The U.S. economy is broken. Time for a New West!

Richard Sherzan (full bio below) is a lifelong Democrat now living in Coralville, who supports the principles of individual freedom, dignity, and happiness, which were advocated by John F. Kennedy, Robert F. Kennedy, Martin Luther King Jr., and Cesar Chavez.

I. Where are we? Economic underinvestment and economic decline

In my view, the Biden-Harris economic policies represent the same, old, outdated, and weak policies, which have spurred America’s economic decline since the 1970s. They helped Donald Trump win the 2016 presidential election on a promise of an “America First” approach. 

New economic ideas and actions are needed, not only for the Democratic Party's future political success, but for the American people to have a strong and prosperous 21st-century economy.

In the preface of his 1962 book, The Emergence of a National Economy 1775-1815, American historian Curtis P. Nettels wrote the following about the origin of the U.S. economy:  “…the achieving of Independence, the making of the Constitution, and the establishing of the federal government provided the legal foundations on which the structure of the economy of the United States has rested since 1789.” 

Nettels began chapter 1 of that book by stating, “During the forty years after 1775 the American people brought forth, not only a new nation, but also a national economy.” (emphasis added) The author expressly declared, in crystal clear language, a profound and vital historical fact in American history: namely, that “the American people," themselves, created the American “national economy." Not the federal government, and not business, or the private enterprise sector.               

Further, history shows clearly that since 1789, “the American people” have always relied upon the existence of an American-centered “public-private economic partnership” (between the federal government, and business, or the private sector) for a secure and prosperous “national economy”—for a secure and prosperous American way of life.

As described below, the existence of that American-centered “public-private economic partnership” is in question in 2023, due to new, unprecedented, structural changes—namely, the economic disconnect of big business, or big capital, from the U.S. “national economy”.    

In my view, the current U.S. economy can be accurately described as a “railroad train” without an “engine." The historic, American-centered, “public-private economic partnership”, created by the U.S. Constitution, is now broken. The primary economic interest of big business (approximately 4,000 multinational corporations)—in terms of long-term investment, profit, and growth—is now the global marketplace and the global economy, rather than the domestic marketplace and economy.  

The primary economic interest of the American people, however, is the domestic marketplace. According to the U.S. Department of Commerce Bureau of Economic Analysis, U.S. big business now employs about 14.6 million employees, or about a third of its roughly 43.9 million worldwide employees, in foreign countries, including China. 

Big business has been offshoring American jobs since the 1970s. This continual, long-term pattern of off-shoring American jobs, now reaching more than one-third of all employees of major U.S. companies, provides indisputable, empirical evidence that the country's historic “public-private economic partnership,” established by the Constitution, is now broken. With that disconnect, it follows logically that the traditional American economy is also broken.                            

During the country’s first Progressive Era of the early 1900s, the danger to American democracy, as argued by Teddy Roosevelt, was the concentration of big capital by big business, through new national corporations. We are now living in a second Progressive Era, where the danger to American democracy is the abandonment of big capital from the domestic economy through multinational corporations. These new economic conditions constitute an unprecedented, annual, underinvestment crisis for the U.S. economy in the 21st century.

II. The parties offer the same policies

In touting Donald Trump’s “America First” economic policies, Republicans seem aware of the broken U.S. economy. However, when addressing this issue, Trump and other Republicans have continued to offer the same old policies: reduced regulations, lower taxes, tariff actions, and so on. To use a literary analogy from one of Charles Dickens' books, the Trump/Republican Party “America First” economic policies, amount to nothing more than Oliver Twist economics: "Please, sir, I want some more." 

As mentioned above, Democrats have advocated many of the same weak economic policies. In my view, those will not stop America’s economic decline, repair the broken economy, nor win against China’s “Made in China 2025” economic policies, which are designed to win the high technology “Commanding Heights” in the 21st century. 

Continuing the same economic policies under new economic conditions, in reality, mean nothing less than a second-rate American Economy, and a second-rate America, in the 21st century. This country deserves a better future. However, the disengagement of big business from the domestic economy, in favor of the global economy, is only one side of a larger, long-term economic problem facing the U.S.                  

The second side of America’s investment crisis is not new, but our country's political and economic leadership have either intentionally or unintentionally failed to recognize it. In his 1936 “Great Depression” book, The General Theory of Employment, Interest, and Money, the British economist John Maynard Keynes set forth his revolutionary economic theory: that, in a private sector, free market money economy, the private sector will normally underinvest, due to unavoidable “uncertainty” (no one knows the future). 

