I recommend reading this excellent critique of Paul Krugman’s political philosophies by Brink Lindsey, and I recommend reading it alongside this series of posts by Robert Reich on manufacturing and the American economy. The two men come from very different places on the ideological spectrum, but they’re largely singing the same tune. Hope for liberaltarianism!

The story is this — the roiling years of the 1930s and 1940s led to a broad array of controls placed on the economy (ably described in Lindsey’s piece). These controls ran the gamut from extensive regulation of industry, to limits on trade and immigration, to high levels of progressivity in taxation. Amid the cultural, political, and economic tumult of the 1960s and 1970s, these constraints began to unwind. Progressives like Krugman tend to focus on the institutional changes of the Reagan era, which were in some cases significant, but social changes and shifts in the structure of the economy played crucial roles in the liberalization of the American economy.

I think Lindsey provides a compelling account of the ways in which the movement to expand personal freedom — as represented in the sexual revolution, women’s liberation movement, civil rights movement, and so on — was closely connected with the demise of the organization economy, based on cartelization of industry, unionization, and group dynamics generally. The individualist economy of the 1980s and 1990s was rooted in the celebration of personal freedom that erupted in the two prior decades.

At the same time, many of the institutions themselves were becoming unsustainable amid changes in the broader economy. Development in emerging markets and changing technologies undermined rigid economic systems, from Bretton Woods to the Big Three. Sustaining the economy of the 1950s indefinitely would have required shutting out quality imports from Europe and Japan (and later, the Asian tigers and China) and rejecting innovations in automation, communication technologies, and computing generally. The world changed, and those changes could either have been accommodated or rejected outright. Quite wisely, I think, they were accommodated.

Another way of describing the situation would be to say that the cost of providing economic security under the institutional regime of the 1950s became too high, and so pieces of that regime were steadily dismantled. Unfortunately, very little was put in place of the lost strictures. The public seems to have concluded that there was necessarily a trade-off between economic security and economic dynamism. Protections for workers and businesses could be had, but only at the cost of economic growth. And I think that both Lindsey and Reich are correct in saying that this view is reflected in the desires of many liberals to return to the boring old manufacturing economy of the 1950s. A lot of people on the left want to go back to a time in which people made stuff and were members of unions and put their money in banks that did very little with it.

This strikes me as very mistaken. If it was determined that the strictures of the 1950s and 1960s were too expensive to maintain in the economy of the 1970s and 1980s, then they’re almost certainly way too expensive to try and reanimate in the 2000s. What’s more, the attempt to do so seems to involve a rather substantial lack of imagination. Surely there are ways to provide economic security without unduly compromising economic dynamism?

In fact, there are. There are investments to be made in health care, and education, and in a social safety net that encourages entrepreneurial activity. You can promote dynamism by ensuring security, in other words. The difficulty in obtaining these policies is the lack of a political constituency for them large enough to overcome a political order captured by powerful interests. It’s not clear to me how to develop that consituency, but it seems to me that assuming it can’t be done and pushing for a return to the old ways is probably the wrong approach.