At long last the Americans are turning their attention to
their own problems rather than look to the rest of the world and pretend to fix
everyone else's house at a time when theirs is sinking under their feet while
crumbling over their heads.
America is talking about its economy in what looks like the
start of a serious debate in search of solutions to problems that were in the
making for a long time. In fact, Paul Ryan who is Chairman of the House Budget
Committee has just released a budget in which he says: “Five years ago, we had
a financial crisis. It flared up suddenly, though the tinder had been building
up over time. And the damage was severe.”
Mr. Ryan is talking about the budget. No doubt the
responses, the points and the counterpoints that will follow will also revolve
around the budget. This is as it should be but it is only half the story
because the tinder that built up has involved more than the mismanagement of
the budget. It involved the structure of the economy where the deficiencies
must be fixed or the troubles will flare again.
Like any other nation, America needs the wise management of
its budget but also needs to maintain an industrial economy that enjoys a sound
structure. What is that? And how do you get it?
If we start with the definition that a sound industrial
economy is one that will withstand severe shocks of any kind and not crumble,
we must set aside all notions relating to a transient performance the way that
we do now when gauging the health of an economy. What we need to examine is the
structure of the economy we have under consideration because structure is what
decides how solid the base is, thus how well that economy will absorb the
shocks that are sure to hit it again and again.
What we need to remember is that an economy does not have to
be sound to perform well. It will do that at times, and do badly at other times
depending on the external factors that surround it at that moment. The point is
that nothing in a transient performance can tell you whether or not an economy
will withstand the shocks that will come when you least expect them. Thus, the
essential feature you must have in an economy for it to be sound is that it be
well structured. If and when you have that, you may take into account the
external factors that surround it, and manage it in such a way as to have it
perform at optimum levels.
But what does it mean to have a solid base upon which to
build an economy? The best way to answer this question is to visualize in our
mind's eye the evolution of a hypothetical economy that began to industrialize
at the start of the Industrial Revolution a little more than two centuries ago.
The essential point here is that both the Revolution and the economy will have
developed together as one and the same phenomenon. This says two things about
it. First, the economy will remain at the leading edge of progress having no
one to imitate or “steal” from. Second, it will depend on itself, will learn by
trial and error, and learn from the mistakes it makes.
Imagine now a place called Europe where the ore of metals,
especially iron, was discovered in the ground close to the surface. Shortly
thereafter, a bunch of social drinkers who loved to make whiskey for themselves
and for others discovered something by accident. While distilling the
ingredients, they observed that when steam was allowed to build up, it acquired
the kind of power that surpassed the power of the horse. Given that society had
been using the horse to do work too hard for people to do, the lads who drank
together thought they could combine the iron and the steam to whip up a new
gizmo that will revolutionize the world.
They sat together, scratched their heads and talked about
the thing. One idea led to another, and before long someone uttered the term
steam engine. Yes, said another lad, let's build one of those and use it to
pull not one chariot per horse but pull a whole train of them with a horse made
of iron. And the next lad said, let's also use the steam engine to power the
loom and all the textile machines they have in that building. And the lad after
him said, we can also use it to power the machines that the carpenter keeps
over there. And the lads raised their glasses, and they all drank to that –
Scottish Whiskey, of course. Now tired, they slept on the idea, woke up in the
morning and started to work on the steam engine they dreamed up the night
before.
And this is where they hit a snag. It is that in order to
build a machine of this complexity, they had to have the kind of tools and
machines that no one had before. No one had them, in fact, because the lads
were standing at the leading edge of technological development where no one
stood before. And so, our lads found themselves forced to invent, develop and build
the tools and the machines they needed in order to make the kind of parts that
were never made before, and assemble them into the sort of engine that was
never seen before.
What happened after that was that the lads and the multitude
of people they attracted to their new enterprises worked to improve on the
performance of the steam engine. To this end, they kept inventing and kept
developing newer tools and newer machines they employed to produce a variety of
other tools and other machines that were powered not by human or animal muscle
but by steam engines that were specifically designed for the purpose. It is
that technology had, at this point, come full circle doing a positive feedback
on itself, thus grow in quantity and quality almost exponentially.
This sort of development is called organic because it mimics
the way that nature develops new species. But the similarities do not end here
because the two developments have something else in common; it is that neither
will forget its past. For example, if you get inoculated against a disease,
your body will learn to fight it now, and will fight it again many years later.
In a similar sort of way, we can see that technology has revived the windmill
to produce electricity in the modern era. This is a gizmo that was invented
thousands of years ago to grind the grain that the ancient people used to make
bread, and to grind the rocks which they used to make bricks and other building
materials.
And there is another similarity between the two
developments. It is that nature stores the legacy of its achievements in the
DNA of living things. As well, the legacy of technological developments is
stored on murals, books, discs and the other storage devices of the modern age.
But while both of these are considered organic developments, there exists
another form of development that is very different. It is one that can only be
called artificial. It is practiced by the societies that missed the original
Industrial Revolution and are now in the process of catching up with those that
raced passed them.
Such societies have no indigenous industrial legacy that can
be considered abundant enough or varied enough to build on and create a modern
industrial state. Thus, they rely on the legacy of the more advanced societies
towards which they look for ideas, and from which they buy the tools and the
machines that go into the construction of their industrial bases. And because
peoples and circumstances are different, some of these societies seem to
succeed well while others seem to struggle endlessly. Why is that?
My view is that the societies that succeed at building a
sound industrial base are the ones that mimic the path of development taken by
those who started the Industrial Revolution. That is, they follow the organic
method by developing widely enough and solidly enough at level one before going
to level two. Once there, they again develop widely enough and solidly enough
before going to level three, and so on.
Taking this approach, they do not do spectacular things to
tell the world they have arrived. For this, they are rewarded with the fact
that when the shock hits, they survive it and go on with their lives as
normally as before. And this is because they would be standing on a construct
that looks like a step pyramid – one that is as solid.
As to those who are eager to show off their early successes,
they do the things that do not show they have arrived at a safe place but tell
the world they have achieved something spectacular. It is like building tall
towers with little at the base to keep them standing. If and when the shock
hits, these societies suffer tremendously then spend a great deal of time
picking up the pieces to rebuild from scratch.
And you do not need to be a newly industrialized nation to
make those kinds of mistakes; you can be a nation that lost the edge to
competitors but now seeks to re-industrialize. This is where America stands
today, thus the need to consider the budget not as a stand alone subject, but
consider it in conjunction with a full blown plan that will mimic the steps of
an organic industrial revolution to fortify what is there already.