Romney's Spotty Economic History

Conservatives who credit Romney with having very sophisticated economic understanding, will be surprised by the slapdash and often outright ignorant economic history propounded in No Apology.

Click here for all of David Frum's blogposts on Mitt Romney's "No Apology".

In his book No Apology, Gov Romney thanks almost 2 dozen people in his acknowledgments for their contributions to the book. He might want to rethink his thanks to whoever it was that worked on chapter 2, a short essay on the theme "Why Nations Decline."

While Chapter 1 is by turns intelligent and serious, and then intelligently cynical, Chapter 2 reveals a much more careless hand. (It does however contain two favorable references to CEOs, Bruce Henderson of Boston Consulting Group and Bill Bain of Bain Consulting.)

Chapter 2 quickly surveys the decline of the Ottoman, Spanish, Portuguese, Dutch, and British empires. For the most part it's a mish-mash of poorly remembered undergraduate survey history textbooks. But there is one strange passage I'd have expected Good Romney to catch. It's on p. 42.

"The Dutch also suffered from unearned wealth. Their trade monopolies, underinvestment in productive industry, complacency, and cultural decay led this condition to be called 'Dutch disease.'"

The reference is very hazy: Is Romney talking about the (relative) decline of the Dutch economy in the 18th century? The placement of this material suggests that he is. Most historians attribute that decline to the exhausting cost of wars with Louis XIV, not "complacency." But that's quibbling.

The real surprise is that Mitt Romney seems not to know what the phrase "the Dutch disease" usually means to economists. In the 1960s, the Dutch discovered a huge natural gas field off their shores. To buy this gas, foreign customers first had to exchange their money for Dutch currency, thus bidding up the value of the Dutch guilder. As the guilder rose in value, non-resource Dutch companies found themselves priced off world markets. The resource windfall carried a penalty: the hollowing out of Dutch manufacturing. THAT is the Dutch disease, and it explains why so many resource-rich countries have difficulty translating their resources into more permanent wealth.

I'm genuinely surprised that Mitt Romney would not know that.

My surprise stirs a deep anxiety about Romney: Like many conservatives, I have credited Romney with very sophisticated economic understanding. Almost two years ago, however, a prominent Republican who has long followed Romney's career cautioned me: Management consultants are not financiers. They understand organizations, not economies. The slapdash and often outright ignorant economic history propounded in Chapter 2 lends credence to my friend's doubts.