In my previous post I laid out the view of the economist, Tyler Cowen, in his new book “Average is Over”, that the powerful trends of globalization, technology, and ever increasing machine intelligence (such as Google’s search engines), will lead to a super elite 10-15% of American’s who will have the ability and self-discipline to master tomorrow’s technology and profit from it. The average middle class worker will be increasingly replaced or downgraded by intelligent machines. Social and economic inequality will continue to grow and this new trend will be very hard to overcome. This is a bleak prospect for the future of America.
What can be done to resist this trend and to try to turn it around? Jim Clifton, the CEO of the Gallup Organization, says in “The Coming Jobs War”, that “what everyone in the world wants is a good job” and he has many ideas about how to boost the economy in order to produce more good jobs. According to Mr. Clifton, there is no shortage in this country of creativity, new inventions and innovation. What is lacking are successful business models to commercialize the good ideas which are already out there and create customers for new products. We need entrepreneurship. “Entrepreneurship has a direct impact on supply and demand, but with a distinction. It doesn’t just provide supply, it builds demand.”
Next question: how do we boost entrepreneurship? We get government out of the way as much as possible. This means the lowest possible tax rates (offset by eliminating tax loopholes for the wealthy) and fewer burdensome regulations (such as the employer mandate for health insurance).
As a society we have to decide which is more important: creating more and better jobs by growing the economy faster or making everyone more equal with higher taxes and more income redistribution. We can’t have it both ways. To reverse or at least slow down the trends which are now shrinking the middle class, the best policy is to go all out for entrepreneurship and investment!