Trump should also explore the possibility of renewing the Plaza Agreement to try to establish order in today’s foreign-exchange markets, which are at the doorstep of a currency war. With the world’s combined public and private debt approaching an astonishing—and likely unsustainable—300 percent of GDP, there needs to be a global debt conference to establish contingency planning in the event parts of the world, particularly emerging markets, at some point initiate a scenario of debt default.
But most of all, Washington policymakers need to adopt a new Main Street mind-set that focuses like a laser on the small, the new and the entrepreneurial. They need to establish the conditions that continue to make the United States the start-up capital of the world. Audacious discovery is the goal, the true magic of this capitalism for all.
There is no doubt that technology today is feared by some as a disruptive force. And it is true that technological change can be scary. The rise of artificial intelligence is an exciting but sobering development. If computers increase their IQ by just 1.5 points per year, in less than a decade computers will be smarter than 90 percent of the U.S. population. Artificial intelligence has the capacity to be an awesome economic disrupter leaving a lot of people sitting around with not much to do. But fear of technological advancement has been present throughout history. Intense fear developed with the advancement of agricultural technology. And the pessimists time and again have been proven wrong. The new technology brought with it the creation of entire new industries.
But there is another reason why people had better hope the pessimists are wrong. The only way the world can save itself from the coming tidal wave of social chaos and violence associated with joblessness and debt is with turbocharged, innovation-driven growth. The facts are startling. Over the next twenty-five years, 3 billion more people worldwide will enter the global middle class. This growth will require the creation of hundreds of millions of new jobs. For many countries, within a quarter century, nearly half of their populations will be under the age of thirty, all desperate for a better life. An innovation-driven explosion in global growth is the only means of avoiding a worldwide political calamity of economic hopelessness dropped someday soon onto the laps of our kids.
THERE ARE reasons to be positive. As high-tech investor Christopher Schroeder argues, the global economy has enormous potential for growth. “In less than five years, two-thirds of the world will be walking around holding the equivalent of today’s smart-phone, a device with more computing power than NASA had in the 1960s.” As the late Joel Kurtzman, the former Harvard Business Review editor, aptly put it, “There are no facts about the future.”
The future has always been beyond prediction, requiring risk-takers, explorers and dreamers to take a leap of faith. The world is always full of surprises. What nation, for example, is today the world’s top per-capita consumer of YouTube? The United States? China? The United Kingdom? No. The answer is Saudi Arabia. Saudi women comprise the largest group of viewers. And their most popular viewings? Anything involving education.
But as encouraging as this and other developments are, a large bulk of the world economy, led by Europe, Japan and now China, faces a corporate capitalism far worse than in the United States. Instead of unleashing the innovative talents of their citizens, just the opposite appears to be happening. A stifling top-down mismanagement by establishment elites reigns. The innovators continue to hold back.
This is a tragedy. Today’s innovative advancements in information and other technologies, while on the surface terrifying, can produce a powerful bottom-up growth phenomenon. The breadth of human knowledge is at everyone’s fingertips and essentially is free. Customers are theoretically limitless.
Even though today’s economic system still favors the elites, that situation is changing. Intellectual property is increasingly the most valuable asset in today’s changing economy. Everyone may very well soon have access to the means of production. The doors of entry to the innovative economy are being blown wide open.
In the United States, the building blocks are still in place to achieve higher levels of economic success. Top-down design solutions and large, inefficient bureaucratic institutions are perceived increasingly by voters with skepticism. We live in an increasingly bottom-up world where the empowerment of people can be an awesome force. But leadership from Washington is essential to creating a level playing field.
Compared to the rest of the world, America holds some unique advantages, including in the field of energy technology and production.
America has a culture that historically has valued entrepreneurial risk-taking and tolerated failure, while adhering firmly to the rule of law. In some parts of the world, debtor prisons still exist. Or intense social stigma is associated with business failure. It is not inevitable that the United States will fall into a Japan-like scenario, muddling through for the next several decades.
But policymakers need to write a new American economic narrative in which not just the risk-takers of Silicon Valley and Wall Street are seen as the essential actors. Average folk must be encouraged to dream big and dare big. This should be the start of an important process of Americans attempting to discover who they are as a nation. The window for change is only open briefly. The clock is ticking. Half of American families are near insolvency. Half have no means of handling an unexpected $500 bill for a medical emergency or car repair. In economic policy, results matter. The elites in Washington have run out of excuses. The 2016 election was proof that the little guy in America is desperate for a more robust economy. The little guy is fighting back.
David M. Smick is chairman and CEO of the macroeconomic advisory firm Johnson Smick International, founder and editor of the International Economy magazine, and bestselling author of The World Is Curved: Hidden Dangers to the Global Economy (Portfolio, 2008). This essay draws on his forthcoming book The Great Equalizer: How Main Street Capitalism Can Create an Economy for Everyone (PublicAffairs).
Image: Tokyo at night. Wikimedia Commons/Creative Commons/Moyan Brenn