The Boundaries of Possibility

The Boundaries of Possibility
Innovation requires liberty.
by John Hayward
11/17/2011

Whole Foods CEO John Mackey, who describes himself as a political independent, wrote a powerful tribute to economic liberty in the Wall Street Journal on Wednesday:

The success of economic freedom in increasing human prosperity, extending our life spans and improving the quality of our lives in countless ways is the most extraordinary global story of the past 200 years. Gross domestic product per capita has increased by a factor of 1,000% across the world and almost 2,000% in the U.S. during these last two centuries. In 1800, 85% of everyone alive lived on less than $1 per day (in 2000 dollars). Today only 17% do. If current long-term trend lines of economic growth continue, we will see abject poverty almost completely eradicated in the 21st century. Business is not a zero-sum game struggling over a fixed pie. Instead it grows and makes the total pie larger, creating value for all of its major stakeholders—customers, employees, suppliers, investors and communities.

Watching the United States slide from third place to ninth on the Index of Economic Freedom makes Mackey worry about the future. He sees the most important form as “radically cutting the size and cost of government”:

One hundred years ago the total cost of government at all levels in the U.S.—local, state and federal—was only 8% of our GDP. In 2010, it was 40%. Government is gobbling up trillions of dollars from our economy to feed itself through high taxes and unprecedented deficit spending—money that could instead be used by individuals to improve their lives and by entrepreneurs to create jobs. Government debt is growing at such a rapid rate that the Congressional Budget Office projects that in the next 70 years public money spent on interest annually will grow to almost 41.4% of GDP ($27.2 trillion) from 1.4% of GDP ($204 billion) in 2010. Today interest on our debt represents about a third of the cost of Social Security; in only 20 years it is estimated that it will exceed the cost of that program.

Risk and innovation are the key ingredients of prosperity, and they require liberty. At this very moment, you are surrounded by the impossible: technologies that would have been all but unimaginable only twenty or thirty years ago. From smart phones to tablet computers, these things were created by the drive to offer something new, creating opportunity along the way. None of them would exist if the quest for excellence ended at “good enough.”

Who really “needed” an iPhone? The old cell phones were good enough, weren’t they? In fact, they seemed a bit miraculous at the time. People got along reasonably well without cell phones for a long time before they came along. Watch an old movie sometime. As late as the Eighties, people shoved change into pay phones when they needed to make a call on the go. If they were expecting a call, they hung around by the phone. It worked.

Weren’t audio and video tape cassettes “good enough” to carry music with you, and watch movies at home? Okay, the sound and image quality degraded over time, and they were bulky… but then we had CDs and DVDs, and they were perfectly serviceable digital technologies. The boxy old television tubes were adequate for watching a limited range of programming. We didn’t really “need” huge flat screens at affordable prices, giving us access to a galaxy of cable channels and streaming media.

Advancing forward has always carried substantial risk, both for investors and consumers. Ask anyone who bought an eight-track tape player, Betamax video cassette deck, or HD-DVD player.

These technologies are everyday, familiar examples of a process at work constantly, in every area from the production of food to the delivery of medicine. It’s difficult to precisely measure wealth and poverty – it is often noted that the “poor” in America have access to many luxury goods, including all of those mentioned above. Perhaps the best way to assess wealth is to look at the value of time. The amount of time average people must invest in taking care of basic necessities, like food and shelter, has declined steadily over the past century, and the value of their leisure time has increased. This is true for both frivolous and constructive activities. If you’re old enough to remember the pre-Internet era, think about what you had to do in order to research and write a school report, compared to how quickly kids today could do it.

And yet, the scholastic performance of our children has declined, even as an unbelievable quantity of information has been placed at their fingers. This is due, in no small part, to the hermetic insulation of public education from the forces of competition. Schools are filled with technology that simply would not exist, if the companies that produced those machines were run like public schools.

Competition is an aspect of liberty. The two are inseparable. The Obama disaster has been all about the fantastically expensive, and utterly doomed, attempt to gain the fruits of competition without freedom and risk. Central control is a poor substitute for consumer demand, because government is concerned with the acceptable, and has no energy for exploring the boundaries of possibility. No one thinks outside the box in a re-distributive State. Why would they?

It should surprise no one that entrepreneurs who must fight for the support of investors produce far superior results to crony capitalists who secure “investment” by making the right campaign contributions. It’s the difference between those who stake their fortunes on what could be, and those who use their power to declare what must be. As power accumulates in Washington, the boundaries of possibility contract. Debt is the negation of possibility – an obligation placed upon the next generation that will rob them of resources that should, by rights, be theirs to invest as they see fit.

It would be sad if our children came to look upon the end of the Twentieth Century as a time of miracles, a bygone era when people were free to take crazy chances in the pursuit of incredible reward. It would be a shame if they learned to be satisfied. That is what the titanic but helpless government we are building today will require of them.
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To read another article by John Hayward, click here.