Flashback: No Bottle for the Genie

Other responsibilities beckoned Tuesday, so there’s no new DJ. Instead, I decided to flashback to a speech I gave several years ago about economic change. Not exactly a topic likely to go out of style. Back tomorrow with a fresh DJ.

RALEIGH — North Carolina’s economy is undergoing significant change. That’s no surprise to you, I’m sure, nor is this change limited to the borders of our state. To differing degrees, in differing ways, communities across the country and around the world are grappling with similar changes. Innovations in information, communications, manufacturing, transportation, and management are rewriting the rules for how firms organize themselves, deliver goods and services to consumers, and return value to shareholders.

We’ve seen wrenching and exciting economic change before in our history, so some might be tempted to see this new wave of reorganization as no big deal. I don’t agree. This Information-Age Economy is real, and it’s here to stay. You can’t wall yourself off from it with protectionist tariffs, or government programs, or wishful thinking. You can’t put the genie back in the bottle.

And you shouldn’t want to. After all, genies are powerful things. The new technologies and trading relationships of the 21st century are powerful, too. We all benefit when information that used to reside in shelves of books or the minds of middle managers are now available with a touch of a button. We all benefit when automation drastically reduces the cost of producing goods, even if in the short-run some workers find themselves displaced and in need of retraining.

Those who whine and complain about economic innovation have a failure of perspective. All they can see is an abandoned warehouse, and so they miss seeing the telephone line stretching above it that may well carry the just-in-time information that made warehousing unnecessary. All they can see is an abandoned factory that used to make the socks now mass-produced in Mexico, and so they miss what happens to the money consumers used to spend on higher-priced footwear that they can now use for something else. Are they buying more software? Are they going to the movies more often, or eating out more? Are they purchasing more medicines to alleviate their pain or extend their lives? And who dominates these growing industries?

Napoleon Bonaparte once had something to say about putting a problem in perspective. The story goes that one of Napoleon’s marshals came to him one day and told him that the enemy was very close, and that the danger of his army’s defeat was imminent. Napoleon replied: “Bring me larger maps.”

I grew up in rural Mecklenburg County, just outside Charlotte, and much of my family still lives there. So I go back and forth to Charlotte frequently, and because I like the back roads I take Highway 27, which go through the little town of Carthage in Moore County. You may not have heard of Carthage, but it does have a claim to fame: a century ago, the town boasted one of the most prominent and successful manufacturing firms in the South. It was the Tyson and Jones Buggy Company. At its peak in 1895, the factory there turned out about 3,000 buggies a year. A Tyson and Jones was considered a sort of “Cadillac of buggies.” But by 1925, the last buggy rolled off the assembly line, and the plant disappeared. Carthage never recovered as a center of manufacturing.

So is this just a story about how economic change – in this case, the invention of the automobile – destroyed a community? Hardly. Go just a few miles south of Carthage and you get to another town, called Pinehurst. It was right around the time that tinkerers were inventing the automobile and the Carthage buggy plant reached its peak, in 1895, that millionaire businessman and philanthropist James Tufts was beginning to plan his new resort town. Tufts was from the Northeast. He knew that workers in the big cities there would likely appreciate the opportunity to get away during the winter months to affordable vacation spots south of the Mason-Dixon. In 1897, a visitor brought a set of golf clubs to Pinehurst, and began a tradition that continues until this day. And the fact of the matter is that without the invention of the automobile, it would not have been practical for average families from the Northeast to take a trip down to North Carolina for a golfing vacation. The town wasn’t on a major rail line, and wasn’t served by either a seaport or airport. It was accessible by car. Today, Pinehurst is the third-most popular golfing destination in the world.

My point is that it is all too easy to see the negative consequences of economic transformation and not to see the much-greater benefits. Many of North Carolina’s traditional industries are facing unprecedented competition and rapid technological change. Some will rise to the challenge and survive. Others will fail. Both results work, in the end, to advance economic growth by identifying new ways to do things and cautioning other would-be entrepreneurs against ideas or business forms that no longer make sense.

North Carolina’s main challenges aren’t economic. They are challenges of leadership. Our political leaders do not seem willing or able to set firm priorities for spending our tax dollars. They continue to add program after program, position after position, raiding our highway trust funds and local tax funds to pay for bloat. They continue to raise our tax rates, even as they complain that these taxes are outdated. They continue to fund and protect monopolies in education and other fields rather than embracing ways of opening up competition and empowering consumers to make choices that satisfy their individual needs. Basically, they continue not to lead. And we are all paying the price as a result.

Of course, many active in politics view this differently. They believe that failure lies in not passing new laws, in not creating new programs. Adam Smith offered the appropriate rejoinder in his Wealth of Nations: “It is the highest impertinence and presumption . . . in kings and ministers to pretend to watch over the economy of private people, and to restrain their expense, either by sumptuary laws, or by prohibiting the importation of foreign luxuries. They are themselves always, and without any exception, the greatest spendthrifts in the society. Let them look well after their own expense, and they may safely trust private people with theirs. If their own extravagance does not ruin the state, that of their subjects never will.”

Economic leadership means taking risks, and it actually involves a certain amount of self-confidence – even to the point of vanity. (That’s all right, by the way, because a capitalist economy doesn’t thrive on charitable intentions. It thrives by creating an environment in which self-interest advances the good of everyone.) The most useful trait in political leadership, on the other hand, is humility. Those who lead best attempt to lead the least. Lao Tzu, the legendary Chinese philosopher who founded the school of thought called Daoism, expressed this essential wisdom centuries before the birth of Christ:

A country may be governed with justice,
And a war may be won with cunning,
But people can only be mastered by following them.

The more people are controlled, the less contented they become.
But when will leaders understand the significance of this?

I’m not suggesting, of course, that political leaders cannot articulate great goals and accomplish noble ends. But they must resist the impulse to try to do for us what we can and should do for ourselves. That’s the genius of the American experiment. And it is the proper response to the leadership challenges facing North Carolina — to rediscover the wisdom of the Founders, the core function of government, and the political virtue of humility. Let government do less, but do that better. And let businesses and entrepreneurs follow their dreams and create the new enterprises of the New Economy.

Hood is president of the John Locke Foundation.