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ffirs.indd ii 03/12/11 8:12 AM Additional Praise for American Gridlock “Woody Brock’s writings are often the first place I encounter issues that soon become central debates within public policy. He is prescient, penetrating, broad, surprising and wise. Some writers illuminate yesterday’s news, a few may shed light on tomorrows. But very few thinkers can help you to understand the issues that will shape not only next year, but also the next decade. As America faces a pivotal election, his book could not be more timely.” —Edward Smith, The Times (London) “The events of the past several years have clearly exposed the faults in standard economic and financial analysis. And the economics profession currently seems at a loss to provide credible and practical policy prescriptions for the current malaise facing the U.S. and other major countries. In this fascinating book, Woody Brock stands above the crowd with his original and well thought out plans for a sensible way forward to a brighter future. It is a welcome counter to the widespread gloom that surrounds most of the discussion of the outlook.” —Martin Barnes, Chief Economist, BCA Research “The world is bogged down by incremental thinking and yearns for some “big ideas” to liberate us from the serial crises that confront us. Over the years “Woody” Brock has proven himself as an original thinker whose solutions to problems often turn out to be right. Now, in this book, we have a set of recommendations that may put us on the right course.” —Byron R. Wien, Vice Chairman, Blackstone Advisory Partners LP “Woody Brock tackles America’s big problems at a breathtaking scale. No small ideas here. And no flinching from the conclusions which follow from the fierce logic he applies. Read this book to find a way forward out of the broken politics and doctrinaire policies that leave so many disgusted and depressed to the prospect of a genuine prosperity.” —Joseph Dear, Chief Investment Officer, California Public Employees Retirement System (CalPERS) “Woody thoughtfully addresses the critical issues facing our country and shows how they can be resolved using a different analytical approach. A must read for any serious market participant.” —Susan E. Manske, Vice President and Chief Investment Officer, The John D. and Catherine T. MacArthur Foundation “Woody Brock is an American masterpiece. There is no one like Woody. No one is able to think as broadly as Woody, while simultaneously thinking so deeply. No one is as amusingly insightful, witty and provocative as Woody. Woody’s economics are a blend of deep, revolutionary, insight and common sense. I will never know how he does it, but I deeply appreciate that he does it. No one is a better catalyst for my own thinking than Woody. Read American Gridlock. Savor American Gridlock. Allow yourself to be provoked and prodded by American Gridlock. Then put it down, go fishing, then reread a month later. You will be deeply and lastingly rewarded for your efforts.” —Richard N. Foster, Investment & Advisory Services; former Managing Director, McKinsey & Company; author of Creative Destruction ffirs.indd i 03/12/11 8:12 AM “For decades Woody Brock has enlightened a select audience with his logically rigorous, factually impeccable analyses of past developments and future trends. Time and again I have seen his insights prove true, especially in cases where he has challenged the prevailing wisdom of the era. Now for the first time he addresses a general readership, with a comprehensive assessment of how to cope with the most intractable public problems of our time. I don’t agree with every one of his prescriptions, which is why I am all the more sincere in recommending the thoroughness and rigor of his logic.” —James Fallows, The Atlantic “American Gridlock is a major endeavour containing deeply profound insights. It requires the courage to see that economics has largely failed and must be replaced as the master discipline by political theory and science, and with a new emphasis on fairness and justice in the distribution of benefits and rewards. Woody Brock is one of the few thinkers of our times who can tackle this mountainous task and unlock the paralysis in which the increasingly muddled debate about Capitalism has plunged us.” —Lord Howell of Guildford, Minister of State, Foreign and Commonwealth Office, UK “If Woody Brock did not exist, God would have had to invent him. He is a unique, challenging thinker who makes most conventional economic forecasters look like trendfollowers. Serious investors and students of public policy should be delighted that he has finally written a book in which his renowned analytical approach focuses on public policy. This is badly-needed fresh air in a seriously polluted environment.” —Don Coxe, Chairman, Coxe Advisors LLP “American Gridlock provides a compelling framework