocracy) and their legislative lemmings place with the private sector much greater control on how those funds are spent.
As long as we have an imbalance in our mixed economy that disproportionately favors the private sector, while suppressing those functions provided well only by the government, we cannot expect to achieve the health care reform goals of true universal coverage, universal access, universal comprehensiveness, efficiency, and, most importantly, equity. Governments do these well, whereas the private sector acting alone does them poorly, if at all.
It is important to understand that the private sector performs better when the government is functioning well under a public-private partnership. To address our American amnesia, everyone should read this book. Liberals, progressives, and moderates will surely understand. Many conservatives in the business community will understand after this refresher course on why we do want the government involved in those activities that only the government does well. Hard Randians (amoral or cold-hearted libertarians) likely will not, but there is nothing we can say that would ever satisfy them since they are lost in their ill-conceived fictional utopia created by Ayn Rand.
Randians aside, we need to remember the words of the authors: "A government that effectively promotes human flourishing is a government worth fighting for."