Dr Jeff Cornwall

The Flame is Fading

The impact of the changes in public policy over the past decades — increased direct government control over the direction of the economy, higher tax rates, more regulation — are not just simple on/off switches.  Even if we were able to magically turn all of this around tomorrow, the lasting impact would remain for years to come.

What we often fail to understand is the impact of public policy decisions on our culture.  Just as on example, look at unemployment benefits.  Over the past years the tendency has been to extend government unemployment benefits during tough economic times.  While this seems on the surface a compassionate thing to do, the research into this clearly shows that such extensions actually extend the period of time that people remain unemployed.  It has also contributed to, along with many other policy decisions, an expectation in our society that the government will be there to support you.  Over the generations, this is now deeply embedded into our culture.

A direct result of increasing dependence on government is that the self-reliance that was such a fundamental aspect of the American culture for generations has been eroding.  And that value of self-reliance was a major driver of our entrepreneurial nature as Americans. 

Let’s assume that we continue with the acceleration of government’s role in our economy and our private lives.  Then some day in the future we wake up and realize that we have been heading in the wrong direction — that socialism really does not work very well after all. 

So we elect an entrepreneur as President, who promises to unleash the free market to restore our economic engine of growth and prosperity.  This new leader slashes taxes and cuts through the red tape that has bogged down entrepreneurs for generations.

But then, very little changes in our behaviors.  Changes in public policy do not have the desired impact.  Is this a case where these policies are a dismal failure?  Not at all.  It means that with our years of government expansion, we have suppressed the very aspects of our culture that drive us to want to become entrepreneurs.

Want to see what this future looks like?  Take a look to our south at Chile. 

Like the ghost of Christmas yet to come in A Christmas Carol, Jonathan Ortmans offers a glimpse of this possible future.  One that we can avoid, but only if we change our ways.

Ortmans’ writes a post at Policy Forum Blog in which he examines the fact that, while an economic success story in South America, Chile has not been able to unleash entrepreneurial growth in its economy. Its answer to this shortfall?  Put government in change of creating entrepreneurship.  Chile shows what happens when we have relied so long on government to fix things, to fix everything, that we wrongly assume that only government can create entrepreneurship.

Unfortunately, Chile is not yet a startup culture, and innovation still plays a
minor role in the creation of new enterprises, according to the infoDev Incubator Support
Center (iDisc) service from the World Bank. This may come as surprise since the
Chilean government’s investment in R&D has increased 70% since 2005 and much
of it has flown into universities. It has also created the InnovaChile program
to support innovation in various sectors, including biotechnology, energy and
ITC.

This is what can happen in America if we do not change course very soon.  For you see when assumptions get ingrained into our culture, we do not consciously know they are our assumptions.  They are simply taken as a given.  The leaders of Chile cannot comprehend any solution but the government for their economic challenges.

The self-reliance that made America an entrepreneurial powerhouse is still evident.  I see it burning in the generation now in college.  But with each step toward socialism in our economic policy, the entrepreneurial flame fades a bit more in our culture.