The American economy is among the most powerful forces for good in the history
of humankind. The nation’s economic engine has driven living standards to heights
unimaginable at the nation’s founding. Steadily advancing prosperity—bolstered by
bursts of scientific and technological discovery—has expanded productivity and greatly
improved the quality and duration of life.
The duty of this generation is to ensure that the American economy sustains its strength.
And the purpose of this essay is to outline an economic governance framework, based on
our nation’s foundational principle of natural liberty, to meet the challenges of our day.
In the twentieth century, America’s military played the decisive role in defeating the
major global threats to liberty—the Central powers in World War I and the Axis powers
in World War II. America’s economic and military strength largely checked the advances
of the United States’ cold war adversary, the Soviet Union, which ultimately collapsed
under the weight of a failed ideology.
America’s story, however, is neither linear nor assured.1 Too often, economic policy
discourages work and investment, exacerbates inequality of opportunity, and stifles
economic growth. And in the realm of national security, major armed conflicts in Korea,
Vietnam, Iraq, and Afghanistan ended without clear American victories.
Nevertheless, for most of American history, each generation of citizens enjoyed a higher
standard of living, a safer, cleaner environment, and a stronger, more secure place in
the world. Today, however, America faces a formidable set of detractors with a seemingly
forbidding set of questions.
Is personal freedom not suitable to the challenges of our time? Is economic liberty no
longer resonant to a broad range of citizens, including policy makers? Is the United States
unwilling, unable, or unworthy to champion sound principles of economics to other
nations? Is the ascendant intellectual Left in the United States offering a superior policy
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John F. Cogan and Kevin Warsh • Three Keys to Unlock the American Economy
mix? Is the ascendant East offering a superior alternative to that of the West? Is the failure
to convey the principle of economic liberty simply a matter of parlance or persuasion or
personage? Or is it something more profound?
Major pillars of US society—government, business, other private organizations—are failing to
deliver on realistic expectations of the citizenry. Americans are losing faith in institutions of
all sorts, making our common creed harder to sustain and economic progress more difficult to
achieve.2 We are, as described by our late colleague George Shultz, at a “hinge point” in history.3
Three major shocks of the twenty-first century—the September 11 terrorist attacks, the
2008 global financial crisis, and the 2020 pandemic and lockdown—exacerbated existing
trends and undermined the American ethos. In each crisis, government policies that were
once unthinkable became inevitable, owing ostensibly to the exigencies of the circumstance.
The size and scope of government—and the rationale thereto—expanded mightily.
Today, individuals and businesses find themselves subject to more intrusive government
edicts, a national debt that exceeds national income, less security, less liberty, and less assured
prosperity.4
The growth of government encourages businesses, unions, and other interest groups to look
increasingly to the state for favors, subsidies, and bailouts. Rent seeking weakens competition,
stifles progress, and undermines faith in our political and economic institutions.5
Internationally, threats to freedom by authoritarian-imperialists are not some relic of the
past. The postwar global balance of power is threatened on many fronts: Russia’s overt
actions to eradicate an independent Ukraine, Iran-backed terror attacks throughout the
Middle East, and China’s “wolf-warrior” activities in Asia. The vaunted “rules-based global
international order” is not self-enforcing. Strong economic governance—and credible
military might—underwrite liberty