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Barack Obama’s American System

President Obama’s State of the Union last night was something of a dud. Cautious and boring, the speech was Obama’s message to a Congress that’s unable either to pursue his goals or to develop alternatives. Soaring rhetoric would have been wasted on that audience, as would detailed proposals. The main point was this: when Congress does nothing, the executive will press his independent authority to the legal limit, and perhaps beyond. In that respect, the speech could have been given by any recent president, including George W. Bush.

In addition to its assertions of executive power, the speech offered more clues about Obama’s economic vision for his second term. As laid out in the speech, Obama’s agenda is based on federal spending for infrastructure and research, along with tax and regulatory incentives for manufacturing.

Contrary to many critics on the right, this perspective is neither socialist nor corporatist. Rather, it’s a kind of updated mercantilism, with elements of Henry Clay’s American System. The guiding thought is that “free” markets tend lock in the status quo because they do nothing to balance the existing advantages of big economies. On this view, the best way to encourage innovation and growth isn’t to remove government from the economy. Rather, it’s to use public funds and regulation to level the playing field between international competitors.

Take Obama’s persistent interest in green energy. Despite the Solyndra debacle, this really isn’t a sop to campaign contributors or environmentalists. Rather, Obama believes that solar and other alternative energy sources are going to be a big business. Unless America gets in on the action, it will find the field dominated by foreign companies, whose cheaper and more sophisticated products it will then be compelled to buy. In order to prevent this dependence, the government must “invest” now, even if the returns are not obvious or immediately forthcoming.

Although it may seem contradictory, Obama’s proposal of a North Atlantic free-trade agreement is consistent with this argument. In Obama’s view, the United States and EU are in a position of rough economic parity, and can therefore accept the stabilizing effect of free trade. That’s not the case with China, with which the U.S. is in competition for jobs and markets.

Many economists are critical of this style of argument, which assumes (among other things) that the president knows what industries are likely to be important in the future. But it has considerable popular appeal and deep roots in the American political tradition. Unlike academic economists and “free market” pundits, most ordinary people see international trade as a zero-sum game and fear that the destruction involved in technological shifts is not always creative.

Should the economy continue to stagnate, we can expect to hear more economic nationalism in Obama’s remaining annual messages. If Obama fails to seize the opportunity, Republicans will have a more promising message at their disposal than Marco Rubio’s dusty Reaganisms.

about the author

Samuel Goldman is an assistant professor of political science and director of the Loeb Institute for Religious Freedom at George Washington University. He earned a Ph.D. in political science from Harvard, where he has also taught writing. In addition to The American Conservative, Goldman’s work has appeared in The New Criterion, The Wall Street Journal, and Maximumrocknroll. Follow him on Twitter.

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