“We have met the enemy and he is us.”
— the comic-strip character Pogo by Walt Kelly
The same may be true of the economy. So says Tyler Cowen, author of the new book “The Complacent Class: The Self-Defeating Quest for the American Dream.”
Although we’ve recovered from the Great Recession, there are widespread fears that the economy will stagnate or grow only slowly. Government won’t be able to handle the next crisis, whether a war, financial meltdown or pandemic.
Maybe, says Cowen, an economist at George Mason University. But he doesn’t blame the usual suspects: debt hangover from the 2008-09 financial crisis (consumers and firms repay loans rather than spend on goods and services); huge trade deficits; or the impotency of government policies — rock-bottom interest rates and big budget deficits — to spur growth.
Rather, Cowen argues, the fault lies mostly with us.
We don’t move to new jobs as much as we once did; the cross-state rate of migration is down roughly 50 percent from its 1948-71 average. We don’t form new companies as fast as before; he cites one study estimating that start-ups now represent only 7 percent to 8 percent of firms, down from 12 percent to 13 percent in the 1980s. We increasingly cluster with people “like us” — in class, educational background — by marrying them and living in the same neighborhoods.
In isolation, none of these trends may be crippling, but collectively they undermine the economy’s flexibility and its “dynamism,” says Cowen. If people won’t move for work, some productive jobs will go unfilled. The growing segregation by background and lifestyles reinforces the reluctance to move. The scarcity of start-ups hampers job creation and higher living standards.
Cowen blames many of these trends on “complacency.” Americans increasingly value security and stability. They “don’t like change very much, unless it is on terms that they manage and control, and they now have the resources and the technology to manage their lives on this basis,” he argues. But what satisfies people as individuals may weaken the country’s ability “to regenerate itself in the ways it did previously, as during the postwar era or the Reagan [presidency].”
Business managers exhibit similar attitudes, slowing productivity gains. (”Productivity” is a buzzword for efficiency.) As a share of the economy, research and development remains at 1960s levels. Growing industrial concentration may stunt start-ups, because barriers to entry have grown. Another study finds that in 40 percent of U.S. manufacturing industries, the top four firms control half or more of the market. In 1992, that share was 30 percent.
Though intriguing, Cowen’s argument is hardly airtight. The caution and standpatism that he calls “complacency,” others (including me) have labeled “entitlement.” In the post-World War II era, Americans generally expected economic security and stability as well as rising living standards. Maybe these expectations were unrealistic, but people were conditioned to believe in them.
The present rude awakening may reflect fear more than complacency. The financial crisis and Great Recession frightened Americans across the income spectrum, because the economic collapse was not foreseen, nor were the massive job losses. People and firms responded by spending less and saving more as a cushion against unexpected, future crises. That’s prudence, not complacency. But Cowen barely mentions the Great Recession.
The evidence of complacency may also be overstated. For example, business-funded research and development is now near a record high as a share of the economy — about 2 percent of gross domestic product — and represents 69 percent of all R&D spending. That’s hardly proof of complacency. Overall R&D is weaker because federally funded R&D has fallen to its lowest share (23 percent) since 1953, when the National Science Foundation started making R&D estimates.
What Cowen has given us is an interesting concept — complacency. But whether it explains the economic slowdown is a provocative idea that’s as yet unproven.
Read more from Robert Samuelson’s archive.