TAS: I feel proud. So do you see any effective Republican or conservative leadership around?
GILDER: Rush Limbaugh. He is the most important and effective Republican leader today and also the most interesting. Far and away. No competition. A much more important positive force than Bush or Cheney or any elected official. He has done far more to help conservatives win arguments and elections than any other person or institution in the country. And he has done it in a way that completely contradicts the image elite liberals try to pin on him and conservative radio generally.
TAS: How?
GILDER: He is a genuine intellectual, in the best sense of the word. He is principled and he cares about ideas. And he is an optimist. He believes in the ultimate triumph of good. And he cares about his audience. His is actually an incredibly generous vocation.
TAS: Generous?
GILDER: Generous and optimistic. He believes that he can change the country, change people's minds, just by talking to them, very patiently, every day. I love the way he treats sincere liberal callers.
What he really wants to do is persuade them, regardless of whether doing so makes "good radio" in conventional lowest common denominator media terms. That's very generous. But I think that generosity is also the key to his success. He's the most generous talk show host I know of, in the sense of being the most focused on the good of his audience, and he is also far and away the most successful. It's a very typical, entrepreneurial, capitalist story. Rush is like a supply-side monument.
TAS: What did you think of the way Bush handled the China crisis?
GILDER: There are two issues in China: First, trade with China is crucial to the future of the U.S. economy. To halt trade with China is wantonly destructive of U.S. interests without inflicting any substantial damage on China, assuming for some reason we wanted to damage China.
Second, if we do not maintain our defenses, we'll lose. What matters is not our posture toward China, what matters is our capabilities. It's absolutely our key responsibility to maintain our defenses, it's the only way to prevent war.
TAS: You don't buy the argument that in the new economy our economic dominance is so profound we don't need military hegemony?
GILDER: No. There are lots of interests not only related to China and Taiwan but around the world, where people, baffled by the new economy, still believe that the way you gain wealth is to take it by force. The only way to discourage them is to make the use of force unthinkable by maintaining unchallenged military capability. Not merely superior, but unchallengeable, to render the idea of using force against the U.S. absurd and self-destructive.
There are two ways to strengthen these primitive forces that imagine the way to wealth and power is war. The first is to restrict trade, which of course makes their argument more true. If we won't trade with the Chinese, or if we crush Third World growth through other absurdities like the Kyoto treaty and the myth of human-caused global warming, then war becomes their best option. The Chinese have to rebel against any international order that restrains their growth. They have no choice.
American politicians who argue that some new, revised Kyoto treaty would be better if it restricted Third World energy use with the same severity that it restricts ours are dangerous. Of course the entire treaty would be a disaster anyway, but making it more "equitable," i.e. more damaging to developing nations, would only make it worse. That's an excellent way to persuade, say, the Chinese that war against Western hegemony is actually necessary.
TAS: What's the other way?
GILDER: To drop our defenses. So to restrict trade with China, while at the same time contemplating actual reductions in defense spending, is as dangerous a thing as we could do. I don't believe the world has become a fundamentally safer place. Human life is just perilous.
TAS: So we are stuck with a perpetual arms race?
GILDER: Just the opposite. By maintaining overwhelming superiority we end the race. We got the Russians out of the race by winning it. Every time we reduce our defense spending we enhance the incremental effect of increased defense spending among our adversaries, whoever they may be. The interest in expanding offensive capabilities by every strange extremist group in the world—or by Chinese hardliners—greatly increases if our defenses slacken. On the other hand, if our strength is 10X, eminently possible with new technologies, then the plans of the militarists in China to increase their strength to 2X become futile and kind of silly.
TAS: But as a high-tech cheerleader you have argued bitterly against "technology transfer" rules that restrict American companies from selling abroad sensitive technologies with potential military applications. Are you the capitalist Lenin said would sell the rope to the revolution's hangmen?
GILDER: No. In the first place, most of these restrictions are just as inept as any other government regulations. They typically cover out-of-date technology, or technology that is widely available from other sources, so the restrictions punish American companies exclusively and thus tend to retard our efforts to stay ahead.
Technology is globalizing. There's no way to keep American technology from foreign countries; it's inevitable that it spreads around the world. America has the best technology sector, but not the best technologists. The best technologists, the best engineers, or the people who will be the best engineers ten years from now, are in India and China waiting for visas so they can be the best technologists over here. Secrecy chiefly prevents Americans from using technology rather than possible adversaries from acquiring it.
TAS: How?
