In the Hot Seat: The Bureaucratic Management of Economics and Society

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Now for today’s update…

Is the Wall Street Journal going socialist and covidious?

Surely not. But its op-ed on May 2 by Christopher Mims, which I eagerly picked up on the assumption that it somehow reflected the glory of tech writer prodigy Forrest Mims, repeats all the long-debunked clichés about the supposed dependence of technology on government.

“From the invention of the internet (thanks, Defense Advanced Research Projects Agency!) [I thought it was Al Gore] to the sequencing of the human genome (thanks, National Institutes of Health!) [thanks more to Craig Venter and Celera Genomics!], markets and the profit-making companies that inhabit them simply aren’t suited to generating the shared public goods that accrue from many kinds of research. That’s fine, adds Dr. [Jonathan] Gruber [famous for Obamacare], because like roads, fire departments and a standing army, R&D should be one of the necessary recipients of government funding.”

This hallowed but hollow argument for government dominance works by tracing the source of any technology back into the 1950s and 1960s. Following World War II and into the Korean war, nearly all US technology came from what Dwight Eisenhower called the “military-industrial complex.” Shrouded in secrecy, the war research effort engulfed the economy and most scientists enlisted for the duration. For the subsequent decades, much governmental domination of science continued by inertia.

So, whether the internet, or microchips, or fiber optics, or human genome sequencing or even the World Wide Web, socialists, and political analysts have managed to find a government pedigree or thread of funding. They use this evidence to justify government domination of science, which means political manipulation of science. Effectively today it means that all science must submit to politicized pseudo-science priorities such as climate change, “sustainability,” green energy, and virus lockdowns.

However, as much as data can be probative, this theory has been tested and disproven.

Good News from the Private Sector

In Sources of Economic Growth (2003), the Organization of Economic Cooperation and Development (OECD) published some 248 pages of tables, figures and data in a regression analysis of the issue.

As British scientist and scholar Terence Kealey has explained in The Economic Laws of Scientific Research and his mal-titled-must-read Sex, Science, and Profits, the OECD found “a significant effect of R&D on the growth process.”

However, to the OECD’s shock and considerable alarm, they discovered that all the positive impact came from private sector research and development. Public sector R&D produces “negative results” and “taken at face value… suggests publicly performed R&D crowds out resources that could be alternatively [and more productively] used by the private sector.”

As Kealey summed up the findings, citing replication by several other studies: “The OECD concluded… that it is business, not public, R&D that drives economic growth, and that the public funding of research and development displaces its business funding… and actually damages economic growth.”

The Truth About the United States Security and Defense

As Kealey observed about the internet, “Ironically government helped delay the development of the net and web. The market — in the shape of customers in the financial, oil and automotive industries — was pushing hard for the new IT technologies [“distributed computing”], but AT&T [et al] were able to resist [them]” in the name of legislation giving the telco’s a last mile monopoly.

While microchips were dominated by defense markets, with their requirements of secrecy and bureaucracy, the industry languished in a few major companies led by IBM and Bell Labs. It was not until the eruption of the personal computer and software industries that chips became the foundation of the global economy.

Trenchantly making the argument, nuclear physicist Edward Teller compared the contributions to US security of the nuclear industry — long draped in government guidance and secrecy — with the contributions of the computer industry open to the world. The computer industry has advanced thousands of times faster than the nuclear industry and US security is largely based on it. From Desert Storm to anti-missiles, US defense is devoid of nuclear technology but replete with computer and microchip advances.

Socialism and secrecy do not outperform freedom, even in the military realm, even in otherwise capitalist countries. The Manhattan Project was a brilliant exception, but it succeeded chiefly because of wartime suspension of the normal immigration and security rules.

Without immigrants from Europe, mostly Jews, many of them Communists or Communist sympathizers, the atom bomb, the hydrogen bomb, and intercontinental missiles could not have been created in the US. The key to the success of this project was Robert Oppenheimer’s rejection of General Leslie Groves advice that the venture should proceed in uncommunicating modules with no one knowing what others were doing.

The secret and essentially socialized US nuclear and missile industries bogged down in bureaucracy and could not even keep pace with the Soviet Union. In the 1950s, the Soviets launched Sputnik, a world-leading submarine fleet, and intercontinental missiles, while the US fell pathetically behind. Today, if we continue our stress on secrecy and security and ban immigration from Asia, we will find ourselves similarly falling behind China. It is already happening.

In the competition with the Soviets, it was chiefly the free and open computer and microchip industries that allowed MIRVing (with multiple independent reentry vehicles) and miniaturization of warheads for lower powered rockets. It was the free and open electronics industry that gave ultimate superiority to the US and enabled victory in the cold war.

The pullulating rivalry of technological enterprise, inimitable by any truly totalitarian state no matter how many “secrets” it steals, is the best guarantor of American safety and security in the face of the unique perils of the new century.

Today’s Prophecy

Today, above all, we need to rely on private sector research and development. The rise of new Luddites in politics epitomized by the advocates of “sustainability” and the “Green New Deal” has rendered governments sclerotic with environmental rules, medical restrictions, and safety requirements. All of these regulations tend to be based on the so-called “cautionary principle,” which essentially paralyzes with mazes of rules any new technology with a possible peril.

Dominated by worst case analysis, this principle enables leftist lawyers to stop almost any project they don’t like from genetically modified crops to fracking for natural gas. Even under President Trump, the government remains chiefly in the business of halting progress not promoting it.

Dr. Anthony Fauci, for all his acclaimed brilliance, confessed that the reason for shutting down and locking-in the economy and society was not the proven effects of COVID-19 but the possible “worst case” impact. As a doctor, above all, he does not want the patient to die. Any extreme measure is justifiable. But prescriptions tenable for individual patients are outrageously inappropriate for entire societies.

Human beings have evolved for millions of years with viruses and bacteria. It they could wipe us out, there would not be eight billion of us around.

If enterprise were governed by worst case possibilities, the Wright brothers’ plane could have never taken off, let alone an industrial or biotech revolution.

Only private sector businesses go broke if they cannot launch new products. Only private sector businesses have to defend themselves from rivals by maintaining research superiority. Only private sector ventures have sufficiently specific goals that allow them to focus like a Manhattan project during the war.

Where government has specific goals, as in defense, it should guide and finance research and development programs. But no one should imagine that government is somehow the preferred vessel of human progress. The egregious blunder of the current lockdown illustrates the crippling flaws of bureaucratic management of economics and society.

Regards,

George Gilder
Editor, Gilder’s Daily Prophecy

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George Gilder

George Gilder is the most knowledgeable man in America when it comes to the future of technology — and its impact on our lives.

He’s an established investor, writer, and economist with an uncanny ability to foresee how new breakthroughs will play out, years in advance.

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