Keynes challenged and disputed Adam Smith’s long-standing, “invisible hand” economic theory. As explained in Smith’s 1776 book, The Wealth of Nations, that concept held that in a free market economy, private sector investment “naturally” trends towards, and “naturally” self-adjusts towards, an optimal level of economic investment for society.     

Smith’s “invisible hand” theory (see the book Wizard of Oz, for another literary analogy) argued, essentially, that an unregulated free market—dependent solely upon economic investment by the private sector—is the best of all possible economic worlds. 

Keynes argued in General Theory that Smith was wrong about the “invisible hand,” because his theory failed to consider the real world of economic uncertainty. That unavoidable condition moves the private sector to invest less than it otherwise would, if the economic future were certain. 

Which theory describes economic reality in the United States more correctly? Look around you for empirical evidence, particularly at the “casino” character of the stock market.          

The Republican Party and its leaders, including Trump, still cling to Smith’s “invisible hand” theory. It could be described as their economic Bible. 

In contrast, the Democratic Party in 2023 seems to have no clearly-defined, guiding economic theory. Most Democratic politicians have yet to clearly understand or utilize Keynes’ revolutionary economic theory: that chronic private-sector underinvestment in the domestic economy is the norm, not the exception.

The bottom line: the disconnect of U.S. big business from the domestic economy in favor of the global economy amounts to a structural change in the economy, as well as an investment crisis.     

History has brought us to this point.                     

III. Where Do We Go From Here? Economic “New West”

Continuing to use the economic railroad train analogy: 

In my view, the central economic problem of 2023 is not with U.S. “infrastructure,” as the Biden administration's economic policies suggest. That is, the poor condition of our railroad tracks, roads, bridges, or waterways is not the issue. Rather, our central economic problem is the absence of a domestic “engine” for the economy and for the American people. 

Living in unprecedented economic times, we need unprecedented, economic policies and institutions. The policies of the past, whether advanced by the Democratic or the Republican party, mean more decline and a second-rate U.S. economy. 

We must begin with the creation of a strong, long-term, domestic “public-private partnership.” A new, public-private federal Department of Economic Development would be a good place to start, modeled on short-term successes of the past, such as the transcontinental railroad partnership of the 1860s and NASA's Apollo Moon Program partnership of the 1960s. 

Such a new institution would require modification and consolidation of existing institutions to achieve maximum effectiveness and efficiency, both in operation and costs.

The American free market economy was not created by or for the private business sector. It was created by and for the American people, through the U.S. Constitution. The task now before us is the renewal and strengthening of that economy, to enable the public to achieve security and prosperity in the new global economy.

One final comment about our new times, from a broader perspective:

For roughly 500 years, the natural resources of North and South America, and of planet Earth, seemed unlimited. That concept of unlimited natural resources has been the dominant economic vision. In the 21st century, we have awakened to a more realistic vision of planet Earth, as shown by the famous “Pale Blue Dot” photo from NASA’s 1990, Voyager I space probe.

This "Space Age" vision shows us the truth about Earth's limited natural resources. If you listen carefully, our planet seems to be telling us, “It's time to re-evaluate and renew your economic values and economic life. It's time to adapt them to a new environment, a new world, or watch humanity become extinct”.

IV. Summary   

The future of our children and grandchildren will be determined by which “economic trail” Americans now choose to follow. We can and must stop our economic decline, for their sake. 

We can and must choose a new “economic trail”: one that leads away from the failed policies and decline of the past. We can and must choose a “New West Economics,” based on a long-term, “public-private economic partnership," which will lead toward prosperity.

Westward Ho!

Richard Sherzan is a U.S. Army Veteran with a Purple Heart Award and a Bronze Star Award, with “V” Device (heroism in ground combat, Vietnam), who also protested the Vietnam War. He retired in 2014 after working for seventeen years as an Unemployment Insurance, Administrative Law Judge in Arizona. He grew up in Iowa, where he served in the Iowa House and was the Polk County, Iowa, coordinator for Morris K. Udall's 1976 Presidential Campaign. He has a law degree from Drake University and an M.A. degree in American history from the University of Iowa.

Top image: A pioneer covered wagon on the prairie. Photo by Han_eck, available via Shutterstock.

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