Isn’t it a bit impertinent of a bunch of Brits to turn up presuming to tell the Americans about capitalism and how to save or reinvent it? That was the excellent question posed by Professor Niall Ferguson in his speech at the launch of the American edition of CapX in New York this week. He drew an amusing parallel with the famous performance by James Brown on the TAMI show in 1964. The Rolling Stones were higher up the same bill and Mick Jagger watched in awe from the wings as Brown put on a sizzling performance, showing the upstarts how it should be done. “Welcome to America,” is what the Godfather of Soul is reputed to have said dismissively to a stunned Jagger on leaving the stage.
CapX got a genuinely warm welcome in the US this week. In the months ahead, we’ll be unveiling contributions from all manner of leading writers and new voices based in the US that will broaden the range of what CapX offers its readers around the world. It is not just the 2016 US presidential election that we’ll be covering. We’ll offer unique perspectives on economics, culture and ideas alongside our coverage of British, European and global affairs, from a pro-market position.
But isn’t America already the ultimate capitalist country with a thriving free market? As Ferguson noted, it isn’t that simple.
Elements of the US economy certainly are thriving, giving the US an advantage that should position it well to win the economic battle with China, as long as the rest of the economy does not continue to suffer the problems of excessive government interference.
The good news is the existence of technology giants that have emerged from Silicon Valley in the last two decades. They get most of the media attention, although it is hard to avoid the conclusion that their growing power is creating excessive concentrations of power and poor accountability that will, in time, become the object of public concern.
Elsewhere, smaller and medium-sized companies in the US are buried under piles of regulation, which makes the employment market dysfunctional. Companies have to direct too much attention on dealing with the regulatory burden.
In an average year, more than 60 federal agencies combine to issue more than 3,500 new regulations. Indeed, the US economy is one of the most heavily regulated in the world, with the total cost of federal regulations standing at nearly $1.9 trillion.
The regulatory state, which has expanded steadily since the 1970s, needs paring back. In 1975, the Code of Federal Regulations was 71,000 pages long. By 2014, the number of pages had grown to more than 175,000.
Since 1936, the federal government has published the Federal Register, a daily compendium of all new proposed regulations and changes to existing regulations, plus presidential documents and agency notices. It has exceeded 77,000 pages in each of the last five years. Of the six all-time-high Federal Register page counts, five have occurred under President Obama, a figure who is remote from the concerns of business people trying to hire and make a profit.
According to analysis by the Mercatus Center at George Mason University in Virginia, those pages of the Federal Register contain more than one million separate regulatory restrictions. Those restrictions cover everything from the size of holes in Swiss cheese to procedures for weighing farm animals.
Perhaps the Americans could do with some friendly pro-market input after all. Ferguson said in his speech that the situation is so troubling that some of what he sees in the US now reminds him of the British malaise in the late 1970s. For the US to prosper, it urgently needs a transformative leader, a new generation Thatcher or a Reagan, to cut through the thicket and encourage, through the power of leadership, Washington’s politicians to back economic reform.
Is there a candidate running for the nomination of either party who fits the bill?
The traditional British response to that question will be a hollow laugh, especially when it comes to the Republican Party. The British have a terrible habit of sneering at US politics, viewing it as a money-mad circus in which celebrity rules. Oh, and George W Bush didn’t have a passport. That British myth is not true, actually. Bush travelled to Scotland as a youth and spent time with the Gammell family, working with cattle and drinking.
When Bush became President he reputedly rang the switchboard of Bill Gammell’s oil firm in Edinburgh and asked to be put through to his friend. The receptionist asked: who is calling? Bush said “the President.” She asked him of what. “Of the United States,” Bush replied.
Anyway, the point is that non-Americans should not dismiss US politics in general or this Presidential field in particular. The Wall Street Journal and Fox Business debate that took place this week was far more sophisticated than any of the TV set-pieces on offer in the UK earlier this year during Britain’s general election. In the US this week, those on stage faced substantial, difficult questions. There was no hectoring from the moderators. It lasted for two hours and it was absorbing.
Under that spotlight, Donald Trump came off worst. His pronouncements grew increasingly ludicrous the longer he talked. To this watching Briton it was like listening to a cross between Nigel Farage, Alan Sugar and JR Ewing from Dallas.
Yet, Trump’s populist message and anti-elite positioning appeals to those voters who have had enough of politics as usual and yearn for someone to make a complicated world simple by the use of silly slogans.
George W Bush’s brother Jeb had a poor evening too. The difference between him and Trump is that it is possible to feel sorry for Jeb Bush, who is clearly well-meaning. If this was 1956 he would probably be in the lead, but it isn’t the Fifties and Republican voters do not want an Establishment choice. If Bush ever really wanted to run for President, rather than feeling pressured to, he now looks utterly lost, as though he is stuck in a race he doesn’t know how to win. Follow him on Twitter for a really mournful experience, where a decent man is forced to tweet “fun” comments to show he is a fun guy not worried about his political career going down the pan.
Marco Rubio, from Florida, looked like the winner of that TV debate. He is young and he has interesting ideas. His former pro-immigration position may harm him in the primaries with anti-immigration Republican voters. It certainly gives his rival, Senator Ted Cruz, a line of attack.
Still, the hope for the Rubio camp must be that such problems are eclipsed by his charisma and the promising reality that he has the beginnings of an economic agenda designed to deal with the US economic malaise.
On personal taxes, he suggests replacing the current set of seven individual income tax rates ranging from 10% to 39.6% with three rates, 15%, 25% and 35%. He wants corporate and small-business tax rates to fall to 25% from current rates of 39%. Right now the US has the worst of all worlds in which business tax rates are high, while there are so many exemptions, allowances and loopholes that insufficient revenue is collected and confusion reigns. Rubio is for lower, flatter, simpler taxes. He also grasps that the US system needs to be redesigned to encourage domestic investment, to find ways for American wealth off-shore to be readmitted and put to work funding investment and chasing profits.