Jimmy went in for his annual physical with Dr. Nolan. The doc shook his head and explained to Jimmy that he was going to have to change a lot of his habits: "Jimmy, you have a lot of things wrong with you. You are vastly overweight, anemic, diabetic, you smoke and drink too much, and your knees are about to go out under all the stress." Dr. Nolan suggested that Jimmy solve all those problems in one big bang. He would have to cut down on his visits to the Varsity, quit eating Key Lime pie, eliminate his 5 pm JD, quit smoking, and most important, eat more spinach, do more burpees, and have two knee replacements.
Jimmy was stunned. While he was willing to change his lifestyle over time, moving quickly on these fronts seemed impossible. How can one eat more spinach and not follow it with at least a tiny mouthful of luscious pie? And how can a human being cut out a daily ration of chili dogs without at least one puff on a cig or washing it down with a little JD? Worse, how does one do burpees without fully operational knees?
Dr. Nolan was insistent. "Jimmy, all these vices are connected. If you make headway on one, then you will just fall backwards on another unless you attack them simultaneously. Sure it will be rough for a while. But once you get past the first days, you will begin to feel like Melissa McCarthy on steroids." Jimmy replied, "Yes, Doc, but trying all that stuff at once might just demoralize me, and I might not even make it to my next appointment. And by the way, Melissa McCarthy is a woman."
Enough foolishness? I don’t think so. The idea of big bang versus gradualism is worth discussing in light of our new government’s volley of shots aimed at our country’s problems. I don’t have to repeat it all here but we have seen and heard policy announcements in many areas – healthcare, bank regulation, environmental regulation, tax reform, infrastructure, and so on. The rationale is that we have deep problems that are worsening. The explanation is that we cannot wait to attack these problems. Since many of these problems are related, it makes no sense to prioritize, because failure to move in one area means new policies in other areas will not succeed.
Is policy in 2017 like building a house wherein one must start with the foundation before erecting the walls? Or is policy more like making an omelet where you throw in all the fillings more or less simultaneously?
Much was said about a big bang after the Soviet Union fell. Many countries were freed from Soviet policies and decided to move away from a socialist economic framework to one that was more capitalist. Some, like Poland, wanted to move quickly on many fronts. Hungary took a more gradual approach. (Hungary and Poland were not in the Soviet Union but were under its influence.) Others went even slower. I just read some of the economic analysis of these programs and policies and now have a headache. As you might expect there is no silver bullet to transformation. How one approached economic transformation depended on a lot of things including the nature of each country’s specific problems, its culture, and its history with socialism.
Countries that moved quickly and forcefully experienced very negative short-run effects including large recessions and high unemployment. Some that took gradual approaches avoided some short-term pains but followed a slower path to eventual stronger growth. It has been a quarter century since all that started, and the truth is that transformation goes on in most of the former Soviet sphere. The Baltic countries (Latvia, Lithuania, and Estonia) and Russia are the only countries to have annual real per capita GDPs of close to $20,000 per year. The rest are much lower.
The radical changes necessary to move from Soviet to market economies dwarf the changes going on today. Nevertheless, the experience of big bang is helpful. First, while there is some precedent for moving quickly on many fronts, there is also the recognition that gain may follow considerable pain. So one question is whether or not America in 2017 can tolerate a step backward. Second, much depends on the severity of the problems. Severe problems may be more entrenched and difficult to dislodge. A second question, then, is how bad are today’s problems in the USA? Third, results depend on history and culture. A past with experience in competitive markets helped places like the Baltic countries once they were freed from the Soviet Union. A third question: do US voters want to return to less government and more reliance on markets?
Are our economic problems in the USA today bad enough that people are willing to take a step backward to move the economy forward? Or do we even think these new policies are on the right track? It looks like a new big bang is about to start. The dust is about to fly.