Thomas Friedman and Michael Mandelbaum's new book, That Used To Be Us: How America Fell Behind in the World It Invented and How We Can Come Back, is pretty newsworthy — how often do you see a three-time Pulitzer-Prize-winning columnist for the New York Times, in one book, more or less endorse both the gold standard and a third-party presidential candidate?
But the aspects of this volume that are worth noticing go way beyond those two. I was struck by what might be called cultural conservatism. The authors quote the governor of Pennsylvania, Edward Rendell, complaining that the National Football League postponed a game because of a snowstorm. Said Mr. Rendell: "It goes against everything that football is all about. We've become a nation of wusses. The Chinese are kicking our butt in everything. If this was in China, do you think the Chinese would have called off the game? People would have been marching down to the stadium, they would have walked, and they would have been doing calculus on the way down."
The authors write: "American young people have got to understand from an early age that the world pays off on results, not on effort." They cite a Finnish television reporter based in Washington who says, "My daughter plays soccer and as a nine-year-old she already has these huge trophies, and she actually hasn't won anything. My brother played professional hockey in Finland for a number of years, and he doesn't have any trophies as big as the trophies my daughter has."
American workers, the authors write, should think of themselves like new immigrants: "approaching the world with the view that nothing is owed to you, nothing is given, you have to make it on your own." That applies to government workers, too; the authors cite John Hood of North Carolina's John Locke Foundation on the problems of defined-benefit pensions for government workers. They denounce what they call "the overly generous contracts of public-service workers in the last decade," offering the example of a Sacramento, Calif. fire-truck driver who "earns a salary of $144,000 a year in a county where the average annual wage is about $52,000."
The authors don't use the term, but there are aspects of the book that are Hayekian in their respect for Friedrich Hayek's insights that knowledge is distributed and that order can be spontaneous rather than imposed. The authors call it "Carlson's Law," after CEO Curtis Carlson of SRO International: "Innovation that happens from the top down tends to be orderly but dumb. Innovation that happens from the bottom up tends to be chaotic but smart." This applies not only in business but also in the military, where, the authors report, Army how-to manuals are moving from print into online Wikis.
The authors chastise President Nixon for his 1971 action breaking the link between the dollar and gold. Under the old system, they write approvingly, "the dollar was tied to the price of gold and international exchange rates were fixed, which imposed fiscal discipline on all participating countries, including the United States. The government couldn't print or spend money as much as its leaders wanted."
There are some wonderful anecdotes about how capitalism encourages cross-cultural cooperation. My favorite concerns a St. Louis, Mo., company called EndoStim, which is developing an implantable medical device to treat acid reflux. The authors report: "EndoStim was inspired by Cuban and Indian immigrants to America and funded by St. Louis venture capitalists. Its device is being manufactured in Uruguay, with the help of Israeli engineers and with constant feedback from doctors in India, the United States, Europe, and Chile. Oh, and the CEO is a South African, who was educated at the Sorbonne but lives in Missouri and California. His head office is an iPad."
Another great anecdote is about changes to ski resort lift tickets — from a ticket that was punched, to one with a bar code that was scanned, to a kind of E-ZPass that operates a turnstile, eliminating the need for the employees who used to punch or scan tickets. These are the kind of concrete, reported observations that make Mr. Friedman's books bestsellers and help win him all those Pulitzers.
The authors recommend reductions in entitlement programs, including Social Security and Medicare. They write, "A generation ago Democrats stood for progressive change. Now they defend every federal program as if each were sacred. They have become the most conservative force in American politics."
They are alert to the unintended consequences of regulations, offering the example of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. The authors report, "some experts speculate that one reason for the sharp drop-off in entrepreneurial start-ups during the Great Recession — a drop of 23 percent as opposed to the usual 5 percent in previous recessions" is that this new law made would-be entrepreneurs less willing to risk financing their new companies with credit-card debt.
They approvingly note that Steve Jobs, Michael Dell, Bill Gates, and Mark Zuckerberg are all college dropouts.
They enthusiastically cite the growing number of voters who register as independent as a sign that voters are dissatisfied with both Democrats and Republicans. And they call for a third party candidate. They don't name Michael Bloomberg or Bill Gates, but they say, goadingly, "such a candidate would have the same impact as a philanthropist, improving the lives of other people after he or she is gone. Philanthropists' bequests do change the world for the better, and an independent presidential candidacy can change America — and therefore the world — for the better as well."
So far, so good. The book touches on elements of Richard Herman and Robert Smith's Immigrant, Inc., the New York Sun's gold standard editorials collected in It Shines for All, and Nick Gillespie and Matt Welch's The Declaration of Independents, all of which were reviewed earlier, and mostly favorably, here.
The two big disappointments for me in this book come on tax and energy policy. "Americans will have to pay more in taxes," the authors declare, recommending, "raising marginal rates for the wealthy — and for the middle class as well." At least one driving force here seems to be a misinterpretation of the Clinton years. The authors attribute the growth and surpluses to President Clinton's 1993 tax increase, while I attribute it to the tariff reductions of NAFTA and GATT/WTO ("the largest tax cut in the history of the world," Larry Summers says), the capital gains tax cut of 1997, and welfare reform.
The authors write, "There is every reason to believe, in other words, that clean energy will become the successor to information technology as the next cutting edge industry on which the economic fortunes of the richest countries in the world will depend. That is the bet that China has made in its twelfth fifth-year plan." They speak of "national energy standards for every building and home." There's a paragraph praising California because "New houses, built with ever higher performance standards, known as building codes, have cut energy use in new homes there by 75 percent." California's dismal economy is mentioned only later, in a different section. It all is enough to make uneasy anyone who genuinely believes in Carlson's Law.
The other thing that bothered me about the book were two cases in which quotes were copied and pasted as if the mere title of the person uttering them meant they should be believed. One example is this passage: "Jeffrey Immelt, the chairman and CEO of General Electric, one of the largest private companies in the world, noted the dangers of the mistaken belief that the government has no constructive role at all in the economy. 'We worship false idols in terms of the power of the free market…'" No mention in the book that GE's stock is 61% lower than when Mr. Immelt took over as chairman and CEO a decade ago. And no skepticism about attributing to Republicans or even to libertarians (most of whom, after all, believe at least in government protection of property rights through courts and law enforcement) the straw man that "the government has no constructive role at all in the economy."
Elsewhere, the authors extensively quote Jennifer Granholm, the governor of Michigan from 2003 to 2010, on the need for government funds to back the electric car, which, she says, "is going to be a trillion-dollar industry." No mention in the book that under Governor Granholm's leadership her state lost more than 600,000 jobs, and had the highest unemployment rate in the country for 49 months. One answer to the book's title question of "How America Fell Behind" is by listening uncritically to advice from people like Mr. Immelt and Ms. Granholm. That aside, there's nonetheless plenty to learn from in this book.