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A New Economy: Post-Partisan, Innovative

In mid-June, 100 business owners and their allies came to the White House to ask for action on the economy. Such meetings happen often, but this one was different. The business leaders did not come to demand lower taxes, looser regulation, and smaller government. Instead they called for renewed growth based on a broad prosperity, wise public investment, and sustainable use of natural resources.

These business leaders are part of an emerging movement for a new economy. American Sustainable Business Council, which convened the meeting, is a major group in this movement. The movement spans conventional political lines. It includes both business groups and worker groups. It includes libertarians calling for local self-reliance and antipoverty advocates calling for a stronger safety net.

These advocates also came together at a recent conference organized by the New Economics Institute. The central goal of the conference and the movement is to design and build an economy that provides better livelihoods for ordinary people, and which works within the limits of the natural environment.

Four basic ideas are central to the the new economy movement:

No. 1: The Rules Are Rigged

New economy supporters say that our economy is not really a free market or a level playing field. The "rules" that control the workings of the economy are rigged, and they are becoming more so. For example, many government subsidies and policies protect established, older industries with political clout, such as big agriculture. Other subsidies are indirect, like the military spending that protects the oil supply. New economy advocates call for a truly level playing field that lets innovators challenge established industries. They want to get government out of the business of propping up yesterday's leaders.

Another area where the rules are rigged is the tax code. Ongoing change in tax laws has shifted the burden through a combination of tax cuts that mainly benefit the high end, and service cuts that mainly penalize the middle class. One such cut is the reduced government support for higher education, which has raised the tuition that students and their families must pay. These shifts have resulted in the wealthiest 1 percent capturing a much greater share of national income now than they did 20 years ago.

No. 2:  Better, Not Bigger

Many new economy proponents argue that we have placed far too much faith in economies of scale and the efficiencies of big business. This misplaced faith has destroyed Main Street and given us little in return.

The problem with bigness is two fold. First, many of the apparent economic advantages of big corporations result from special treatment they get rather than actual operating efficiencies they achieve. Bailouts for "too big to fail" banks give them an unrealistically low cost of capital. An honest, risk-adjusted cost of capital would be far higher, and smaller banks would be far more efficient and competitive by comparison.

Second, when big companies negotiate with cities and towns that are desperate to attract an employer, the companies have all the advantages. Big companies have far more experience and leverage in these negotiations. As a result, cities and towns often negotiate away whatever economic gain might have come their way. Recent research on economic development in Wisconsin and Illinois confirms the problems with conventional business attraction and retention programs.

The answer lies in new models that prioritize local development over business attraction. The Business Alliance for Local Living Economies and the Institute for Local Self Reliance champion the rebuilding of American Main Streets. They have shown that growing local business costs far less per new job created. They call for reform of obsolete zoning, permitting, and other policies that block or slow business formation.

No. 3:  U.S. Competitiveness at Risk

Many in the new economy movement focus on the erosion of competitive advantage across U.S. industry, particularly in manufacturing. As competitiveness erodes, the United States loses the ability to maintain high employment and good wages.

Part of the problem is industrial policy, or rather the lack of one: The U.S. government no longer supports strategically-important industries as it did in the past. It no longer funds as much research. The government does little to stop other governments (chiefly China) from siphoning off U.S. know-how to help their own companies advance. China drills for knowledge the way we drill for oil.

Another challenge involves education and skills: Educational attainment among Americans has fallen. Fewer students complete college. Fewer still study advanced science and engineering. Highly skilled immigrants can't get the visas they need to stay and build businesses.  

Some threats to U.S. competitiveness are indirect. For example, the United States spends 16-18 percent of GDP on healthcare, whereas most advanced countries spend only 10-12 percent of GDP for largely the same health results. The extra 4-8 percent must come from somewhere. Either it cuts into what we can spend on other things we value, or it cuts into the investments needed to make us more productive.

No. 4: We Only Have One Planet Earth

New economy advocates stress that we can't use more resources than Earth can provide. Groups like call for reducing carbon pollution and protect the rainforests that remove carbon from the air. Many other natural resources are at risk at well: fisheries, rare earth elements, and drinkable water. New economy advocates call for shifting the economy to less resource-intensive products and services, increasing efficiency, and reducing consumption overall.

Towards Post-Partisan Solutions?

The new economy movement draws support from diverse groups from many points on the political spectrum. Both progressives and Tea Partyers claim that the system is rigged against ordinary working Americans. (Tea Party groups decry the bank bailouts, for example.) People from both sides of the political spectrum lament the decline in American educational performance. Libertarians support the call for strong local economies, unencumbered by national policy. Perhaps the new economy movement offers an opportunity to move past polarizing rhetoric and stale solutions. It's a question worth asking. The stakes are vast.

(A version of this was posted earlier at