A Reviewers Notebook: The Economy in Mind
DECEMBER 01, 1982 by JOHN CHAMBERLAIN
The double entendre in Warren T. Brookes’s title, The Economy in Mind (New York: Universe Books, 381 Park Avenue South, New York, N.Y. 10016, 256 pp., $15.95) is presum ably intentional. Quite literally Mr. Brookes, a former Boston businessman who has recently set up shop as our most lucid economic columnist, means that wealth starts with ideas in people’s heads. This truth, unfortunately, is not at all apparent to the majorities that control our destinies. So, with the future of the economy in mind, Mr. Brookes patiently points out to the erring mul titudes certain facts which, if acted upon, could restore us to an old American heritage of free choice in plentiful circumstances.
The significance of the first meaning of Mr. Brookes’s title is particularly obvious from the author’s own Massachusetts vantage point. All along Route 128 outside of Boston little companies exploiting the new knowledge that comes out of electronics and the computer have grown fat. The so-called high tech origins of these companies are in the American university world as exemplified by nearby institutions such as M.I.T., the University of Massachusetts, Boston University, Boston College and (though Mr. Brookes has a low opinion of certain Harvard professors of political science) Harvard. High tech comes out of the laboratories and off the blackboards of chemists and physicists—it is preeminently of the mind.
The money that is to be made from the proper application of such academic sources so far outruns what Massachusetts can derive from codfish and cranberry juice that it is ridiculous to think about it. Even so, the application of mind to the packaging of cranberry juice in water and airproof paper containers and the wrapping of fish in plastic bears out Mr. Brookes’s thinking. Indeed, as George Gilder points out in a foreword, Mr. Brookes’s career as a businessman consisted largely of reeducating the entire meat industry in its marketing practices. Believing in Cryovac, a saran- type plastic package used mostly for frozen poultry, Mr. Brookes showed his colleagues that saran could be used to wrap and box all the appropriate cuts of fresh red meat at the slaughter house, thus doing away with much of the work done expensively by retail butchers.
Erhard Advises Kennedy
The trouble with the politicians who represent Mr. Brookes’s state in Washington is that they still think in terms of a retail butcher constituency. This was not always true of the Massachusetts politico. Mr. Brookes has a great fondness for the memory of President John F. Kennedy, who believed in the Laffer Curve before Laffer. Brookes reminds us that it was Chancellor Ludwig Erhard of West Germany who first impressed it upon young John Kennedy that cutting high marginal tax rates would pay off even more for the masses than the classes. When Kennedy visited Germany in 1961, Erhard, a Mont Pelerin disciple of Mises, Roepke and Hayek, told him to avoid the British high tax-model, to stop punishing wealth creation and to cut America’s “egregiously high wartime tax rates.”
Kennedy took Erhard’s advice, overriding his own “liberal” advisers. He made his tax-cut case in words that would “have delighted both Andrew Mellon and Ronald Reagan.” When his tax bill passed in the early days of Lyndon Johnson, before the high spending of the Great Society and the Vietnam War was inflicted upon us, America, in Kennedy’s words, “began moving again.” Personal savings jumped from an average annual growth rate of 2 per cent to 9 per cent. Business investment went from 2 per cent to more than 8 per cent. Within two years the Gross National Product had increased 20 per cent, and unemployment had declined by 33 per cent. Even Walter Heller, the Keynesian economist who had tried to stay Kennedy’s hand, had to admit that the tax cuts, anticipating Laffer, had paid for themselves “in increased revenues.” Thus “trickle down” trickled out to help government itself as well as the little man struggling to make it to a higher income tax bracket.
A Democratic governor, Edward J. King, got the idea and proceeded to put Massachusetts on the Laffer Curve by reducing local taxes. Unfortunately, Senator Edward Kennedy and his House of Representatives colleague Tip O’Neill have failed to appreciate the wisdom that Ludwig Erhard conveyed to John F. Kennedy a full generation ago.
The Case For Deregulation—A Lesson for OPEC
What Warren Brookes tries to bring home to his readers in Boston and elsewhere is as old as Adam Smith and J. B. Say, who believed that ideas could pay off in unhampered production if they were allowed to flow without the attention of the politico in. search of special privilege for a limited constituency. We have seen what could happen to please the almost universal constituency of automobile owners when Jimmy Carter and Ronald Reagan deregulated oil prices. OPEC has never been the same since.
Brookes, not satisfied with the trouble we have already made for the OPEC energy cartel, wants to extend deregulation to natural gas sooner rather than later. He notes that three separate studies, one of them by the Colorado School of Mines, show that there is plenty of gas in the continental United States to make oil imports from the Middle East unnecessary once factories and utilities have been converted to natural gas or easily accessible coal. According to Dr. Paul Hastings Jones, “geo-pressured methane” gas in deep Gulf Coast brines could contain 50,000 trillion cubic feet of gas. This is for the far future when we really need to drill deep. There are much more available reserves that would be tapped quickly if the price were permitted to swing flee.
Mr. Brookes goes to Canada to prove his point. When Canada deregulated new gas it completely transformed western Canada’s “leisurely” petroleum industry within two years. The new gas discoveries piled up a surplus that Canada was happy to sell to the United States at enhanced prices, meanwhile freeing oil for gasoline use in cars both in the U.S. and in Canada itself.
Reagan knows all this, but he has not yet mustered the political courage to do for gas what has already been done for oil. So we continue to have a natural gas shortage. As William Tucker of Harper’s magazine, quoted by Brookes, puts it, “without the foreign oil needed to make up for the natural gas shortage, OPEC would be about as important to the American economy as a Turkish bazaar.”
Brookes is marvelous when it comes to using statistics, but he is just as good when he deals in moral categories. No individual or nation, he says at one point, “ever became rich through envy. Nothing useful or constructive was ever created through envy. No business ever succeeded through envy. No jobs were ever created through envy. Envy in reality is the single most impoverishing attitude of thought.”
This is only one of Brookes’s small sermons. A preacher could live off the grist provided by this book for a year.