for citizens, policymakers and market participants to overhaul their views on many important issues of the day. The power of Woody Brock’s approach—emphasizing deductive reasoning and eschewing information overload—makes this elegantly written book a must read for those who value understanding over data. I would suggest burying oneself in American Gridlock before occupying Wall Street, the executive suite or public office.” —Scott Bessent, Chief Investment Officer, Soros Fund Management “H. Woody Brock is one of the few leading economists who can combine high-powered theory and deductive logic to yield practical solutions to real-world issues. He constantly surprises and inspires with new creative inputs and insights. In his latest book, he provides thought-provoking ideas on how to get a polarized and gridlocked America on the path to progress.” —Christian Casal, Office Manager McKinsey & Company, Switzerland “If you can handle the truth about America’s Lost Decade, Phiberalism, Leverage, Thugocracies, and Distributive Justice then American Gridlock is a must read. You will leave behind today’s heads I win, tails you lose mentality. No more repetitive talking heads, know it all politicians and tired academics. Woody offers up common sense solutions based on sound reasoning to today’s pressing problems. Finally, the TRUTH! —John H. Carlson, Fidelity Investments, Boston ffirs.indd ii 03/12/11 8:12 AM “American Gridlock delivers desperately needed fresh air and sunlight, dispelling the funk and gloom that are dampening the American spirit. Woody Brock defines five critical problems confronting the US today and leads the reader to compelling win-win policies that will break the current gridlock and put America on a path to sustainable prosperity. His work is original and of critical importance. The clear thinking and optimism of one of the world’s great thinkers obviates the need to contemplate writing America’s obituary. Anyone with a vested interest in our future should place American Gridlock at the top of his reading list.” —Jan L. Yeomans, Vice President and Treasurer, 3M “Woody is a paragon for prosperity, and he is a master of truth and its processes—something our postmodern age has let drift out of the public discourse. He must be read by politicians, policymakers, CEOs and advisers, and by everyone concerned with today’s problems and building a sustainable and prosperous future. He shows how it can be done without unnecessary pain, making this book the antidote to the current global economic and financial malaise. His new book is a must read for every politician, policymaker, adviser, CEO, and everyone concerned with today’s problems and building a sustainable future.” —Michael Roux, Chairman, Australian Davos (ADC) Forum “If ever there was a time when a fresh, original approach to understanding the challenges facing democratic capitalism was needed, it is surely now. This book offers such an approach, and provides novel answers to wickedly difficult questions about the sustainability of our way of life in the 21st Century. I have admired Woody Brock’s creative strategies to address complex issues for decades, and rank this book as his greatest, and most important effort yet.” —Keith Ambachtsheer, Director, Rotman International Centre for Pension Management, Rotman School of Management, University of Toronto “American Gridlock surpasses the lofty expectations of a long-standing client. To provide ‘win-win’ solutions to our most vexing economic problems, Woody employs commonsense coupled with profound and not often cited academic principles. His analysis addresses the challenges—deficits, entitlements, financial meltdowns, dealing with China, and Distributive Justice—that must be confronted to arrest the decline of the West. Most impressively, his is a refreshingly independent and optimistic voice in an era of partisanship and pessimism.” —Ed Sullivan, Ph.D., CFA, Managing Director, General Motors Asset Management “American Gridlock, the new book by Woody Brock, should be required reading in Washington. First, because it is offers real solutions to many of today’s biggest problems that are based on solid grounding in economic and political theory. Secondly, because it offers real hope that there is a way out if only folks will start to think differently and creatively.” —Will McLean, Vice President and Chief Investment Officer, Northwestern University “I have known Woody for many years and have always admired his brilliance on economic issues. He has advised many of us on looming economic disasters including ffirs.indd iii 03/12/11 8:12 AM his prediction of the crash in 2008. Not surprisingly, in American Gridlock: Why the Left and Right are Both Wrong, Woody, like only he can do, diagnoses the persistent problems in today’s economy then sets his sights on prescriptions for fixing them—prescriptions that others are unable