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Why Sputnik's orbit doesn't intersect economic growth

By Daniel M. Ryan
web posted January 31, 2011

Let's face it: the standards for a successful State of the Union speech don't include follow-through. If President Barack Obama's entire wish list gets bogged down in Congress, few of his present boosters will care. A President whose director of social media reports directly to him is more concerned with the immediate effects of the speech than its longer-term impact. In so planning, he's not that far from standard operating procedure in D.C. Fact is, the supposed short-termism of American corporations is pretty long-term when stacked up against the immediate-termism of contemporary politics. Such immediacy goes with a highly competitive democratic system. Those who castigate "corporations" for not being sufficiently long-term and demand more government intervention, knowingly or not, want the economy run by unelected bureaucrats – not unlike the way the mainland Chinese economy is run.

It was that group of people that President Obama wanted to reassure with his Sputnik trope. On the whole, his speech had the tone of outreach to the Republican Party; he was cajoling. Even the Sputnik reference itself had been drawn from a Republican Presidency.

This kind of bipartisanship has a vintage about as old as Sputnik. It's "we propose, you dispose." The Republicans are supposed to be good fellows, drop their opposition, and help with the dirty work. Democrat invocations of war, or something close to war, always give it away. The Democrats use them because they work. To the Democrat mind, a Republican is something akin to Pavlov's dog. Ring the bell of war, or of national crisis, and doggie wags his tail and salivates. This is the insider's version of the "stupid party" label.  It's an easy racket so long as the Democrats don't get known as the "Untrustworthy Party." A long-term thinker would demur from such a ploy, but long-term thinking seems largely absent in politics. Whether the Republicans wise up without damaging their electability is a matter that has little relevance to the next headline. Besides, it's worked for a long time – and that's as far as a practical politician gets to long-term planning. 

Old Wine…

Unsurprisingly, the same old hobby horses appeared in the wrap of facing down the People's Republic of China. The key to beating China wasn't the dissolution of the regulators, an affirmation of the national merit of wealth-building, or the jawboning of banks to lend more to manufacturers. No, the supposed key to success was the same old Democrat talking points: get more schooling and put up solar panels. And keep the subsidies flying.

If President Obama were focused on follow-through, rather than political effect, there were several changes he could have suggested. One obvious one, which would have evinced policy seriousness about the purported crisis, would be to provide stipends for postsecondary students matriculating in math and science geared to performance. That six billion dollars' worth of purported subsidies to oil companies could have been put to that use. Another means would be partial student-loan forgiveness for a list of accepted hard-science and mathematics majors, scaled to grades. Granted that these two solutions address the issue from the top up rather than the bottom down, but there are other options at the lower levels that don't require much federal money. Streamlined approvals for math and science immersion charter schools, for one. Asking the First Lady to use her bully pulpit to encourage science and math studies wouldn't cost an extra dime.

Instead, he used exhortation. The main dollars-and-cents proposal was an increase to the subsidies received by the solar panel industry, in more direct form this time. President Obama said, "China became the home to the world's largest private solar research facility." He did not say that they're betting on the continuance of the indirect subsidies he himself supported. Needless to say, the Chinese see an exporting opportunity. That research facility was not built for the sake of publicity or vote-getting.

By bringing up alternatives, I could be pegged as someone who likes to suggest the politically impossible. Leaving aside the fact that Asian governments find achievement-oriented education policies to be politically possible, leaving aside the fact that President Eisenhower found so too, I note the fact that "problem-solving policy = politically impossible" is one of the indicators of a nation that's going to go through a rough slog. The kind of slog that greatness theatre won't fix.

…In An Ill-Fitting Old Bottle

Obama's use of Sputnik evinces that he wasn't around then, and didn't find out about it from anyone who was. When the Soviets launched that satellite, successfully, Americans were shocked. It was a bolt from the blue, which came out of nowhere.

How was that shock in any way similar to the growth of the mainland Chinese economy? It's been in the press for years now. Even a Rip Van Democrat, who fell asleep twenty years ago and woke up today, wouldn't be shocked by it. If anything, he would be shocked by the humbling of Japan. In 1991, it was still held as near-gospel by Democrats that Japanese industrial planning combined with Japanese industriousness would overshadow the United States. Mainland China, although then considered one of several nations following in Japan's wake, was already noticed as a fast grower. Likening it to a shocking event like Sputnik is like calling a sports-steroid scandal a shock. Both invite the question, "where have you been for the last quarter of a century?"

Winning the space race had little to do with economics. It consisted of meeting a few well-defined technical goals, with price no object. Contrary to President Obama's narrative, both the basic science and the basic engineering were available in 1957. Note the difference between pre-Apollo NASA and post-Apollo NASA. Pre-Apollo, the teams could draw upon already-established engineering designs. Post-Apollo, new engineering was required. From that already-existing engineering base, NASA put together Mercury, Gemini and Apollo in less than ten years. Since then, in the last forty years, it's been responsible for the Space Shuttle and Skylab. The difference between the two eras is the difference between tapping already-existing engineering and striking out in new directions. Even an open chequebook can't change the difficulty with the latter.

What vast untapped potential is there in the United States economy, which already exists and need only be deployed? As Obama himself acknowledged, it's entrepreneurship – America's legendary competitive advantage. Contrary to his public-private love-in, American entrepreneurs have excelled in converting existing technologies to new, unplanned and unforeseen uses. In a very real way, what became the Internet was a hand-me-down from the government. It didn't become a hot new industry until a flood of people with a profoundly un-ARPAish mindset saw what could be done with it. Even in the mid-1990s, it was seen as little more than a place for online diaries and porn. Successive waves of free and independent entrepreneurs made it what it is today.

If the Washington leadership is serious about restoring America's competitive strength, they would look at what worked for America in the past. One fact plainly stands out: America did not become great through subvention-driven mercantilism.

It's true that present-day Asian nations are becoming economic powerhouses through mercantilist policies…with the notable exception of yesterday's powerhouse Japan. But it's also true that Asian mercantilism take place in a politico-cultural matrix that isn't transferable to America. The above suggestions I made may be politically impossible, but a serious emulation of mainland China's current scramble-for-all is politically unthinkable. Rather than graft work, America would be better served by examining and going back to its own roots.   

But, that wouldn't make for good political theatre. ESR

Daniel M. Ryan is currently watching the gold market. He can be reached at danielmryan@primus.ca.

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