FEARS of a recession have suddenly made economic policy a hot topic among the chattering classes. It is a fashionable belief among elites that the Reagan economic policy of lower taxes and freer markets has run out of gas, that the problems of high taxes and overregulation are mostly solved, and that we need to move on to address the new and different economic problems that we now face. I believe that this analysis misreads both the Reagan Revolution and our current economic situation.
Post-war U.S. economic policy was made by a generation of statesmen who dealt themselves a great hand of cards, and then played it brilliantly. It is hard to exaggerate the strength of the U.S. competitive position in the world economy in June 1945: America accounted for an absolute majority of all global manufacturing output, had the most technologically advanced economy in the world with ample supplies of natural resources, and could protect this state of affairs with an invincible military that possessed a nuclear monopoly. Most of the rest of the world was either in ruins, pre-industrial, or under the control of Communist regimes that smothered economic energies.
Comments