December 13, 2018

Niskanen Center Releases New Policy Vision Paper



Today we are excited to release a new paper that provides a detailed overview of the Niskanen Center’s distinctive policy vision. Entitled “The Center Can Hold: Public Policy for an Age of Extremes,” the paper was coauthored by Niskanen scholars Brink Lindsey, Steven Teles, Will Wilkinson, and Samuel Hammond. You can find it here

In the paper, we argue that American liberal democracy is currently experiencing a crisis of legitimacy. That crisis began with Donald Trump’s victory in the Republican primary and was underscored by his improbable elevation to the presidency: Neither of these events could have occurred in a healthy, stable, well-governed polity.

We contend that new governing approaches are needed to resolve the crisis:

There is only one sure way to quiet our populist distempers and restore faith in democratic institutions, and that is for those democratic institutions to deliver effective governance. The failures of governance are what got us into this mess; public confidence in government will return only when government demonstrates through successful problem-solving that such confidence is merited.

 

Success in this effort will require not just new policies, but a whole new way of thinking about policy. The center can hold, but first it must be fortified with new convictions. There are, to be sure, many reasons why our political system has failed to address the mounting problems and dissatisfactions of the 21st century. But one crucially important and widely neglected factor is that the two prevailing ideological lenses, on the left and right, have gaping blind spots that render the most promising path forward invisible.

 

On economic policy issues, the traditional axis of conflict is “pro-government” on the left and “pro-market” on the right. Overcoming our present malaise, however, will require bold moves in both directions simultaneously. We need both greater reliance on market competition and expanded, more robust, and better-crafted social insurance. We need more government activism to enhance opportunity, and less corrupt and more law-like governance. To clearly see these needs and how best to answer them, it is necessary to use a new ideological lens: one that sees government and market not as either-or antagonists, but as necessary complements.

Rejecting today’s ideological polarization over the size of government as a false dichotomy, our hybrid vision combines the best aspects of the “pro-market” right and the “pro-government” left:

Another way to put the same point is to say that we reject both market fundamentalism on the right and democratic fundamentalism on the left. In other words, we don’t believe that either a well-functioning market economy or a well-functioning representative democracy is self-creating, self-executing, or self-sustaining. Market fundamentalists are prone to arguing that all you need to get markets up and running is to get government out of the way—in other words, the less government, the better. Democratic fundamentalists make the mirror-image mistake, arguing that all you need to get democracy to work better is to grant government more powers—that is, to shift more and more decision-making from private actors to officials of a democratically elected government. We, by contrast, believe that the functioning of both markets and democracy depends on how they are structured: the right structures produce good results, while the wrong structures can cause disaster.

To restore flagging economic dynamism, we advocate far-reaching regulatory reforms to unwind distorted rules that favor privileged insiders at the expense of everyone else:

Regulatory capture is broadly defined as insider domination of the policymaking process resulting in regulation for the benefit of the industry rather than the public. This dynamic has led to badly distorted policies that throttle innovation and growth even as they redistribute income and wealth to a favored elite at the top of the socioeconomic scale. The result is massive misallocations of resources ranging from the financial sector to health care to where Americans live and work, and a corresponding diminution of economic dynamism and opportunity.

At the same time, however, we need to bolster programs of social insurance to address dislocations caused by creative destruction and maintain political support for robust market competition:

It’s worth reminding ourselves what is at stake in this discussion. In the face of inevitable shocks caused by creative destruction, political systems can be fundamentally destabilized in the absence of effective systems of social insurance. The contemporary rise in anti-market populism in the United States is a clear case in point….

 

Preparing for the next economic shock, be it from trade, a recession, or rapid technological change, calls for major enhancements to our unemployment and income security systems, up to and including a dedicated federal funding stream for subsidized employment programs.

 

Without strong income supports that put a floor beneath displaced workers and systems that smooth the transition to new employment, political actors and the public tend to turn against the process of creative destruction itself. Put differently, a lack of social protection begets protectionism, as the quite reasonable demand for economic security is instead translated into popular support for trade barriers, inflexible labor regulations, industry bailouts, and precautionary impediments to new technologies, all of which conspire to further undermine economic security over time through sclerosis and stagnation. This is why countries with some of the largest welfare states also have some of the most dynamic private-enterprise systems, and vice versa. By filling in for missing insurance markets, a robust welfare state works hand-in-hand with flexible market processes to produce broad-based prosperity.

Our policy vision represents a sharp break from the prevailing orthodoxies of left and right, and is therefore hard to pin down with a handy, reductive label. Although we make the case for bold reforms, we believe the essential spirit of our project is one of moderation:

The goal of the moderate is not to achieve perfection according to a single, unbending standard, but to strike a rough and workable balance among a variety of valid yet competing and perhaps unreconcilable objectives. In these disordered times, restoring balance will require major policy changes, and we do not shrink from the challenge. Yet our goal is not to make the world conform to some abstract, rationalistic schema. Rather, it is to work successfully and effectively within the world as it actually is, with all its messiness and confusion.

In the spirit of moderation, we have attempted to learn from and incorporate what is best in competing ideological traditions. We hope that the new synthesis we offer can help move our divided society toward the best version of itself and away from the toxic tribalism that afflicts us today.

Read our entire policy vision here.