(This is the fourth #NoApologyBoockClub post. The third post is here.)
Romney really knows how the economy works, and if you read chapter 5 of No Apology you will feel like understand it too.
Productivity, innovation, role of government
The economy depends on workforce productivity – which is a measure of the value of the goods and services produced by a worker. Romney gives this example (paraphrasing): imagine a tiny nation with 200 workers – 100 raise food and 100 build houses. One day someone invents a plow that can be hitched to a draft animal. From then on only 50 workers are needed to raise food. Is this good or bad? 50 people are out of work – if a meeting of workers is called, you can count on 50 votes against the plow. But what is certain is that someone will discover new things for those 50 unemployed workers to produce – tools, clothing, entertainment, etc. Some of the new jobs will pay more than farming, some will pay less – so some of the 50 will be better off, some will be worse off. But overall the nation will be much better off because more is being produced per person. The overall productivity rose and with it did average personal wealth – all because someone invented a plow.
Innovation comes in two types: improving the old, inventing the new. The first type may result in reduced unemployment while the second one usually adds employment. Innovation of either type requires more than a good idea – the conditions must be right for the idea to be adopted and implemented. That is where government comes in. Too frequently, government creates the wrong conditions – it puts hurdles in front of innovation through red tape and taxes, and in misguided attempts to protect those who would lose jobs because of it.
Romney view the loss of a job on an individual level as a traumatic and painful event. It can ruin lives. It is imperative that we, as a nation, do everything possible to support people who have lost employment and to help them find new, more productive, employment. But he makes very clear that government policies that aim to prevent loss of jobs – by either preventing creative destruction or by preventing competition that leads to innovation – is self-defeating and ultimately leads to the collapse of entire industries. (As we have seen these past four years – we get massive unemployment with no new jobs at all.) He points out instances where some unions have successfully lobbied government to prevent productivity improvements and thereby crippled an industry’s competitiveness. There are some very rare occasions that government should intervene temporarily when an American industry is threatened by a foreign competitor, and he lists them in the chapter.
Government should therefore mainly stand out of the way of innovation. However, Romney does believe that government’s role does not stop there: it should promote education (innovation comes mainly from educated minds), it should fund science and basic research, and it should properly regulate the financial system – he calls this last one dynamic regulation. He discusses the 2008 financial meltdown, what went wrong (there is even a chart), and how Secretary Paulson’s TARP was different from Secretary Geithner’s TARP.
Romney sums up his economic agenda thusly:
To strengthen America’s economy, we must minimize those things that retard economic growth and promote those things that accelerate it. A growth agenda favors low taxes, dynamic regulation, educational achievement, investment in research, robust competition, free trade, energy security, and purposeful immigration. And it seeks to eliminate government waste, excessive regulation, unsustainable entitlement liabilities, runaway healthcare costs, and dependence on foreign oil. This, in a nutshell, ought to be the economic agenda for America.
In an election that hinges on a sick economy, Romney presents as the ideal candidate to rehabilitate it.