GILDER: Edward Teller made the point very compellingly a few years ago when he compared the computer industry :with the nuclear weapons industries. The nuclear industries were as secret as they could be made, and our nuclear weapons program was never conspicuously better than our adversaries'. Remember the surprises of Sputnik and the Soviet hydrogen bombs. Computer research, by contrast, was almost totally open, and advanced hundreds of times faster than our nuclear research. And eventually the computer industry became the crux of American defense as was manifested in the Gulf War. Now it threatens to render the nuclear forces of other nations obsolete through million-fold advances in computing power and in optics, with SDI.
Our advantage is that we're an open, creative, innovative, entrepreneurial economy, and we have to use that advantage. We have no particular advantage in secret programs where countries that specialize in secrecy like Russia and China easily surpass us.
Meanwhile the technology companies in Guang Dong province are growing explosively, and Shanghai is becoming rich, and trade with the U.S. is increasingly desirable, and more and more Chinese have their kids in American colleges. So no program forbidding "technology transfer" will actually be effective. But for the U.S. to adopt policies that would seek, however ineffectually, to keep the Chinese out of the vital center of the world economy will justifiably anger the Chinese.
TAS: With both India and China rapidly developing vigorous native high-tech sectors, young Asian engineers and programmers increasingly do not feel compelled to leave home to seek their fortunes. We could soon be struggling to attract the same immigrants we now routinely send home.
GILDER: Immigration policy should be about attracting people. Except for the ominous implication of the initials, the Immigration and Naturalization Service should change its name to the Immigrant Recruiting Service. It should be working to attract people who want to learn English and come to U.S. universities. Close to half of all graduate students in engineering and science at MIT are immigrants. They have made big sacrifices to come here and have gained all sorts of extraordinarily valuable skills, and they should be encouraged to stay. If you learn English and come here, gain critical capabilities, you should automatically get a Green Card. Forcing them to return home is perverse and destructive to the United States.
American high-technology companies are overwhelmingly dependent on immigrants, as Americans are increasingly unwilling to endure the enormous disciplines required to excel in science and math. We go to Silicon Valley to visit these companies all the time. And we just take for granted that their top technical people are going to be very hard to understand because they do not speak English well enough to convey these complex ideas to American journalists like us. We're so surprised when the leading engineer turns out to be an American that we immediately invite him to one of our conferences so he can speak without mystifying the audience.
TAS: In the late 1970s and early '80s, you led the intellectual debate on sexual issues from the conservative side. In the 1980s your book Wealth and Poverty transformed the way people thought about capitalism. And then you wandered off to study transistors. Why did you do that?
GILDER: I thought I had won those debates. Whenever I actively debated anybody, they didn't have any interesting arguments anymore, so I thought I should learn something I didn't know about. And the work that went into Wealth and Poverty persuaded me that the crucial factor in economic progress is innovation, which comes from new technology, so I wanted to understand the processes of technological advance.
TAS: One of my favorite Peter Drucker insights is that the only productive factors in a company, and by extension in the economy, are innovation and marketing or sales. Everything else is cost.
GILDER: Right, every other department in a business is a cost center.
TAS: And yet every time we export a cost center, whether it's a manufacturing plant or a telephone call center, conventional economists sound the alarm that the U.S. economy is being gutted.
GILDER: And most of these jobs were jobs that Americans would not perform because they had better options. So we should export those jobs to countries that have no better options. It's actually extraordinarily beneficial to those countries and poor people in them to be able to perform this work which Americans used to perform but from which we've graduated to better things.
TAS: So after wandering off to transistor land, you came back and bought The American Spectator. Why?
GILDER: I needed a cost center. It was just too profitable around here.
TAS: How nice for you.
GILDER: Seriously, we bought the Spectator to have a vessel for the views of the investor class, which spearheads the economy. I woke up from 15 years of studying semiconductors and optics to discover that a whole generation of polled politicians had entirely forgotten the lessons of the Reagan era, and that science policy had been incredibly debauched by special government interests and, most critically, by the perverted illusions of the environmental movement.
TAS: Speaking of which, Christie Whitman looks like a potential disaster at EPA.
GILDER: Christie Whitman is an upper-class American woman. I come from that milieu. I spent my life, quite happily, in the very pleasant company of such women, and almost none of them have any comprehension of the environment. Almost all of them are averse to science and technology and baffled by it. And they clutch at the pretentious irrationality of environmentalism as their countervailing wisdom. She represents this class perfectly.
Christie Whitman was a good governor, she's good at most things. But these people are disdainful of science and they are bowled over by panicky environmentalist claims. The kinds of data that are adduced regularly to show that PCBs or cell phones or global warming are serious perils would not survive the most routine analysis by somebody with a vague understanding of statistics and random clustering, or the normal apparatus of the scientific approach.
