National Investment in National Renewal – Three Why’s and Three How’s

Abstract

I identify one crucial error that accounts for recent American economic decline, three obstacles to rectifying that error, and three reforms to existing institutions that remove the three obstacles. The error is to have thought of ‘national development’ as a one-off achievement, rather than as a perpetual process of ongoing renewal. The three obstacles, all in the nature of classic collective action problems, are how to coordinate the formulation and execution of a regularly updated national development policy, how to capture and incentive-compatibly channel the gains to continuous infrastructural renewal in a mixed public/private economy, and how to control macro-financial conditions in a manner that renders investment in continuous industrial renewal privately rational. The three responsive institutional reforms are a National Reconstruction and Development Council (NRDC) that combines all cabinet-level executive agencies into ‘an FSOC for continuous national development,’ a National Investment Corporation (NIC) that designs price-signal-impounding and equity-stake-justifying financial instruments in connection with national infrastructure projects, and a newly ‘Spread Fed’ that restores the Regional Federal Reserve Banks to their original status as a network of regional development banks. Here is the ‘three-legged stool’ on which Building Back Better – and Beyond’ can succeed.