By Robert Hockett
Modern economics and many policies informed by it have brought near miracles of wealth-generation to societies worldwide. They have done this by showing how societies that foster and reward individual creativity and initiative, and that provide these divine human attributes with efficient outlets through which to build and produce and disseminate what is at first only conceived or imagined, are societies whose members flourish and grow ever more prosperous together.
Modern economics and the policies informed by it also have suffered one blind spot, however. They often have failed to clarify how they define those ‘economies’ and ‘societies’ of and to which they speak.
Later economists, unfortunately, as their models grew ever more general and mathematical, abstracted away from such things as sovereign nations and their people. They knew not ‘citizens,’ but ‘representative agents.’ They spoke not of countries or states, but of ‘the market’ considered as one global or imaginary thing rather than many national things, or of Arrow-Debreuvian vector spaces removed both from time and from space.
The penchant for abstraction that led modern economists to part ways with early political-economists like Steuart and Smith was not entirely without value. It brought great gains in logical rigor and theoretical understanding, as do most ‘general’ models like that of Walrasian General Equilibrium Theory. But too many policy-makers informed by the latterday economists, unlike earlier generations of Hamiltonian policy-makers informed by earlier political-economists, have purchased their rigor and understanding at the expense of empirical relevance and practical wisdom.
In a world of nation-states both historically and geographically situated, policy-makers can control only, and hence must focus mainly upon, that for which they are actually responsible – their domestic economies made up of their national citizenries.
The policy relevance of this basic truth is not hard to see. A central insight of the early political-economists was that a real life national economy, to be strong and creative and prosperous through time, had to be a productively diversified economy. – diversified within the national boundaries that policy-makers had actual authority to affect. Robust national economies had to have robust agricultural, industrial, commercial, and financial sectors – they couldn’t afford to ‘outsource’ these things. And they had to have multiple sub-sectors within each of those sectors – many different kinds of manufactures and manufacturing industries, for example, within ‘the manufacturing sector,’ many kinds of financing within ‘the financial sector,’ and so on.
Without this form of productive diversification, early theorists like Steuart and policy-makers like Hamilton warned, a nation risked forfeiting both its enduring prosperity and, more ominously, its very integrity and autonomy – its sovereignty. Such a nation would lay itself bare to the destructive gyrations of uncontrollable world markets and the depredations of often-hostile or imperial nations abroad.
Treating ‘the whole world’ rather than the nation as the relevant unit of productive diversification as later political economist David Ricardo subsequently did, in other words, was effectively surrendering to fate rather than taking responsibility for destiny – our destiny, as a free and independent, productive people.
Today two visionary members of Congress – Representative Ro Khanna of California and Senator Marco Rubio of Florida – announce bicameral, non-partisan legislation I proposed back in 2020 to re-enable precisely that national project – the project of retaking control of our destiny as a free and productive people, and hence our strength and enduring prosperity as a nation.
Our National Development Strategy and Coordination Act of 2022, which comprises the first two planks of my earlier-proposed four-plank National Reconstruction and Continuous Development Act of 2021, partially repurposes, and on a monthly basis reconfigures, existing institutions of our government in a once familiar but lately forgotten manner. This is a manner that enables our public servants to focus, together, attention and action upon a cross-cutting national imperative that we have ignored at our peril for too long: the continuous productive revitalization of our national economy, understood as a coherent whole that embraces all states and regions, all sectors and subsectors, and all industries and sub-industries involved in ensuring the productivity, the prosperity, and the enduring strength of that whole.
The Bill does this through two simple and mutually complementary, yet far-reaching measures.
First, it combines all of our already-existing – and democratically accountable! – Cabinet-level executive Agencies with responsibility for facilitating the nation’s primary industries and infrastructures, joined by leaders from all of our States and all of our most systemically important private sector industries, into one regularly meeting National Development Council (NDC).
The Council will be responsible both for crafting and regularly updating a coherent cross-regional and cross-sectoral National Development Strategy, and for coordinating that Strategy’s continuous execution. In so doing, it will act much as our regularly meeting National Security Council does in accountably bringing together all of our national defense and security agencies in crafting, regularly updating, and executing a single coordinated national defense and security strategy.
Second, the bill repurposes our already existing Federal Financing Bank (FFB) within the Department of Treasury, whose job is already to collect, lever, and distribute the funds used by our Cabinet-level Agencies in executing national policy, into the financing arm of the Council. That is, we repurpose the FFB in a manner directly corresponding to the way that the Council itself regularly recombines and partially repurposes those parts of the Executive Branch of our government accountably responsible for executing national economic development policy.
As noted above, this two-tiered model, which strategically combines collaborative policymaking and coordination functions with financing functions to facilitate productive synergies and continuous modernizations across all regions and industrial sectors of our continent-spanning economy, is not new. Indeed, it is the modern equivalent of what we have done as a nation in all of the most ‘winning’ productive periods of our past as a proud sovereign nation.
