The background to the election this year is a basic question, how does the US revive its economy and raise it to new heights?  The two basic responses are on the one hand, increased involvement of government in the economy, and the other, reduced government involvement. Obviously these are two conflicting ideas.  Or are they?

The government plays the key role in our economy.  Indeed, since the Federal Government alone already accounts for one-fourth of all spending, government is the very foundation of our economy.  Whatever the various levels of government do, they will be the most important “movers and shakers” in our economy.  

But I would suggest that there is a right way and wrong way for government to participate in or direct our economy.  To illustrate I offer two real examples.

At the beginning of the 20th Century two large, relatively poor countries shed dictatorial rule with considerable violence and in the process established two intense democracies, Turkey and Mexico, two countries with which I have considerable personal involvement. 

The new republic that replaced the collapsed sultantate in Turkey and the vibrant, reestablished republic built on the “Revolution” in Mexico required tectonic changes to catch up with the more developed countries.  To be sure, Mexico had been brought into the industrial age by long time “Presidente” Porfirio Diaz, as they say he built the railways that ultimately proved to be the revolutionaries’ main instrument in their successful war.  Likewise the Sultan had built railways across Turkey and shipyards in its major ports to provide basic infrastructure for his nation.   But both countries were basically agrarian countries and the key to improving their economies lay in developing a strong agricultural base.

The new governments had to lead the effort to build strong agricutures.  For starters they had to redistribute the largely underutilized lands to the farmers.  In Mexico this was done via the “Revolution” that broke up large landholdings.  In Turkey the new republic led by Mustafa Kemal, now named “Ataturk,” simply seized land from the sultan and his court and the Moslem church.  

So far the two countries were on the same page.  What they did next produced the results.

The Mexicans reallocated the seized lands to the peasants via a system called “ejidos” which roughly means “communes.”  Plots of land were given to groups of peasants to farm as a group, i.e. as a commune.  The Turks reallocated the lands to individual farmers in small plots, typically the equivalent of 15 hectares or about 40 acres. 

Both countries also turned to the USA for advice since they knew how brilliantly successful our agriculture had been and was.  They adopted our farm extension service to place experts in the field to work with the farmers.

But the Turks went further.  They established the state owned “Agriculture” Bank which guaranteed each farmer a loan at the beginning of the farm year to buy inputs.  The Turks also, following the US lead, established cooperatives which in their case guaranteed the purchase of all each farmer produced. Thus, with  guaranteed financing and sale of his output, the farmer was left to focus on making sure his crops grew.

In contrast, the Mexican “ejidos” were not guaranteed financing or sales. 

Not surprising the Turkish farms flourished providing the nation with more than sufficient food and a huge surplus to export.   Mexico never produced enough in the 20th Century to be auto-sufficent in food production and its production for export came from farms outside the “ejidos.”  

My point is that both countries used massive government intervention to convert their agricultures.  However, in the Turkish case government developed a balance between the public and private sectors, the farmers, that produced a vibrant agriculture that is the envy of other emerging countries.  The Mexican “ejido” experiment failed miserably leaving most ejidos to lease their land to private farmers who then hire them on.

Yes, the government has the key role to play in leading our economy to new heights.  But that role has to be carefully constructed.  In our present economic slump we have not got it right yet.