Book Review for Bloomberg by Harvard Business Review Editor

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Book Review for Bloomberg by Harvard Business Review Editor

Post by johnkarls »

Bloomberg – 4/26/2016

Learning to Love (Tolerate?) Big Government

Review by Justin Fox -- Editorial Director of the Harvard Business Review and business/economics columnist for Time Magazine; his book “The Myth of the Rational Market” was a NY Times “Notable Book” for 2009 and was named best business book of the year by

In December, Gallup asked 824 U.S. adults this question: "In your opinion, which of the following will be the biggest threat to the country in the future -- big business, big labor or big government?"

Sixty-nine percent responded “big government.” That was down from 72 percent in 2013, but otherwise higher than at any other time Gallup has asked.

What exactly has big government done to these people?

Well, according to political scientists Jacob S. Hacker and Paul Pierson, it has improved their lives dramatically. Over the course of the 20th century, Hacker and Pierson write in their new book “American Amnesia: How the War on Government Led Us to Forget What Made America Prosper,” government investment, regulation and other interventions made Americans vastly better-educated, longer-lived and richer. Government action played a similar -- and sometimes even bigger -- role in virtually every other advanced nation. Write Hacker and Pierson:

“There are no rich countries with small governments -- governments that spend and regulate little, governments that eschew public investment and keep the public sector’s reach to a minimum. (Okay, there are a few that are sitting on huge pools of oil.) A big government isn’t a guarantee of prosperity, but where we find prosperity, we find big government, too.”

If that’s true -- and I’m pretty sure it is -- then why are people in the U.S. so sour on big government? In Hacker and Pierson’s telling, it’s mainly because of a decades-long propaganda campaign waged by anti-government activists on the right. One key technique, they write, is to: "Say the government isn’t doing its job, make it harder for the government to do its job, repeat."

They're specifically referring there to the long Republican offensive against the Internal Revenue Service and, again, that seems like an accurate depiction. 2 Still, saying that it’s the right-wingers’ fault feels incomplete. There has to be some reason why these anti-government arguments have struck such a chord. Two spring immediately to mind.

One is simply that there are diminishing returns to government bigness. Yes, government action was essential to making the great leap to prosperity in the U.S. and other nations, but that doesn’t mean every government intervention is helpful. The bigger government is, the more chances it has to fail at something.

The other is that administering big government requires a level of specialization that makes it impossible for voters and even elected officials to fully understand and control it -- which makes voters and elected officials understandably cranky. This is the subject of a new Brookings Institution paper by political scientist Philip Wallach, “The administrative state’s legitimacy crisis.” The problem, Wallach writes, is that, "Only specialist elites seem to possess any ability to guide policy development, and trust in them has been diminished both by their increasing segregation and their evident failures."

In the paper, Wallach traces the intellectual history of what he calls “the technocratic administrative state,” which has been subject to many challenges through the decades but seldom quite the outright dismissiveness that he says is being preached by three of the remaining major candidates for president (Ted Cruz, Bernie Sanders and Donald Trump). Wallach offers a few suggestions for upgrading the accountability of government agencies, which seem pretty sensible. But I’m not quite sure how we get away from the fantasy -- espoused by Cruz, if not so much Sanders and Trump -- that doing away with big government will somehow fix everything.

Hacker and Pierson's new book is aimed directly at this fantasy, but I'm torn on whether it will do much to dispel it. Hacker is a professor at Yale who first came to national attention 3 with his 2006 book, “The Great Risk Shift: The New Economic Insecurity and the Decline of the American Dream,” which described how governments and businesses had shifted retirement and health-care risks onto the backs of families. In 2010 he collaborated with Pierson, a professor at the University of California at Berkeley, on “Winner-Take-All Politics: How Washington Made the Rich Richer -- and Turned Its Back on the Middle Class,” a book that I liked a whole lot.

For me, “Winner-Take-All Politics” was a revelation, a careful accounting of why the purely economic explanations for rising income inequality in the U.S. that I had previously subscribed to (technological change, mainly) fell short. And while I can’t document this on short notice, I have the impression that the Hacker-Pierson thesis that political decisions played at least as big a role as economic forces in driving inequality changed a lot of other people’s thinking, too.

I’m less clear on whose minds will be changed by “American Amnesia.” Those who are convinced that government is always and everywhere the problem probably aren’t going to be converted by a book that argues not only that government is the solution but also that anti-government activism is the problem.

Still, there is much to be said for frequent recitation of the true history of government’s role in U.S. economic growth. 4 Since its beginnings, as Hacker and Pierson document in “American Amnesia,” this nation has had a mixed economy, with government playing a central role in shaping early communication, financial and transportation networks. That role expanded a lot in the 20th century -- and guess what: For the U.S., the 20th century turned out pretty great.

There's lots to criticize about current government policies, but there was never a government-free economic Eden in the U.S. to which we can aspire to return. Anyone who promises that is trying to sell a bill of goods -- and if more voters figure that out, we may actually end up with a better government.


(1) It is, admittedly, a weird question. If not forced to choose among the three “bigs,” I would guess that lots of people would offer up different looming threats. Also, with the decline of unions in the U.S. it no longer makes sense even for those who can’t stand them to label them the biggest threat -- which leaves only big government and big business to choose from. Still, fear of government has risen a lot more than fear of business, and another polling series with a different question tells a similar story.

(2) Devin Leonard and Richard Rubin’s Bloomberg Businessweek cover story on the IRS last year made clear that funding cuts and political attacks, especially since Republicans took control of the House of Representatives in 2011, have left the agency reeling and may eventually endanger its ability to collect the taxes that the government needs to function.

(3) Or at least my attention: Hacker and Pierson also published a book together in 2005, “Off Center: The Republican Revolution & the Erosion of American Democracy,” that got some nice reviews but that I wasn’t familiar with until I saw it in the “Also by” section at the beginning of the latest book.

(4) I wrote last month about “Concrete Economics,” another recent book that does this.

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