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Economic reinvention is at the heart of business cycle recovery and economic dynamism. In the depths of an economic downturn, entrepreneurs take advantage of cheap, used capital facilities and idle workers to launch them in new uses. The productive supply-side reinvention leaves behind the broken economic model and unveils a creative venture of greater social value.
The failure to appreciate this core economic dynamic lies behind the failures of big-government attempts to micromanage the economy. Discretionary Keynesian stimulus is built on the notion of propping up the existing firms, labor market relationships, and purchase patterns. In the aftermath of the Great Recession and Obama Administration stimulus efforts, new-firm creation dropped dramatically in the U.S. and the recovery proved modest at best. This is not a coincidence. Interfering with the core mechanisms for reinvention harms the capacity of the economy to transform itself for the future. [...]
Flexible markets, a ceaseless commitment to innovation, the capacity to organize and reorganize skills, risk capital, and technologies are the mechanisms of economic reinvention. Personal freedoms, religious freedoms, and small non-intrusive government are the mechanisms of social, cultural, and personal reinvention. Our policy future should be built on these principles, and not on top-down, one-size-fits-all regulatory and discretionary fiscal approaches.
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