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Wednesday, January 6, 2010
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On New Year's Eve, the good folks at Lake Superior State University released their annual list of "banished words." These are figures of speech that became stupefying cliches over the past year and from now on can have no place in respectable discourse. 2009's top winner was the go-to adjective of Obamanomics - "shovel-ready." To give you a sense of what kind of terms take this yearly palm, previous honorees include "it is what it is" and "we're pregnant."
"Shovel-ready" grates on the ears as we make way into a new decade, to be sure. But let's take a moment to identify exactly how bad the economics behind this term are. We might save ourselves further trouble as we try to shed this confounded recession.
Unless you're involved in mining, there's only one thing to do after shoveling dirt out of the ground in an economic project: Fill the hole with concrete. If building a building, you dig the hole and cast the foundation. If grading a road, you line the scar in the land with aggregate and cement mix. This was indeed the fate of territory near Grand Junction, Colo., where President Obama made his contribution to the banished-word cause back in August: "There are almost 100 shovel-ready transportation projects already approved in Colorado which are beginning to create jobs. Not far from here, for example, there's a project to pave and add lanes to State Highway 92."
Concrete is about the physically heaviest thing that gets produced in the economy. Cast concrete adds up to tons and tons.
One of the most stunning facts about the long arc of economic growth in the United States over the last century is that today, yearly output - the total tonnage of it - weighs about as much as yearly output did a hundred years ago. Since 1910, the economy has grown 25-fold, yet if somehow the stuff produced every year were put on a scale, the same reading would come in each time.
This is, of course, testament to the spectacular feats of innovation that have taken place in this economy. We are so much better at steelmaking than in Andrew Carnegie's day that the machinery necessary to make a unit of steel weighs 50 or a 100 times less. Moreover, the things that we make now that really have value have very little mass at all - a pill to stave off heart disease, the iPod Nano.
Therefore, economic policy that aims at producing heavy things - "shovel-ready" things - misunderstands the foundation of modern prosperity. Modern prosperity is about doing more with what we already have. As the roster of the world's top macroeconomists interviewed for Arnold Kling and Nick Schulz's new book, "From Poverty to Prosperity," all say, this is the process that must continue if we want to continue to better ourselves. Economic policy that doubles down on things we learned how to do centuries ago - casting concrete - will put us on a road to the lower level of prosperity of the past.
The Soviet Union specialized in making heavy things - steel works and dams. When the country came to an end in 1991, its economy was one-twentieth the size of that of the United States, though it is a fair bet that the respective outputs weighed the same. In China, Mao installed the first modern metal works by the dozen, often set up next to the collective farms where millions were starving. Targeting "shovel-ready" projects has been an economic loser throughout the industrial history of the world.
Letting persons innovate, however, has been a phenomenal winner. Government does that best by keeping the economic means of exchange - the currency - stable, and getting the tax and regulatory burdens light. Far from being weighty, "shovel-ready" is what it is: pregnant with no meaning in the modern economy.
Brian Domitrovic teaches at Sam Houston State University in Huntsville, Tex., and is author of "Econoclasts: The Rebels Who Sparked the Supply-Side Revolution and Restored American Prosperity" (ISI Books, 2009).
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