Let the good things flow
On the Japanese panic of the 1980s, the perils of industrial policy, and how to ensure that the United States stays ahead in the long term
Trade policy commentator Simon Lester offers the observation, "As economic competition with China heats up, it's worth remembering that in the late 1980s/early 1990s, people were writing books with titles like 'Trading Places: How we are giving our future to Japan and how to reclaim it'". That seems like a text from an era long ago and far away, but the copyright date is only 1989 -- making the text younger than the median American.
■ Japan was on a hot streak in the 1980s, but it never overtook the United States. That doesn't mean it didn't still end up quite rich: Japan has the world's fifth-largest economy today and a wealthy per-capita GDP. But it also still feels the effects of an interventionist industrial policy based upon the government imposing a scarcity mentality on the private sector.
■ In other words, Japan was on the rise, but it wasn't on an inevitable path to overtaking the United States. And a major contributing factor was (and remains) that the United States benefits from being an unplanned economy. We don't win because brilliant people are in charge; we win because nobody is in charge. Despite the way people wildly overestimate the power of the President to "manage the economy", often at the encouragement of those very Presidents who want to take credit for work they didn't really do, the lack of any real centralized control is both the secret ingredient and the secret recipe. It is both the "what" and the "why".
■ The United States is clearly in an economic rivalry with China, as well as a rivalry for other forms of power and influence. Nothing is certain about the outcomes, but there is a very safe way to forecast the future: Always bet on the side in a competition that is most genuinely open to new ideas, new people, and new partnerships. The freedom to fail (or to simply be wrong without catastrophic consequences) pays huge dividends.
■ On that basis, the people of the United States need to know what's best for ourselves: The maximum possible freedom of movement for goods, people, money, and ideas. On that same account, China's government is actively choosing to hobble itself: Consider the stealth required merely for people to discuss academic ideas freely.
■ Ideas don't move freely across a Great Firewall. Nor are people free to move about when arbitrary and capricious punishment looms over anyone trying to do business inside their borders. Just moving goods isn't enough.
■ The only way for America to lose our place in such a competition is to surrender the advantages that ought to come most easily to us. Let people make choices, leave them free, welcome new arrivals, think liberally (like John Stuart Mill), and make lots of room for failure. That's how to win.
