Go read this, the best magazine column of the young year. Those of us who have long followed the economic analysis of David Malpass, chief economist at Bear Stearns, are thrilled he will now write a semi-regular column in Forbes magazine.
His first installment takes on the “triple deficits” — budget, trade, and savings — and shows they are either innocuous or in fact virtuous. David writes
The U.S. has a powerful, growing economy, yet we project the “wrong path” image of an aging society drowning in debt and burdening the world with risk. This gloomy fiction distorts our domestic and international economic policymaking. We should reject it and launch a more energetic vision of global prosperity built on economic freedom and dynamism.
Malpass echoes a theme I’ve been writing about these last few years, encapsulated nicely in the Chinese currency issue. By falsely accusing the Chinese of yuan manipulation, of foreign reserve hoarding, or of trying to steal our energy (see CNOOC-Unical), we imply a fear of competition, of change, and of the future. Societies acting out of fear often make the wrong strategic decisions. Instead we should act like the colossus we are — with a quiet but robust confidence that can shape the world to our liking over the long-term. Lashing out in zero-sum fashion only makes other nations suspicious of our motives and less willing to accept and cooperate with the American economic imperium — our entirely beneficial “empire of wealth.”
But we are also too hard on ourselves.
Or as Malpass puts it,
In one of the ironies of economics the U.S. apologizes profusely for the global trade imbalance. We accept blame for growing our economy and population faster than our trading partners (which draws in imports) and providing more attractive investments (which brings in foreign capital). Rather, the primary burden should be on the trade-surplus, capital-outflow countries to enhance their economic climes, not on us to diminish ours.
Malpass also agrees with Discovery’s George Gilder, who last week wrote in The Wall Street Journal that conservatives should not try to solve the Social Security “problem” through inevitable tax hikes but should instead pursue the opportunities of global growth that are the only way to pay for our own retirements and health care.
Entitlement reform is also distorted by this mistaken image of U.S. financial collapse. An increase in the Social Security tax burden proposed by austerity advocates would slow the economy without adding one iota of the external funding needed to protect retirees and add to their rate of return. Let’s shelve this “reform,” which is a disguised tax increase, and instead expand tax-preferred savings vehicles.
Malpass richly deserves Forbes’s elevation as one of the world’s top economic and strategic thinkers.