TAS: It's a class problem?
GILDER: We were brought up this way. We were taught to disdain commerce, which is the animus that really drives environmentalism, and to be uninterested in science which, though a higher calling than commerce, is earthy and empirical rather than creative, or so we imagined. I was brought up this way. I wanted to be a writer and maybe a politician, but the idea of going into business was far from my mind. We were poets and critics and...
TAS: Ripon Republicans.
GILDER: ...and liberal Republicans and we took wealth for granted. Christie Whitman comes from one of the richest places on the face of the earth, the horse country of New Jersey. She takes wealth for granted, and thus panics over chimeras of the environment. Environmentalism is a luxury of wealthy people and wealthy countries. It's expensive to be an environmentalist. If you're in Kenya you can't afford it; you strip the hillside in order to keep warm in the winter.
TAS: Nevertheless, there is a growing consensus that global warming is real.
GILDER: But the theory of human-caused global warming is nonsense. The scientific consensus is just the opposite: Human activity has insignificant impact on climate. Changes in solar activity are 70,000 times more significant for Earth temperature than all the global emissions of industry.
Seventeen thousand scientists, many of them experts in climate and atmospheric studies, signed a petition launched by CalTech chemist and inventor Arthur Robinson denying humans cause global warming and that carbon dioxide is a pollutant.
Yes, temperatures are warmer than they were 300 years ago in the midst of the Little Ice Age. There's been a continual and beneficent recovery from that cold period. Nevertheless, historic and scientific records from thousands of different sources show that temperatures today are still a little cooler than they have been for most of the last 6,000 years.
TAS: Do you ever worry that the glorious New Economy which you have done so much to celebrate is killing the family and traditional child-rearing roles that you have also devoted so much of your life to defending?
GILDER: How do you mean?
TAS: Spurred by technology and tax cuts, productivity has been on a tear. Educated American women can earn so much money in this economy that the opportunity cost of having children grows every year. It shows up in birth rates which are already dangerously low. Is the ultimate end of the New Economy death?
GILDER: I obviously don't believe so. Social changes take long periods of time. I think it was Veblen who said that while epidemics of physical disease can be readily combated by antibiotics and medication, psychic epidemics, diseases of the mind, can sweep across the planet, meeting no resistance, and can be reversed only with the most persistent long-term efforts.
Thirty years ago we were in the midst of a psychic epidemic of despair and nihilism. It was alleged that a nuclear cloud, the Vietnam War, the devastation of the environment, and most of all the population explosion, as it was called, endangered the planet. According to this diseased set of ideas, it was somehow irresponsible to bear children. This campaign was translated into policy and billions of dollars were expended in propagating it across the face of the globe. This campaign triumphed. We persuaded countries around the world that human beings were not minds, but merely mouths whose increase ultimately doomed us to famine and failure.
We're still on the cusp, but I think that as the damage from this epidemic becomes clear, it will begin to be reversed. China is about to realize it has a disastrous overabundance of young men because of the extermination of millions and millions of female children. Young men unsocialized by women are a threat in all societies. The usual recourse throughout the history of the human race for young men without women was for the men to conquer neighboring tribes and take their women.
So this is a real peril, a change of view that swept particularly the upper classes around the world, and it's related to the environmental movement which continues its essentially nihilistic course. But I don't think it's an irreversible effect of capitalism, I think it's an effect of anti-capitalist policy, actually.
TAS: But isn't there another element? Market labor makes money, children cost money. Market labor makes you more autonomous, childbearing makes you more dependent. But that's just the economics. As a friend of mine likes to say, "Then Gilder comes along and says not merely that capitalism, rather than being selfish and degrading, is based on generosity, but that entrepreneurial endeavors are redemptive and beloved of God, that microchips are the cathedrals of the modern era." Why would any sane woman choose family over market production where you get not only the money but the redemption, too?
GILDER: One of the real illusions that underlies much of this movement is that women didn't used to work. Women work a lot less today than they did when the United States was an agrarian society.
TAS: But they worked at home.
GILDER: Well, they worked at home and on the farm and they worked far longer hours.
TAS: But the farm economy encouraged high birth rates; the new economy increases the opportunity costs of childbearing.
GILDER: True. But human beings really do like to have families and like to stay home as much as they can. The emergence of the Internet and all the associated technologies allows the disaggregation of production through the homes of the world to a degree almost never before possible. So the sacrifice of leaving the home will diminish. With smaller, less rule-bound companies—and family companies—proliferating, I believe that the natural propensity of people to live in families and raise children, entailing some of the deepest gratifications in human life, will prevail.