The coordinative Council part of the Bill corresponds, for example, to President George Washington’s and Secretary Hamilton’s Treasury Department and Society for the Promotion of Useful Manufactures, while our repurposed FFB corresponds to their first Bank of the United States. That pairing quickly catapulted the US from colonial status into a world-class diversified economy by early on in the 19th century. That preserved our newly won independence and set the course for miraculous growth across all of our country’s states and territories and all of our economy’s then-nascent productive sectors.
The Council also corresponds to President Abraham Lincoln’s and General Montgomery Meigs’s Office of the Quartermaster General, while our repurposed FFB corresponds to Lincoln’s and Secretary Salmon Chase’s Treasury Department and Office of the Comptroller of the Currency. That pairing first won the Civil War and then made the US into one of the world’s top three industrial powers, alongside Great Britain and newly industrializing Germany (itself following Hamiltonian policies), by later in the 19th century.
In more modern times – specifically the early to late-mid 20th century – the same pairing, in the forms first of President Woodrow Wilson’s and Chair Bernard Baruch’s War Industries Board and Chair Eugene Meyer’s War Finance Corporation, then of President Franklin Roosevelt’s and Chair Donald Nelson’s War Production Board and Secretary Jesse Jones’s Reconstruction Finance Corporation, first won the First and Second World Wars and then made the US the world’s unmatched premier economy and first superpower, respectively.
We can do it again, just as we’ve done it so many times before. And we can do it without stopping this time. The key is to take to heart two crucial lessons, additional to the forgotten importance of nations as described above, that inform the Bill, over the course of its implementation…
The first additional lesson is that development – more specifically productive development – is forever. It is never a ‘done deal,’ never a one-off achievement. (As the quintessentially American poet Bob Dylan once sang, ‘he not busy being born is busy dying.’) It is a process of continuous invention within sectors, and then continuous dissemination across sectors, of new products, productive techniques and technologies that grow wealth, improve lives, and foster ever greater and more efficient invention and production economy-wide.
The aforementioned early political-economists and American leaders who read them understood this, and established predecessors of our Council and FFB –those mentioned above – for precisely that reason. Our having got off track and begun thinking of development as a once-and-for all, one-off achievement probably traces back to the Cold War, when ‘development economists’ understandably came to think of their task as that of helping ‘underdeveloped economies’ achieve ‘takeoff’ to avoid the temptations of Soviet communism.
But the Cold War is over. We won it, principally thanks not only to our sense of singular national purpose and resolve, but also to our earlier having learned the lesson of perpetual development necessary to achieve that purpose. And so the time has arrived to recover that lesson.
The second additional lesson that informs the Bill grows directly out of the ‘dissemination’ part of the first additional lesson just mentioned. It is that development – again, productive development – is synergistic, and hence must be coordinated in cross-cutting ways. It is inherently cross-sectoral and cross-regional in character, coherently combining the best efforts of all private sector industries and all public sector levels of government.
And by ‘best efforts’ I mean all segments doing precisely – and only – what they do best.
An electronic vehicle (EV) industry, for example, cannot grow absent a battery industry and regional networks of charging stations. Yet disparate private sector industries can no more push one another to move first on EVs or batteries, or zone locally or nationally for charging stations, than can public sector actors efficiently produce EVs or batteries. All sectors and industries must in effect work together, in coordinated and facilitated, not merely chaotic or dictated fashion.
Similarly, a new chip factory in a particular state or region will hardly make sense in the absence of reliable sources of water and power and neighborhood housing and schooling and transportation for growing workforces and shipment needs. Nor will a wind farm for energy in one site of production be efficient if there is already a solar farm or hydropower station or refinery underway just across a nearby state line. Yet no single firm or state has the resources or authority to ensure all needed parts of the whole that is chip manufacturing are available. Hence, again, the need of both public and private sector coordination and financing across tasks and at all levels.
For private sector industry, then, ‘best efforts’ will mean doing the creating, the inventing, the producing and the distributing. For public sector agencies, it will mean spotting and addressing all holes – all regional disparities, financing shortfalls and other ‘market failures’ – that private sector firms lack the means, the authority, or the rational incentives to correct. And it means doing so in ways that ensure all of our states, industries, and citizens take part in and contribute to our nation’s great perpetual productive project.
The Bill enables precisely these needed developments. It puts in place, using already existing, democratically accountable institutions of our government, both a new coordinative structure and a correspondingly repurposed financing arm that can formulate ongoing national development strategies, execute on those strategies, and in so doing spot gaps both financial and infrastructural that now impede national redevelopment.
Such gaps and the best means of filling them – from public or private to mixed public-private funding and lending alike – will vary through time and from project to project. Hence while it appropriates a modest sum of start-up funding to get started, our Bill’s primary purpose is to ensure that subsequent federal expenditures and corresponding revenue streams, which will ebb and flow over time long after our present generation retires, are deployed and collected both smartly and productively.
The coordinative council and financing bank duo is a uniquely American invention that’s been the secret to all of our greatest productive achievements as a nation throughout our proud 250 year history. It is time we restored it. The Bill does this not by establishing yet more new agencies or by ‘reinventing the wheel,’ but by optimally reorganizing the accountable instrumentalities we already have so that they can get rolling again.