“The Public Sector in a Mixed Economy”


Reaction Paper
(to Joseph Stiglitz’s article)

Naval War College

November 19, 2003

I found it difficult to react to Stiglitz’s article, as the vast majority of it is composed of factual statements and hardly-debatable truths. His objective approach leaves little room for argument, and he may in fact ask more questions as he answers. He does not seem to espouse a particular format for a mixed economy, nor does he denounce or defend any long-held or progressive theories. Yes, I agree with his ostensible conclusions that it is indeed a “mixed economy” which drives US fiscal activity, that economics is essentially the art-science of allocating scarce resources, that theories will always diverge at some point, that no system is perfect, and that we must find an appropriate balance between public and private sector roles and responsibilities.

That said, I am regularly amazed that the US Government does not look to the most successful economic systems in the world as a model for even greater success. As the UN and most international human development organizations assert, GDP-per-capita is not good indicator of economic health. Saudi Arabia, for example, had one of the highest GDPs-per-capita in the world for an extended time, but has since become one of the largest debtor nations in the world. Often referred to as “right wing” Republican, former US Secretary of Education William Bennett, in his publication “Index of Leading Cultural Indicators”, asserts that the US is actually slipping against other developed nations in quality of life areas such as violent crime and suicide rates, illegitimate births, and falling test scores–even though our GDP continues to climb. We have also steadily slipped in the last decade in Transparency International’s world corruption index rankings. Renowned declinist Paul Kennedy admits he is not as pessimistic about the US falling prey to self-inflicted “imperial overstretch” as he was when writing The Rise and Fall of the Great Powers, but he remains skeptical that the US will implement reforms necessary to address the problems mentioned above. While I do feel that it is important to study economic history, to examine the causes of past “government and market failures” (Stiglitz), to ascertain lessons learned about competition and tax policy, and to reassess our responses through the application of either “positive or normative economics” (Stiglitz), I feel there are really more important, more fundamental questions with which to be concerned. The foundation of a healthy country–and not just a healthy economy–is a population which asks questions such as “do we care about rising poverty and illiteracy rates?”, “what should we do about increased homelessness?”, and “how should we address a rising incarceration rate?” Most think tanks and NGOs emphasize that issues such as access to health care, housing, jobs, gender-equal pay, and efficient judicial systems are key to progress. Clean air and water, access to free education, adequate housing, safe labor environments, and fair wages are all indicators of a nation’s health equally important as “growth”, “disposable income”, and inflation rates.

Yet we seem somewhat scared in the US to admit that life expectancy, happiness quotients, per-capita income, health care, education, and affluence are the highest in the world in Scandinavia, where all five countries rank among the top fourteen places in the world to live, according to the UN Human Development Report. Even though Scandinavian nations are democratic and free, their wealth gaps are among the smallest in the world, whereas US income inequality ranks among the highest of developed nations. Many aspects of the New Deal were seen as “socialist” in the US at the time of their implementation, but it is amazing how many Americans now fight for social security as a basic “right”. Péricles said that “the secret to democracy is courage”. George Bush believes in and openly espouses Christian principles. I believe that until we as a nation have the courage to not only to demand, but implement the principles described by many as “Christian”, we will not long enjoy the freedoms and standard of living that we have worked so hard to attain–and been willing to support with corresponding security policies. The late Walker Percy feared an “America gradually sliding into decay through default,” until “defeated…from within by weariness, boredom, cynicism, greed, and in the end, helplessness before its great problems.” Once we directly address those great problems, I feel that deciphering the regulatory role of government in a primarily capitalist system, as discussed by Stiglitz, will be much easier to sort out.

Written by Glenn Yeck | Comments Off on “The Public Sector in a Mixed Economy”