If you asked most Americans today what the biggest threat to our future prosperity is you would get answers like competition from abroad, outsourcing, the subprime mortgage crisis, and the wave of illegal immigration swamping the labor market.

Those answers would be wrong.

In fact, the biggest threat to Americans’ continued prosperity is the growing disquiet about our economic prospects in the face of those challenges, and the economic populism that is bursting out in response to these fears. Democratic presidential candidate John Edwards has distilled those fears into the central message of his campaign, but echoes of his message can be heard in most of the Presidential candidates’ pitches for votes. Certainly much of Governor Mike Huckabee’s meteoric rise in the polls can be attributed to his ability to tap into middle-class fears about the economy’s future.

Edwards’ campaign is built almost entirely on a foundation of class warfare—“the people versus the powerful”—and is chock full of attacks on business, the “wealthy,” and just about anyone who stands in the way of remaking the American economy into a nanny-state paradise built upon government protection and largesse.

Middle class unease about America’s future prospects in the world economy is coming to be a dominant theme in the 2008 elections, no matter who the Democrats and Republicans ultimately choose as their nominees, barring a resurgence of violence in Iraq or another terrorist attack on American soil, of course.

Unfortunately, Americans are woefully undereducated when it comes to the real roots of our enduring prosperity. Since at least the time of the Great Depression, many Americans have been taught that the government somehow “controls” the economy—and that good times and bad have been the product primarily of the economic stewardship of the President and Congress. This is a deeply dangerous illusion for a number of reasons. While it is certainly true that the government—particularly in these times when government spending is such a large and growing part of the economy—can have profound impacts on economic growth, it is certainly not the case that government policy has ever been particularly successful at driving that growth.

In fact, quite the opposite is the case. Government policies have proven time and again capable of slowing economic growth, but with few exceptions they have never proven capable of stimulating the economy in the long term. Even policies that economic conservatives think of as “pro-growth,” such as deregulation, tax cuts and reducing trade barriers are more accurately thought of as the removal of government-created barriers to growth than actual government stimulants to economic activity.

“The economy,” simply put, is not manageable like a machine. It is dynamic, driven by the choices, actions, and desires of over 300 million Americans, and ultimately the billions of people around the world. However frustrating it is to think that our fortunes are hostage to the actions of people across the globe, there is almost nothing positive the government can do to change that fact. We all live on the same planet and are tapping into the same resources to better our lives. It is the inventiveness of individuals and firms that shape those resources into useful products and services that truly make up the economy.

For instance, oil prices have skyrocketed because demand for oil has climbed steadily, particularly in Asia and India as their economies have grown. Conversely, the prices of electronics have dropped precipitously for precisely the same reason, as China in particular has become a manufacturing power due to the adoption of ever freer markets. Continued...