Forbes-American Heritage • 1997 • 212 pages • $22.95
William Peterson, a Heritage Foundation adjunct scholar, is the Distinguished Lundy Professor Emeritus of Business Philosophy at Campbell University in North Carolina.
Over the last 15 years, the U.S. economy has experienced a 3 percent real average rate of growth in gross domestic product (with only one minor recession), declining inflation, falling interest rates, and a stock market since 1982 that has increased in value sixfold in real terms.
Still, good times usually give rise to a cottage industry of pessimism. Browse through a bookstore or peruse the newsletters of some investment gurus and you will find chilling predictions of the imminent collapse of an economic house of cards.
Or you could read Larry Kudlow’s American Abundance. This book is as robustly bullish as anything in the economic soothsaying literature.
Kudlow was one of Reagan’s budget economists. These days he devotes his time to frequent TV appearances, always wisely and wittily defending the superiority of the free market, and to writings that blast gaping holes in the plans of the interventionists to improve our lives through increased government spending and control. He also serves as chief economist to an investment advisory group.
Surveying the economic landscape, he comes to some very optimistic conclusions about our future. Despite the obvious falsity of the notion that “the era of big government is over,” Kudlow sees irresistible forces at work to advance America’s market society. The era of the growth of big government may be over.
One reason for his optimism is the fact that over 40 percent of the population—almost the same number as in the work force—are in the stock market through employee stock ownership plans, brokerage accounts, bank deposit plans, IRAs, Keogh Plans, 401(k) plans, mutual funds, variable annuities, and other private retirement systems. Kudlow reasons that this “investor class,” a vast and growing army of corporate owners, is bound to prevail on Washington and push it toward free-market policies.
Contrary to the predictions of Marx, the workers have become capitalists—owners of the means of production. In the contest between the invisible hand of the market and the clenched fist of Marxism, as Kudlow says, “It was Marxism that withered away.”
The idea that spreading investment via pension plans will cause the masses to jettison their anti-capitalistic biases is appealing, but there are grounds for skepticism. The investment trend has been going on for decades, but where’s the growing opposition to Social Security, Medicare, “public education,” subsidies, import restrictions, rent control, and the rest? Most people are too ill informed to see the connection between government interventionism and the size of their portfolios.
Kudlow courageously calls for wiping out more than a trillion dollars of federal spending, including the abolition of the Environmental Protection Agency, the Commerce Department, and other worse-than-useless agencies. That certainly would be good, but I fear that instead of foreseeing gains in their investments from lower spending and interventionism, the typical American would fall for the rhetoric of the politicians and their spinmeisters that the sky would fall if we didn’t continue squandering money on such follies.
Kudlow also sees a big plus in the great technological wave that has been sweeping the economy, boosting productivity (which he thinks is understated in official statistics). Thanks to revolutionary knowledge and information technology—microchips, microprocessors, cell phones, personal computers, fiber optics, bioengineering and so forth—we are entering a Second Industrial Revolution, he maintains.
There is no denying that technology has given the economy a tremendous surge and will probably continue to do so as long as we can keep the government from upsetting the apple cart. The forces of “green” reactionary statism dislike technological progress and will do everything they can to slow or stop it.
In the course of the book, Kudlow pays homage to several of the great economists of the twentieth century, including Ludwig von Mises, Joseph Schumpeter, F. A. Hayek, and Milton Friedman, whose philosophies, he believes, will help make the 21st century one of growth—both economically and morally. “We are in a period of great change and transformation,” he writes. “Our evaporating inflation rate and our rising economic growth rate are mirrored in the phenomenal increase in the stock market, which is a metaphor for our times. We can look forward to improving social, spiritual values; an era of global peace and prosperity is upon us.”
Whether Kudlow’s optimism about America’s future is warranted; whether American attitudes will move back toward individual liberty and free enterprise, only time will tell. Stay tuned.