In my previous post on the Apollo Initiative as Democratic Planning, I talked mostly about historical parallels between this modern effort and the New Deal’s experiments in planning. Having established that the Apollo Initiative resembles a cross between NRPB-like forward planning of public works and TVA-like public investments in industrial development, I’m now going to talk about how we go about generalizing from this example to a working model of how to organize Federal policy – a Federal system of “public initiative” economic planning.
Why Do We Need This:
As I discussed in my post on Swedish labor demand policy, one of the long term problems that the American economy has developed is a dangerous weakness in the labor market that has only been overcome in the last twenty years by a combination of easy money policies from the Fed coinciding with the emergence of a new bubble to invest in – in the late 1990s, it was telecommunications, e-commerce, and high tech stocks that formed the basis of an “internet bubble,” in the mid 2000s, it was the housing market and its assorted derivatives. However, the long-term prospects of such an economic model aren’t very good – only the internet bubble really produced a strong enough labor market to boost wages, and even that was temporary enough that the housing bubble had to be largely financed on credit, not income.
I would submit that as a nation we cannot simply rely on a strategy of hoping that a new industry will show up at precise intervals when the American economy needs a boost – it doesn’t always happen on schedule, and even when it does, it’s proven to be no guarantee of long-term or widely shared prosperity.
The purpose of the Apollo Initiative and (as I will discuss) other Initiatives is to use the government as a “venture capitalist of last resort,” looking for new industries and infrastructures that can be the source of future economic growth and economic development, while simultaneously advancing a higher public interest. While conservatives are quick to point to Federal efforts at developing supersonic commuter planes and vaccines for cancer as examples of why the government shouldn’t try to “pick winners,” history actually does show us that the government is actually quite good at long-term venture capital, as long as it focuses not on the micro-level of particular technologies or approaches but rather on the macro-level of infrastructures, economic processes, and economic environment.
Both Federal and state “internal improvements” in the 19th century were the decisive factor in American economic development – without the Erie Canal or the Cumberland Road, the economic development of the Midwest, especially the Upper Midwest, as a global agricultural (and future industrial) powerhouse would have been impossible; without the federally-financed growth of the railroad, Chicago would not have become “hog butcher to the world” (and yes, I know that’s a misquote. I prefer the Obama version), California and the rest of the West couldn’t have developed past their extractive-industries phase, and the great industrial centers of coal, iron, and steel production couldn’t have gotten their goods to market. In the 20th century, Federal investments in highways, aviation, aerospace, electronics, high tech, communications, computers, and yes, the internet, not only created entire industries, but also dramatically shaped where those industries would be located. (For more on this, see Margaret Pugh O’Mara’s Cities of Knowledge)
In a sense, the “public initiative” system would only be systematizing something we’ve already been doing on an ad hoc basis, a natural outgrowth of the government’s ability to invest without making a profit, to survive every business or secular cycle, and to invest in the basic research that allows scientists to explore and innovate without immediately showing a marketable product.
An Initiative System:
- The Apollo Initiative (Environment)- as explained in part 1, the Apollo Initiative is a ten year, $500 billion investment in alternative energy, mass transit, energy efficiency, and “green manufacturing.” The stated goal of the Initiative is to combine the creation of 5 million “green collar” jobs with the creation of a cleaner and more efficient alternative energy economy. In part, we’ve already seen the first stages of enactment of this Initiative through the passage of the economic stimulus package (with its components for weatherization, high speed rail, etc.), Obama’s first budget (ditto) and the Waxman-Markey climate change bill. However, the scale of investment and the unification of similar programs into a single directed effort has yet to occur – the Obama administration should get on this, and there’s no reason why this shouldn’t become part of the Obama Administration’s agenda either in the post-midterm run-up to the 2012 election or as part of the 2012 re-election platform.
- The Athena Initiative (Education) – I’ve talked previously about different ways we can improve our higher education system, but an Initiative would be an excellent way to combine disparate reform efforts into a single push. Like the Apollo Initiative, the Athena Initiative could combine a variety of efforts to improve and expand higher education:
- Building a Better Public University System – combine the extension of a new, 1960 Master Plan-like system of State Universities, State Colleges, and Unified Community Colleges with a commitment to double the number of spaces available by expanding existing campuses and building new ones in each state. Similar to my earlier proposal about housing, this would combine improving education with creating thousands of new WPA-like jobs in light construction, but also thousands of permanent jobs ont the new and improved campuses in education, university administration, and university services (like any other institution, universities could not function without maintenance workers, office workers, techs and tech support, janitors, groundskeepers, and other support staff).