Feminism has spread all sorts of distress and despair in families across the country, with divorces wreaking havoc on the lives of further generations and the population explosion turning around into a drastic population collapse. I think people will see this and these ideas will be rejected.
TAS: Old economy publications—Barron's sticks out, there are a few others—are virtually gloating over the collapse of technology stocks. What's going on here? Is it over? Are there still opportunities out there?
GILDER: This is a supreme moment when people can actually get rich, get huge multiples from purchasing the right technology stocks, because prices have collapsed. These moments come only so often, and they come always while Barron's and other such publications are gloating about the effervescence of the technology bubble.
This happened in the mid-'80s, which turned out to be a huge moment of opportunity. In 1985, the semiconductor industry collapsed and personal computers seemed to be a bubble as key PC companies—Commodore, Coleco, Atari, Osborne—all went broke. The semiconductor industry was then supposedly moving massively to Japan. Instead I urged people to buy Intel, Applied Materials, and a company called Semicon. Semicon went broke. But Applied Materials and Intel have increased a hundredfold or more since then, and the semiconductor and personal computers market ended up a trillion-dollar wealth creator by 1996.
Today we're in a time when the entire global communications infrastructure has to be recreated in optical form, through this miraculous technology of glass and light called fiber optics. I believe that the combination of optics and the Internet represents at least tenfold as great an opportunity as computers and semiconductors in the '80s and '90s, provided we don't, you know, make terrible political errors like protecting trade or going to war, or inviting others to go to war by disarming.
TAS: Is there a direct link between the theoretical insights of Wealth and Poverty and what you do today, helping investors make money in technology?
GILDER: The real supply-side insight is the economy is based on creativity and faith. You have to invest in an unknown future and gain returns based on the voluntary responses of others. You can't force your customers, employees, or investors as you can under socialism.
But supply-siders understand that investing in response to the needs of others who voluntarily purchase your goods generates all the wealth in the world. Capitalists are givers rather than takers. The key property of a gift is not that it doesn't in some way benefit you, it does.
Giving is redemptive, but the key property of a gift is that whatever returns it secures are not mandated or required. They are spontaneous. Evoking these spontaneous returns depends on the givers' original and generous responsiveness to the needs of others.
So supply-side economics really has a moral source: It's based on freedom. It's based on a recognition that you can't constrain the outcomes. That if I try to force the good, I end up with stagnation and repression and tyranny. You can't constrain good. It has to be freely chosen.
This is a religious belief ultimately, hearkening back to our own creation as free creatures. The key flaw of socialism is its denial of the ultimate reality of the human condition, which is that we can't control the future. We can choose the good but we cannot choose the outcome. Reaching for control and certainty, we end up in the embrace of evil.
TAS: How do these core beliefs that you can't mandate the future, that you have to invest in the hope but not surety of return, help you pick the right optical company?
GILDER: First, it makes me focus on abundance, on opportunities, rather than on the problems. Peter Drucker said once: "Don't solve problems." And this seems like a ridiculous piece of advice, human beings have to constantly solve problems, that's what we do, what a silly idea. But in business, solving problems means that you get polled—like Bush. You end up feeding your failures, starving your successes, achieving costly mediocrity. So solving problems orients you toward the past; and in order to succeed you really have to be oriented toward the future. You have to pursue opportunity.
I immersed myself in the physics of optics for almost a decade, and I grasped Paul Green's insight that fiber optics afforded capacities 10 billionfold greater and error rates 10 billionfold better than the then-dominant copper technology. I could see that this was effectively infinite opportunity, so people who pursued it aggressively, and with faith, in conditions of freedom were going to achieve great results.
TAS: Did studying the way economies and companies succeed affect your faith? Religious faith, I mean.
GILDER: Probably. It seemed to me that the supply-side vision, the vision of technological advance and opportunity, accorded very closely with propensities of the Christian religion. And so studying these things really strengthened my religious faith. I've always had a religious orientation, but it grew stronger over the years, and as I came to understand that these sorts of secular alternatives ultimately led to an obsessive immersion in problems and ultimately to futility, it's really faith that is indispensable to almost all positive human activity. Because you can't know the future, and if you don't have faith, the pursuit of bodily pleasure and preoccupation with obstacles to it become your entire life and the horizons darken.
I recognized that the opposite of the psychic epidemic is the psychic bonanza or the economy of faith, where you assume that ultimately God is good and good will prevail. Goodness and freedom will triumph over evil. So you don't have to be so obsessed with evil that you close off the future of freedom. |
