Mitt Romney: No Apology: Chapter Five: Part A: A Free And Productive Economy: Book Analysis. A Nelson Rockefeller Republican or Reagan Republican?
ROCKEFELLER, GEORGE ROMNEY AND REAGAN AT A GOVERNOR’S CONFERENCE IN OCTOBER 1967. TWO MODERATES AND AN UNHAPPY CONSERVATIVE. IN WHICH CAMP DOES MITT ROMNEY FALL?
The first part of this chapter concerns itself with the fact our Gross Domestic Product is the foundation for our standard of living, ability to defend ourselves and the basis of our being the preeminent power in the world. He deals with Social Security and entitlements in a later chapter.
Romney in writing this book says he consulted with experts and friends on the various chapters. So the beginning of this chapter is a text book explanation of capitalism and how it works through, innovation, investment, creative destruction and the statement that capitalism requires a free society. Romney adds some anecdotes of his experience as a venture capitalist as a partner at Bain and Company. However the people who contributed to this book may be candidates for his administration if he is ever elected.
Capital formation, innovation and education create the matrix that drives the creativity and technology that makes our society dominant in the world.
In our society there has to be pools of capital or methods of raising capital with educated risk takers to find and support the creators of new inventions and technology. Over regulation, unnecessary taxation and deficit spending are the enemies capitalism
In Romney’s view government will never succeed in the venture capital business however once a new invention or technology has been identified and recognized for its potential but requires massive capital investment then the government may become involved.
The Post Office is a necessary service in this country. In the beginning it was organized and promoted by the government. However it has never been profitable and remains so today even though it has been privatized. (The USPS remains unprofitable because by law it must carry and deliver certain types of mail at reduced rates). Fed Ex and UPS are innovative and profitable private companies allegedly because they are private and would go out of business if not profitable. (True, but they have taken the most profitable part of the postal business and don’t have to charge reduced rates to support communication in the public interest. The reason the government created the postal service in the first place was not for profit but to foster the exchange of ideas.)
IBM on the other hand could never master the desk top computer business and lost control of its own creation to more innovative companies. (This may have been a conscious decision on the part of IBM because it had survived a long and bitter antitrust law suit brought by the government. So it probably did not want monopoly status in the computer business.) Romney’s point is well taken that a free and productive society creates pools of capital, the universities, individuals and institutions that create new inventions and technologies. (True up to a point: The Tennessee Valley Authority, rural electrification and the benefits they have created are but one example that required government intervention because the electric companies although wealthy and in possession of the necessary expertise would not do it.)
Romney believes some regulation by government is necessary but over regulation tends to stifle productivity, creativity and creative destruction by maintaining certain inefficiencies for political reasons. Unions are also necessary to give voice to the needs of the workers but they also can stifle productivity and necessary changes through work rules, strikes and unsustainable benefit programs; witness the automotive industry (and also the steel industry.) Therefore a balance between these forces must be struck to keep GDP, creativity and innovation high.
In writing this chapter Romney appears to be more of a Nelson Rockefeller Republican rather than a follower of Ronald Reagan or even the Bush II wing of the Republican Party in the case of domestic policy. Maybe because he actually got through Harvard Business School on his own rather than on his father’s clout.
However he is for lower taxes and elimination of the deficit. Apparently he believes that lowering taxes gives rise to greater investment which will expand the economy and government revenues needed to reduce the deficit will increase. (This sounds like a good idea but the fact is that the majority of economists agree American companies are holding billions if not trillions of dollars in their treasuries and are not investing in the American economy. Probably because globalization is draining the manufacturing jobs from this country so there is no need to invest in new factories or equipment here. Green technology is still in the venture capital stage but it could be a venue for investment by the corporations with swollen treasuries. Major infrastructure investment like rebuilding highways and bridges have usually been a government responsibility.) So far Romney tells us what worked in the past but does not give concrete ideas what will work in the future. Also he fails to point out that as a percentage of GDP debt service is now less than in the 1980’sand 90’s (3% : because interest rates are lower.) His idea of reducing taxes and the deficet, which is at a higher percentage of GDP than in the 80’s and 90’s and government spending to bring us out of the recession are not valid criticisms of the present administration. Government spending should be higher during a recession to stimulate the economy but taxation should be lower, which Obama proposes for the middle class but not the top 2% of tax payers. (the 2% would have a diminimus effect on the economy anyway.) So technically but not sustantively, he is half right.
His problem is in order to win the Republican nomination for president he must secure the support of the conservative wing of the Party who, for the most part, have an unreasonable view of fiscal and monetary policies.
These are the people who are always looking to the past for the solution to problems like energy, globalization, stimulus packages and tax policy not to the present and future for creative ideas and policies.