How do you get both equity and prosperity?

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Here’s Jim Manzi (no, not that one; this one), writing in National Affairs (via Michael Pettis) on the question, addressed here a couple of days ago, of balancing economic security with economic dynamism:

Conservatives have …, as a rhetorical and political strategy, downplayed the problems of cohesion — problems like inequality, wage stagnation, worker displacement, and disparities in educational performance — to emphasize the importance of innovation and growth. Liberals, meanwhile, have correctly identified the problem of cohesion, but have generally proposed antediluvian solutions and downplayed the necessity of innovation in a competitive world. They have noted that America’s economy in the immediate wake of World War II was in many ways simultaneously more regulated, more successful, and more equitable than today’s economy, but mistakenly assume that by restoring greater regulation we could re-create both the equity and prosperity of that era.

Manzi goes on in this vein, very thought-provokingly, for 7,000 words. In the end, he’s got four five recommendations:

1. Quickly unwind the government’s holdings in private companies (you know, GM and such) and scale back stimulus spending.

2. Go for financial reforms that build walls between risky activities and essential ones, not for lots and lots of new regulations.

3. Give public schools far more freedom to come up with their own approaches to teaching (and paying and hiring and firing teachers).

4. “Reconceptualize immigration as recruiting.”

I’m with him on 2 through 4 (and I’m basically with him on 1, just not on the accelerated timetable he’s talking about). I do think there are some more things government could do to increase economic security—mainly in terms of health insurance and pensions—that if designed well wouldn’t interfere significantly with our competitiveness and might even increase it. But I would love it if more discussions of economic policy focused on stuff like this rather than the usual Washington silliness.

Update: I’ve written more on the topic here.

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