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.
