The economy in the Interlock

Any reasonable observer would agree that the US has many great economic strengths and a number of unique advantages.  We are perfectly capable of strong, continuous growth, averaging 3.5% or more, but we have allowed ourselves to become burdened by a set of problems that combine to reduce our actual economic output.  These things – political policies, social trends, and business practices – are acting like a set of sea anchors hanging off a ship, slowing it in the water.  They’ve developed over time, and originate from a variety of sources, but they are nonetheless a real and present hindrance on our current economic growth.

All of these economic “drag anchors” are important pieces of the Interlock.  Because a weak economy limits our ability to invest in solutions to problems, everything that has a negative effect on the economy hurts our ability to solve all of the other problems we face.

Some of these interactions are strong, and obvious, like the role of education in creating a valuable labor force that can innovate and continue to drive economic growth.  Some are much more subtle:  the effects of air pollution or a water shortage on our economy aren’t nearly as obvious, and are perhaps not quite as critical, as the effects of inadequate education, but they are nonetheless still important factors in our economic growth.

Regardless of the method or the relative strength of those effects, though, they all add up.  A problem that creates a negative effect equivalent to a hundredth of one percent of GDP still represents billions of dollars of lost income for the economy.  Enough problems of that size – and some of these are much larger – can reduce a 4% growth rate to a 1 or 2% growth rate at the best of times.

And, of course, the economy isn’t just a passive victim of all of these problems:  an ailing economy makes it harder to solve everything else.  This is particularly true for the parts of our national system that depend on government money (because government coffers are put under more strain during hard economic times), but it is also true of every other problem out there:  more wealth flowing through the economy provides more resources to fix things and a greater willingness to invest for the future.

When economic resources are tight, the nation focuses on surviving, not on hard decisions about how to fix fundamental problems.  When the economy is bountiful, it’s much easier to make those kinds of decisions – there aren’t going to be as many people suffering because resources were allocated away from them.

This all means that the economy is the most central part of the Interlock – everything impacts it, and it impacts everything else.  It also means that problem number one in the Interlock is increasing the long-term average growth rate of the economy – and that any proposed solution to a particular problem that comes at the expense of long term net economic growth is likely to be self-defeating and should be rejected.

Individually, no one problem in the Interlock is the critical factor in our economy’s sluggishness.  In combination, however, they represent a massive deadweight dragging it down.  Combine that with the fact that they are so heavily interconnected that, barring a heroic effort, each one can only really be solved if the impact of the others on it has been mitigated, and you have a recipe for complete political paralysis, and a prolonged economic slowdown or complete stagnation.  If we want to avoid a slow slide into national mediocrity we will need to address all of the problems in the Interlock to some extent, and really fix enough of them to get back to a substantial level of long-term economic growth.

 

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