Economics doesn’t happen just on the factory floor or the trading floor. Most importantly, it happens between our ears. What we believe about the state of the economy today — and about what the future might hold tomorrow — can have a huge impact on growth.
That’s why CNBC’s Larry Kudlow is spot on:
Does anybody remember, back in the depths of the recession of 1981-82, how President Ronald Reagan kept his chin up and exhorted American businesses to work hard and produce an economic recovery? …
Cynics proliferated. But Reagan stayed with it, praising free enterprise and entrepreneurs. And eventually, sunny skies replaced gloomy clouds. “Morning in America” appeared in 1983-84.
But here’s the key point: When Reagan praised our capitalist system and the businesses inside it, he provided a psychological lift to accompany his fiscal program. That was leadership.
Now contrast President Reagan’s performance with President Obama’s recent attack on business. Instead of exhorting entrepreneurship, Obama demonized it. Here’s the money quote: “If you’ve got a business, you didn’t build that. Somebody else made that happen.”
That’s a put down to business recovery, not an exhortation. Reagan praised entrepreneurs into recovery. Why must Obama trash them into recession?
Words matter, especially when they are spoken by the president of the United States. They affect that tone and tenor of the national mood and the parameters of the national debate. Why the president would choose now to de-emphasize the role of private innovation and entrepreneurs in propelling the American economy is puzzling. He should be praising business and encouraging the millions of unemployed, especially younger ones, to start their own.
Maybe Obama doesn’t understand how damaging and corrosive these sorts of statements and speeches, repeated over and over, might potentially be? America’s entrepreneurial culture is our comparative advantage, our killer app, our national superpower. We shouldn’t take it for granted.
Economist Deirdre McCloskey argues that it was a change in attitudes toward commerce, the business class, and creative destruction that sparked the Industrial Revolution and its economic aftermath — and raised the Western standard of living from $3 a day in 1800 to $130 a day today (at minimum). McCloskey:
In particular, three centuries ago in places like Holland and England the talk and thought about the middle class began to alter. Ordinary conversation about innovation and markets became more approving. The high theorists were emboldened to rethink their prejudice against the bourgeoisie, a prejudice by then millennia old. (Sadly, the talk and prejudice and theory along such lines didn’t alter right away in China or India or Africa or the Ottoman lands. By now it has, despite resistance from European progressives and non-European traditionalists.) The North Sea talk at length radically altered the local economy and politics and rhetoric. In northwestern Europe around 1700 the general opinion shifted in favor of the bourgeoisie, and especially in favor of its marketing and innovating. The shift was sudden as such things go. In the eighteenth and nineteenth centuries a great shift occurred in what Alexis de Tocqueville called “habits of the mind”—or more exactly, habits of the lip. People stopped sneering at market innovativeness and other bourgeois virtues exercised far from the traditional places of honor in the Basilica of St. Peter or the Palace of Versailles or the gory ground of the First Battle of Breitenfeld.
Are Obama’s “habits of the lip” helping or hurting America’s risk-taking spirits right now?