or unwilling to see. This stunning work is wholly different than anything that has come before it, with invaluable insights for policymakers, businessmen, and everyday citizens alike. This book is a must read for anyone who longs for Washington D.C. to stop the shouting and start addressing our nation’s problems in a real and meaningful way.” —J. Pepe Fanjul, Vice Chairman, President, and Chief Operating Officer of Fanjul Corp., and Florida Crystals Corp. “American Gridlock provides the first optimistic analysis suggesting how the United States can recover its leadership position and solve its strategic financial dilemmas. The U.S. has lost its moral and political compass. Woody Brock suggests it can be regained by using an approach to the issues based on reasoning from first principles, clear definition and consistent logic. Everyone interested in the future of American leadership must read and study this book. It is hard work but worth it.” —Sir Roderick Carnegie AC, Chairman, Pacific Edge Group “Across the years, the noted decision theorist Dr. H. Woody Brock has advised a global clientele of public and private sector leaders faced with crucial challenges. Thanks to this deeply intelligent, clearly written, and heartfelt book, the commonsensical wisdom of a legendary advisor to investors, corporations, republics, kingdoms, foundations, and NGOs, now comes home to the USA, where it is sorely needed.” —Kevin Starr, University Professor and Professor of History, University of Southern California. author of Americans and the California Dream, 1850–1915 “Woody’s writings including his new book, American Gridlock, should be required reading for all current and aspiring members of Congress and the White House. He always provides well founded and insightful commentary that identifies and explains complex developments in economics and finance and provides practical solutions to the enormous challenges facing the United States and the world economy.” —Dennis Schwartz, Vice President, Pension Fund & Investments, Deere and Company “Woody Brock presents a powerful and provocative explanation of a public choice system that has lost its way. Through compelling logic and lucid narrative, he offers a bold solution to the current crisis and paints a picture of an economic future that can be salvaged. This book is compulsory reading for anyone with a serious interest in public policy.” —Peter Crone, Chief Economist, Business Council of Australia and former Senior Economic Adviser to the Prime Minister of Australia, the Honourable John Howard “Woody Brock is a master at explaining complex, highly mathematical and often overlooked economic theories in terms anyone can understand. In American Gridlock, he uses new and sophisticated economic theory to derive win-win solutions to five of America’s most pressing problems. His focus on deductive logic provides clarity of thought that should serve as a standard for economic and financial writers everywhere.” —Chris Doheny, Associate Director of Asset Allocation and Risk, The Ford Foundation ffirs.indd iv 03/12/11 8:12 AM American Gridlock ffirs.indd v 03/12/11 8:12 AM ffirs.indd vi 03/12/11 8:12 AM American Gridlock W H Y T H E R IG H T A N D L EF T A R E B O T H W R O N G C O MMO N S E N S E 10 1 S O L U T I O N S T O T H E E C O N OM I C C R I S E S H. Woody Brock John Wiley & Sons, Inc. ffirs.indd vii 03/12/11 8:12 AM Copyright © 2012 by Horace Wood Brock. All rights reserved. Published by John Wiley & Sons, Inc., Hoboken, New Jersey. Published simultaneously in Canada. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax (978) 646-8600, or on the Web at www.copyright .com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008, or online at www.wiley.com/go/ permissions. Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages. For general information on our other products and services or for technical support, please contact our Customer Care Department within the United States at (800) 762-2974, outside the United States at (317) 572-3993 or fax (317) 572-4002. Wiley also publishes its books in a variety of electronic formats. Some content that appears in print may not be available in electronic books. For more information about Wiley products, visit our web site at www.wiley.com. Library of Congress Cataloging-in-Publication Data: Brock, H. Woody. American gridlock : why the right and left are both wrong commonsense 101 solutions to the economic crises / H. Woody Brock. p. cm. Includes index. ISBN 978–0–470–63892–7 (hardback); ISBN 978–1–118–23462–4 (ebk); ISBN 978–1–118–22079–5 (ebk); ISBN 978–1–118–24122–6 (ebk) 1. United States—Economic policy—2009– 2. Right and left (Political science)—United States. 3. Capitalism—Social aspects—United States. I. Title. HC106.84.B76 2012 330.973—dc23 2011039260 Printed in the United States of America 10 9 8 7 6 5 4 3 2 1 ffirs.indd viii 03/12/11 8:12 AM