Before the gale-force hurricane of Reaganomics swept through the United States in the 1980s, America very briefly entertained the adoption of a deliberate industrial policy. As in South Korea and certain European nations, the U.S. government would pick economic winners and losers and direct funds accordingly.
This was no utopian idea. After World War II, a number of European governments invested heavily in key sectors — electricity, steel — to close the technology gap with the United States. Similarly, the South Korean government built up a shipbuilding industry in the 1970s from nothing into the largest and more successful in the world. To a certain extent, the Pentagon accomplished something similar with the Internet (though no American would dare call such a thing “socialism”).
Industrial policy has never really gone away. Many governments, including China and the United States, have focused funds on the clean energy sector (wind turbines, solar cells). But the prevailing economic orthodoxy since the creative destruction unleashed by Reaganomics has been that the invisible hand of the market, not the state, should determine winners and losers.
It turns out, however, that the market’s hand is very often not invisible at all. Actual people, with very visible hands, are picking the winners and losers in the marketplace. Consider the impact of venture capitalists.
Although they’re responsible for only 0.3 percent of U.S. GDP, the influence of these elite investors is disproportionate. Their decisions determine how you communicate, how you shop, how you organize your life. Venture capital has been instrumental in launching companies that today make up over 20 percent of America’s GDP.
As importantly, they’re a major reason why the economy tilts ever more precariously in favor of the mega-rich. James Carville famously said that he’d want to come back in his next life as the bond market. “You can intimidate everybody,” he observed.
But in terms of sheer power, venture capitalists are probably a better bet — that is, if you’re angling to become a master of the universe in your next incarnation.
The Lottery Economy
Every economic class in America plays the lottery. But each class plays a different lottery. The cost of the ticket and the payout in the end are vastly different in each case.
You’ve heard of neo-liberalism. Say hello to its younger, wilder cousin: neo-lotteryism.