What is the Magic Formula of Economic Success?
“The Magic Formula” is what author Nathan Lewis proposes as a way for America to reinvigorate the American economy. His recent Forbes article, “The Magic Formula is the Secret to Another Century of American Prosperity” is very interesting. It does a great job of explaining why low taxes and fewer regulations work for economic growth, and why socialism is so wrong.
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Summary of what “The Magic Formula of Economic Success” Is:
In his Forbes article on the magic formula of economic success, Lewis does an excellent job of describing what makes economies grow. He also describes what outsized positive effects that growth can have. He shows that when countries embrace the “Magic Formula” of low taxes and stable money they grow. When they have devalued currencies and high taxes, they generally don’t grow. the best example he provides is Ireland.
After Ireland decided to cut taxes and embraced other positive policies in the 80’s, it quickly became one of the wealthiest countries in Europe. That growth is no coincidence. Especially when compared to stagnated or broken countries like Cuba and Venezuela.
In addition to describing how economies can create faster growth through embracing the magic formula of economic success, Lewis describes what positive benefits that growth can have. One is obvious- a rising tide lifts all boats. People become richer when the economy does well. Another benefit is that it creates a government surplus despite the lower tax rate. Booming businesses pay more taxes, but the burden isn’t severe. That improves morale and a company’s desire to achieve more.
Finally, Lewis ends the article in the most powerful way possible. He describes how the US used to be a booming economy before taxes rose and the dollar was taken off of the gold standard. Now that we have high taxes and a fiat currency growth hovers in the 2% range. The implication is that we should go back to those policies to improve growth.
I loved this article and thought that it was highly informative and a good explanation about what makes America prosperous and what could make it even more prosperous in the future.
The article was long enough to be informative and short enough to remain interesting. Additionally, Lewis both showed the problems in modern economies- taxes, regulation, and fiat currency- and offered a solution- going back to the old way of doing things. Low taxes and a gold standard. I thought his ability to use historical facts and modern examples to weave a narrative about how policy should change was excellent. It is an article that I would highly recommend you read.
I also liked the article because it fit in so nicely with two books I have read and reviewed on this site recently.
The first book is “The History of the US during the Administrations of Thomas Jefferson.” In that book, Adams describes how Jefferson, in his embrace of the magic formula of economic success, cut taxes and government programs whenever possible and kept money on a gold standard. The result was an economic boom. The resulting economic boom allowed Jefferson to spend more on important things, like building a navy to fight the Tripoli pirates and buy the Louisiana purchase, while also coming up with a plan to quickly pay off the national debt. That’s unlike today, where the government taxes as much as it can get away with and spends even more.
That stands in stark contrast to the modern-day. Now, debt and programs grow despite already high taxes and low GDP growth, as Lewis describes in his article on the magic formula of economic success and Brook and Watkins describe in Free Market Revolution. I think Lewis, Brook and Watkins, and Jefferson would agree on many economic policies.
The other book it fits with is The Affluent Society. In that book, Galbraith is able to show how the US became so wealthy: good economic policies. Those policies, low taxes and a gold standard, were highly conducive to high growth. While Galbraith is something of a liberal and his arguments are not convincing (to me, at least), I do think that some of his evidence is useful in showing what the magic formula of economic success is and why it has been so successful in the past.
Both of those books and the pre-FDR economic policies presented in them show how correct Lewis is in his Forbes article on the magic formula of economic success; a gold standard and low taxes are the way to boost growth; they’re the main pillars of prosperity. Not government spending.
Read Lewis’s article on the magic formula of economic success. You’ll learn a lot from it and be better able to defend why capitalist policies work well and have always worked well.
By: Gen Z Conservative
My review of “The History of the US during the Administrations of Thomas Jefferson”: https://genzconservative.com/book-reviews-history-of-the-us/
My review of “The Affluent Society”: https://genzconservative.com/the-affluent-society/
Nathan Lewis’s Book: https://amzn.to/2I5uEWp
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