Miracle, Schmiracle

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Dukakis runs into problems when he tries to outline how he would foster the creation of new hot spots. Here he deviates substantially from the role government can play by providing better education and more incentives for capital formation. Instead, the governor proposes a form of national economic planning: he would set up a "national network of Center of Excellence" that would, like a gardener forcing a tulip bulb to bloom in winter, try to create a seedbed of entrepreneurship by dint of sheer will. "These guys think you can create a Silicon Valley the way you build the Hoover Dam," observed one former Dukakis aide. "They see everything as a public-works program built in places according to the governor's electoral needs."

Of course, entrepreneurial hot spots don't emerge unless the local conditions are right, and there isn't much the federal government can do to force the bulb to bloom in the location of the government's own choosing. Since the location of a Center of Excellence would naturally be a political choice, it would be used, as is any other pork-barrel project, to reward friends and punish enemies.

In fact, this seems to be exactly what Dukakis's aides have in mind. The governor's chief of operations, John DeVillars, revealed something of the highly politicized ways in which the Dukakis government would select certain regions to become the next Silicon Valleys. Selection would be based on several political criteria, including economic need and the ability of a region to "reflect the perspectives" of the local labor, corporate, and academic institutions. Using such standards, for instance, St. Louis, with fine biomedical institutions but no large-scale entrepreneurial development to date, might be selected as the national biomedical Center of Excellence, aided by tax and other incentives.

Such an approach might be considered unfair by biomedical entrepreneurs in Los Angeles, Boston, and Philadelphia, which are emerging as natural centers of this industry. But DeVillars downplays these concerns. "Anything that helps St. Louis," he says ecumenically, "is good for Orange County, too."

Some campaign insiders cite the removal last fall of longtime chief political aide John Sasso, who represented the closest thing to a broad-brush strategist within the Dukakis organization, as the reason Dukakis has failed to heed the lessons of his own state. "Sasso understood that the aspirations of people to own and run their own businesses was a growing political concern," points out one campaign insider. "While the condition of the country requires a new and more entrepreneurial economic policy, the people around the governor are offering the same old interventionist thing we've been giving the public for 50 years."

Much of the problem, this aide argues, is that Sasso's removal has left the candidate dependent on intellectual direction from Harvard Business School and John F. Kennedy School of Government. As a former lecturer at the Kennedy School, it was natural that Dukakis would seek assistance there. But today, the top advisory positions in his camp are filled by people with Harvard connections. Few members of his inner circle have experience in, or special sensitivity to, emerging growth companies.

Ever since John Kenneth Galbraith began advancing his theories about the inevitable triumph of giant business, labor, and government institutions, Harvard's intellectuals have tended to view entrepreneurs with something ranging between mild bemusement and thinly veiled contempt. Perhaps as much as anything else, this turn away from emerging growth companies reflects the considerable influence of Robert B. Reich, the Kennedy School academic who has become a major economic adviser not only for Dukakis but for much of the nation's liberal establishment as well.

Reich epitomizes the traditional Galbraithian faith in giant institutions over individual efforts. And like many liberal intellectuals, Reich sees the economic model for America coming not from hot spots like Route 128 but from such European nations as West Germany. There, cooperation among big government, big labor, and big business has long been at the heart of economic development. Indeed, references to West Germany have appeared in some of Dukakis's speeches.

The cooperation of government, business, and labor is not unimportant, but it has little to do with the creation of new enterprises, which is the primary engine of job generation not only in the United States but in most other countries. Neither Reich nor Dukakis seems to be aware that the very government-labor-business cooperation so central to Germany has also helped stifle its entrepreneurial environment and helped boost its unemployment rate in recent years to about 10%, the highest level since the early 1950s. Whereas Germany's unemployment rate used to be well below that of the United States, now their positions have been reversed.

If he were talking about Route 128 rather than the Ruhr Valley, Dukakis would be elevating the campaign with a proprietary message about America's economic future. That he hasn't done so seems eerily familiar. Five years ago, another Democratic Presidential hopeful visited growth companies in such dynamic economies as Silicon Valley and Route 128.

But as the race for the nomination came closer, this candidate, like Michael Dukakis today, seemed somehow to lose interest in the reasons behind the explosion in company formation. Instead came the familiar messages calculated to appeal to the institutional interests that have long dominated the Democratic Party -- a call for an increased government intervention in the economy, trade protection, and higher taxes. That candidate's name was Walter Mondale.

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