As regular readers, I’m a huge fan of Tim Lee and his concept of a bottom-up approach to understanding and improving society. And so I was struck by the final paragraph of Republican consultant Alex Castellanos’s New York Times op-ed on the Republican revival.
Mr. McDonnell offered suburban voters, working women and independents a better way to increase jobs and expand the economy, from the bottom up. It was a stark contrast to what Americans are seeing in Washington, where elitist Democratic politicians, in bed with the Wall Street establishment, are taking Americans’ tax dollars away to invest in arrogant, top-down public-sector schemes. This helped Mr. McDonnell forge a powerful coalition involving not just independents but also young voters; he won the under-30 vote by 10 percent. Thanks for the opportunity, President Obama. On Tuesday, Nov. 4, in Virginia a New Republican Party was born. See you in 2010.
My concern is that Republicans haven’t yet lived up to Castellanos’s description. There is still an urgent need to make our financial sector more resilient and to end the string of bailouts that began in the mid-1980s and that gets bigger and more toxic every time. Yet congressional Republicans seem strongly inclined to defend the interests of the too-big-to-fail financial institutions rather than the interests of the entrepreneurs who depend on a financial system that works. I’m oversimplifying matters here, I realize, but I think that Castellanos is right to suggest that the alliance of the Democrats and Wall Street needs to be opposed — and right now, the Republican establishment isn’t doing the opposing.
In a similar vein, we need a bottom-up approach to health reform that facilitates business model innovation. This could be something along the lines of the Ryan-Coburn proposal, that precious few congressional Republicans actually backed, or, better still, something like Martin Feldstein’s call for universal catastrophic coverage. We’ve only seen tentative movement on this front, and health reform might be where Republicans are furthest along.
Bernard Avishai has an outstanding piece in Inc. on the economic ecosystem that is emerging around electric automobiles. I hope to write more about it. Avishai ends on an interesting note. After noting that the Obama administration has invested in R & D and pilot projects and direct grants to firms, he writes:
The point is, there are far too many living things in the emerging ecosystem to be anticipated by any government or major OEM. It will take an implicit partnership of hundreds, perhaps thousands, of suppliers to fill out the technology. The key is to bring them into alignment. “If governments act to consolidate standards,” Posawatz says, “they can really make a difference in catalyzing competition among suppliers.” He would not want to impose standards prematurely and cut off promising avenues for innovation. (Presumably, OnStar’s ambitions are also on his mind.) But when the catalyzers of the new auto industry are so entrepreneurial and distributed, technical standards hardened by government become virtual roads and bridges. They are more vital to electric cars than actual ones. The faster we get to standards, the better.
This principle, of catalyzing competition, is an endless subject I cannot do justice to here. To build out the grid Posawatz envisions, the government must help reduce other obvious barriers to entrepreneurial teams converging on a problem. The administration might look at an outdated patent office, which has been swamped by software developers in recent years — filings mainly from big companies, whose fat patent portfolios needlessly block or intimidate entrepreneurs. It might look at facilitating the exchange, categorization, and monetizing of intellectual property, which cannot flow unless governments engender mutual trust.
I’m more skeptical than Avishai about the need for direct government spending on firms. I do think, however, that you need pro-market government activism designed to reduce those “obvious barriers to entrepreneurial teams converging on a problem.” This is easier said than done. But this project would be at the heart of a bottom-up conservatism.