Business: New Ways to Rethink the Economy

Conventional wisdom holds that in vital areas—health care, taxes, education, trade, social mobility—government and business remain in the grip of tired old rules that don't work in the global economy. Matt Miller, a purveyor of unconventional wisdom, has identified six of these "dead ideas" in his new book, "The Tyranny of Dead Ideas: Letting Go of the Old Ways of Prosperity to Unleash a New Prosperity" (Times Books). And while these zombie modes of thinking are "tacit assumptions and ingrained instincts broadly shared by business executives, professionals, policy makers, media observers and other opinion leaders," Miller believes there are a set of relatively simple, though frequently counterintuitive, answers. But this isn't just a work of theory; Miller is a practicing corporate and policy wonk. He's a contributing editor at Fortune and a senior fellow at the Center for American Progress, and he works as a consultant for private-sector companies. He spoke with NEWSWEEK's Daniel Gross. A podcast of their conversation, which is excerpted below, can be heard here.

NEWSWEEK: We've been worrying about the first dead idea, the assumption that our children will earn more than we will, for a while now. Isn't this just a cyclical concern that crops up during recessions?
MILLER: We've known about downward mobility in terms of people who were exposed to foreign competition, like textile workers in South Carolina losing their jobs and not being able to find something that was as well-paying. But the new research we're seeing now suggests that up to 100 million people live in families that are earning less money than their parents did at similar ages. Even if jobs don't move offshore, the fact that so many other jobs can be performed offshore is going to impose an effective wage cap on a lot of categories of work in the U.S. We're going to have to accept that upward mobility is at risk for a large chunk of the population, and we have to take steps to improve people's lives in spite of that.

Which leads to your second dead idea. You say that the notion that your company should take care of you i.e., provide health care and retirement benefits doesn't make sense any more. Why?
I advise big companies on public policy, so I have a unique angle. The whole employer-based system of healthcare benefits and, to a lesser extent, pension benefits might have made sense 100 years ago, or 30 years ago. But it's terribly out of date today and leaves literally tens of millions of people falling through the cracks. People don't realize that companies now spend more on health care than they earn in profits. Starbucks spends more on health care than it does on coffee. But the companies don't know anything about what they're getting for all that spending.

And yet so many business leaders seem to be opposed to what appears to be an obvious solution: some form of national health insurance.
Historically, big business and its political allies saw offering benefits as a way to ward off greater government involvement and more unionization. And because America was on top economically for so long, companies could basically pass on the cost of rising prices to customers. But that's not the way the world works today, with companies facing global competition. I think it's an ideological mindset, where business leaders, even when they see what's happening, feel reluctant about letting go.

Now, of course, national health care for everybody would have to be paid for, probably with higher taxes, which raises a lot of opposition. Many people, especially Republicans, say that raising taxes hurts the economy. You say that's a dead idea.
Given what has happened fiscally, with spending and taxes, in the past decade, and promises on entitlement spending, taxes have to go up. Most economists acknowledge this, and that it won't be disastrous, but not always publicly. In the book, I quote Dan Crippen, who was a Republican-appointed head of the Congressional Budget Office and a McCain advisor, on this topic. I quoted him anonymously because our ground rules were that I couldn't use his name until after the campaign was over. A straight talker like McCain couldn't be seen as being advised by someone who talks straight on taxes!

While these dead ideas exert a very powerful hold on our political culture, you write that the end of U.S. global dominance and rising inequality will shock us out of this mindset. Once that happens, we'll be in the thrall of a series of what you call " destined ideas," things that sort of have to happen. One of them is that only government can save business. Really?
I don't mean in the sense of the incredible, extraordinary bailouts we're seeing in the current crisis. But rather, health care and pensions need to shift more toward government responsibility. Business can contribute, but government needs to take the lead in making sure we have that kind of security. And that will help business in terms of their global competitiveness.

One of your other destined ideas is that only business can save liberalism.
There are two sectors, health care and education, that are very important to liberals. In those two sectors, America is radically inefficient. We spend much more than other advanced nations, and we get less out of it. And the only way to get it back, ultimately, isn't just to pour more money into insurance subsidies, or to provide more tuition grants. We have to re-engineer the cost structure of the health care and education sectors. And the business sector can provide the entrepreneurial innovation. An example would be the clinics that are in some big retail stores now that provide some simple health care services.

Americans have always been pretty ingenious when it comes to thinking up solutions to our problems. But you say we need to look outside our borders for models.
Historically, we modeled our university system on what the Germans had done. And we could do the same in education. Take teacher training: In places like Finland, or places like Singapore, they recruit from the top third of the college class. In America we recruit from the bottom third of the college class for teachers. They do intensive training and preparation, they honor their teachers, they pay them while they're training them. It's considered a selective profession to enter. Denmark is another example. They've evolved a system they call "flexicurity," where they have the system of labor market flexibility that we've traditionally had, so you don't get the folks stuck in jobs when industries are changing. But they make sure that when industries change, there's enough retraining, and adequate unemployment compensation, so there's a receptivity to the kind of innovation and dynamism in an economy that you need in the 21st century.