- Making Higher Education Affordable – just as the Apollo Initiative combines construction of new infrastructure with new incentives for individuals to improve their environmental “footprint,” the Athena Initiative could fold in money for construction and operation of universities with the funding to make higher education completely free, both at public univiersities, but crucially, also at vocational and technical colleges where people who don’t like academics but who want to pursue a skilled trade can get their own, equally important form of higher education – because we are going to need lots of new electricians, welders, riveters, carpenters, and other skilled workers in our shiny new economy.
- Investing In Teachers – on a similar track, we’re going to need a lot of new teachers, especially as the huge wave of teachers hired to teach the baby boom retire. According to the U.S Department of Education, new hiring of elementary and secondary education teachers will increase to 464,000 by 2017; post-secondary (i.e, higher education) new hirings will increase by another 382,000. That’s 846,000 new teachers not including a massive expansion of higher education like the one discussed above. So assuming a further 382,000 additional post-secondary education teachers, we’re going to need 1.2 million teachers over the next decade, which in addition to its impact on the education system will also help to firm up the labor market. My proposal is that the Federal government pay for half of them, while providing states with financial assistance to increase salaries for all teachers to a minimum standard of $50k a year for elementary/secondary education teachers and $75k a year for post-secondary teachers.
- Mercury Initiative (Information Technology) – another area where Federal investment can make a huge, and actually inexpensive investment is to get involved in expanding the U.S’ broadband network, especially considering that, despite the immense weight of U.S telecommunications giants, we’ve now slipped far behind the rest of the world in a technology we created.
- Establishing a free, national public, broadband wireless network to act as a yardstick competitor and foundation for other networks (private telecoms would survive through specializing in providing really high-speed supplementary service, internet phone service, cellular phone service, and the like). Simply by creating the service, you dramatically reduce the costs for almost every business in the United States, make e-businesses extremely cheap to set up, and expand the market for e-commerce.
- Federal competitive grants and prizes in new technologies (think nanotechnology, A.I, etc.) to spur innovation both in academic and entrepreneurial arenas.
- Federal regulations to preserve net neutrality, protect personal data privacy, and the like.
- Vulcan Initiative (Housing/Manufacturing) – following up on my earlier post about creating a Housing Progress Administration to put unemployed construction (and other) workers to work constructing new affordable (and green, why not?) housing in already densely-populated areas where the housing market had become unaffordable for most Americans and “salvaging” speculative development ghost towns, we also have a need to improve the energy efficiency of the 110 million regular residency units in the United States. You could easily put 5 million people to work not merely constructing new, energy-efficient homes and dismantling empty shells along the highways, but also refurbishing homes, far more than the limited weatherization program funded through the stimulus package.
- Asclepius Initiative (Medical Care) – similar to the Athena and Vulcan Initiatives, the Asclepius Initiative would combine incentives for “best practices” and cost effectiveness research and research into “poverty” diseases like malaria with a massive building program of hospitals and local health clinics and a hiring program of doctors and nurses to bring health services to underserved areas, especially in poor neighborhoods who are disproportionally uninsured. Again, the idea is to combine a public interest (health care), with an immediate infrastructure program (hospitals and clinics) and a long-term jobs program (more doctors and nurses to meet our current and future shortages).
Originally, the Apollo Initiative billed itself at $200-300 billion over ten years; since then, they’ve clearly responded to the larger possibilities of the Obama administration by expanding their size, in good bureaucratic/entrepeneurial fashion. However, there was a specific virtue in the original $200-300 billion price tag – it was cheap on a yearly basis, only $20 billion. And while $50 billion a year doesn’t particularly strain the Federal budget, it does preclude having multiple Initiatives running at the same time – at least politically, if not fiscally.
If, on the other hand, we envision each of these initiatives running at $20 billion dollars a year for ten years, you have the fiscal capacity and political space to run two or three initiatives at the same time while remaining at a yearly cost of only $40-60 billion. This better fits with the ultimate goal, not of trying to pick a single winner, but of pursuing multiple promising lines of economic development while benefiting the commonwealth.