I had written this essay in 2003, 7 years ago. I thought it would be useful to reminisce in 2010 to get a reality check. I have shared this article with Professors George Akerlof of University of California, Berkeley and Johan Galtung of Norway it is also evident that the contents of my essay circulated widely in Washington.
In the long run we may all be dead, nevertheless, bequeathing prosperity to future generations is not a fatalistic exercise. If it were, I would not be writing this opinion piece using a sophisticated word processor and a networked computer that did not quite exist in their present form 20 years ago. In the past 20 years, the world population has grown by, approximately, 2 billion, and the central problem of assuring the continued well-being of humanity has long ceased to be Malthusian; instead it has become sustaining creativity, innovation and transmission of the associated gains equitably to all corners of a planet that is shrinking metaphorically in size and literally in resources.
If history begets politics and politics begets the future of history, a dispassionate understanding of history, especially in a world of orange alerts and gas masks, is perhaps the only way to a future, which we will all cherish to live in. Training to think like an economist while trying hard not to tuck away the realities of politics and culture as ‘noise’ in a neatly constructed system of economic variables, I began to wonder what role does government have in both creating and sustaining economic well-being, assuming an existing knowledge base, shared context of political interests and acceptance of how to get there-broadly understood as co-existence in peace and prosperity, and mutual cultural engagement?
Economic well-being in the market place of ideas, goods and services depends on the ability of the people constituting the market to generate ideas and turn them into goods and services using technology and natural resources. Ideas, goods, services, technology and natural resources can all be bought and sold both in primary markets, and in secondary markets, that is, those depending on the primary markets. I prefer to call this the ‘base wealth’ of any society and it is perhaps reasonable to say that it would be in the best interest of any government, in whatever forms it is constituted (democracy, monarchy, dictatorship, oligarchy, etc.,), to create an environment conducive to generating ideas that both create and use technology to produce goods and services and utilize natural resources efficiently, for its continued survival. It is another question what form of government is best suited to achieving this objective, but it is perhaps safe to say, from historical evidence, that its final form is one in which the power rests with the people who are the key players in transforming the ‘base wealth’ into well being, for they are the stake holders whose competing and complementing interests create the common good.
In the aftermath of the Cold War, we are facing a world that is divided clearly into the ‘haves’ and ‘have-nots.’ The per capita income (or the income per person) is only a symptom that points to a more fundamental and deep divide: the ‘haves’ are those who have existing stock of knowledge (ideas and technology), a shared political context that agrees on the broader principles, though agreeing to disagree on the details while working toward a consensus (democracy and supporting institutions or clearly leaning toward one, and hopefully including the former Soviet Union and China) and historical mutual cultural engagement; the ‘have-nots’ (underdeveloped and newly developing countries in the Near East and Africa) clearly do not share the same environment as the ‘haves.’ The baggage of history is perhaps holding back the two sides from building bridges, while the opportunity cost of not building them is high, as contemporary evidence shows, to both sides. The answer, in the long-term, therefore, is not in missiles, orange alerts and gas masks. It is in building trust.
One short-term cost of building trust may involve engaging in ‘benevolent wars,’ assuming, for the benefit of all, that the apparent oxymoron indeed turns out not to be one; the long-term cost is in both being and setting an example that what we are claiming as the right way is indeed correct because the system, in its enlightened self-interest, has the self-correcting ability to set the wrongs right (bubbles may be an economic phenomenon but corporate fraud is not) and in putting a down payment on the future by sharing the knowledge stock through education, increased health awareness and disease prevention, and institution building, while permitting mutual cultural engagement to take roots.
The specific role for government in this endeavor, to ensure long-term growth thus, is in (a) working together with others in the ‘haves’ to share the cost of both the necessary ‘benevolent wars’ and the associated long-term costs, for it is both actuarially and factually unwise to bear the burden alone and may in fact, defeat the purpose if done so; (b) increasing domestic knowledge stock not through across-the-board tax cuts but targeted tax incentives for innovations in environmentally friendly technologies for automobiles and industrial production, and next generation information and communication infrastructure upgrades that can, respectively, reduce dependence on increasingly scarce fossil fuels and unleash greater mobility of production factors such as knowledge and capital to raise productivity and income levels in the long-term; (c) increasing funding for medical and biotechnology research and development to develop vaccines and drugs for disease prevention and cure; (d) re-evaluating access to education and its quality through college for all income and age levels in the population; (e) re-examining access to quality health care independent of socio-economic status; and (f) though largely abstract and intangible, most importantly, by preserving the integrity of the checks and balances upon which the system is founded and built to both achieve and serve the public interest, and this may involve making difficult decisions on the relationship between political representation and its means (campaign finance) and corporate governance. These, together, will help reduce uncertainty to spur the beginning of the next period of growth, which hopefully, will be a ‘global century,’ quite rightly preceded by the “American Century.”