Tuesday, April 10, 2012

“Is American Decline Inevitable?”

Sydney M. Williams

Thought of the Day
“Is American Decline Inevitable?”
April 10, 2012

The financial and credit collapse of 2008 has been equated to the fall of the Wall in 1989, in that the latter led to the end of Communism, while the former is seen by some as a precursor to the decline of capitalism and America in particular. It was the former that prompted Rahm Emmanuel to declaim: “A crisis is a terrible thing to waste.” Twenty-three years ago Francis Fukuama wrote that history had ended with the victory of economic and political liberalism over communism; history continues to evolve, and always will.

The rise of a mercantilist China is seen by some proponents of American declinism as the wave of the future. By some, it seems preferable to the harshness of capitalism, with what are claimed its financial disruptions, wealth and income disparities, high unemployment and polarized politics. In part, this represents a failure of the press to report the cronyism in China. In part it reflects ignorance of our country. No society has ever allowed so many to participate in the fruits of economic growth, as has America. No society is completely fair, nor would we want it to be. Disparities in abilities and desire translate into differences in wealth and income. Seven of the top ten on the Forbes 400 hundred list come from countries other than America. The desire to succeed knows no borders. The Oligarchs of Russia have nothing on the new Mandarins of China.

Two major factors caused enormous change around the world in a relatively short period of time. Capitalism bested communism and the internet revolutionized communication. Liberalism opened minds and encouraged free trade. The internet permitted the spread of ideas, allowing competition to become global – not only in goods and services, but in people. While the U.S. retains more than half of the world’s top universities, the competition has become more intense. According to the U.S. Census, there are about six million high school seniors. That number can be multiplied by 20 to determine approximately how many young people globally are reaching maturity each year. The competition is becoming increasingly intense. One advantage the U.S. has is that by 2020 it is estimated that America will be younger than China.

There are those that complain that these factors have resulted in laissez-faire economics running wild. There is some truth to that allegation. A few smart, creative, adaptable and aspirant individuals have been able to make millions of dollars, while millions of people, less able or less ambitious, have found the adjustment difficult. It was curious and ironic for President Obama to accuse Representative Paul Ryan’s budget as “thinly veiled social Darwinism.” It was curious in the sense that technology, liberalism and globalization have served to release a sense of natural selection, not in a racist sense, but in the concept that the best people, with the most innovative ideas, will challenge the status quo. It was ironic, in that Mr. Obama, who generally looks upon his opponents as relics of the past, is suggesting they are carriers of the future.

Social Darwinism does not fit with those, like Mr. Obama, who believe government supersedes the individual. Richard Hofstadter, generally considered the author of the term, wrote that “attempts to reform social processes were efforts to remedy the irremediable, that they interfered with the wisdom of nature, that they could lead to degeneration.” While some critics took the President’s use of the term as calling Paul Ryan a racist, I see it more as a part of the most important debate of our age – whether power devolves to the state or the individual.

The effects of these seismic shifts have been notable, benefitting the talented, the educated and the flexible. These shifts have widened the income and wealth gaps. But these gaps are often ephemeral. Success today does not guarantee success tomorrow. For example, three companies dominated the cellular phone business five years ago – Research in Motion (RIM), Nokia and Motorola. Combined, they accounted for 64% of the industry. Today, two companies – Apple and Samsung – dominate the industry. In 2008, electronic books accounted for 0.6% of total trade book sales; in 2011 they represented 18 percent. In October 2008, 8,000 apps were available for mobile phones; today there are more than a million. Facebook users rose from 10 million in 2006 to 800 million last year. In this morning’s Wall Street Journal, there is a story of Instagram, a mobile app company which was sold to Facebook for a billion dollars eighteen months after it was launched. The point is that in an ever changing world there are literally millions of opportunities for the creative, entrepreneurial individual.

Unions did a great job of protecting workers in a static world, and there are those who pine for a past when the UAW provided life-long employment with high salaries and great benefits to hundreds of thousands of men and women. But we live in a dynamic world of constant change, filled with risks and opportunities; thus the union’s relevance has been lessened – everywhere, that is, except in government where unions have undermined creativity and aspiration. Governments attempt at harnessing this creative spirit will prove futile at best and at worse will ensure America’s inevitable decline. Consider the differences between the development of solar power and natural gas. Which energy source is most likely to play the more important role in our economy over the next ten or twenty years? Which is being supported by government and which is being funded by private capital?

Government can, though, help the process. The single most critical sector for any individual’s future success is education. Too many public schools in our country are run for the teachers and administrators and not for the students. That must change, in order that opportunities become a viable option to the youth of our nation. Government can encourage small businesses through programs such as the JOBS Act (Jumpstart Our Business Startups Act.) Through the tax code, it can encourage investment. If one wants to call this social Darwinism, so be it. To me it looks like an exciting, meritocratic world filled with opportunities. Barron’s had a fascinating article in this past weekend’s edition. They researched the four hundred highest-income taxpayers over the past seventeen years. Only four (one percent) were on the list for all seventeen years. Just 27% of the filers made the list more than once and just 15% more than twice. Contrary to what Mr. Obama and the mainstream press would have us believe, the U.S. has not created a new class of moneyed aristocracy. The internet and the rise of liberal politics have unleashed the power of the creative individual. People, money and ideas are in flux, just as they should be.

Balanced rules and regulation are always necessary and we can debate their extent and their stringency. We can only function as a nation of laws; government must aid, not inhibit, development. A government that creates dependency is one that ensures that the mass of the people will remain uneducated and poor. No two people are the same. There is no way of ensuring parity or fairness in outcomes, but we must allow equality of opportunity. Should we substitute the collectivism of big government for the creativity of the individual, the skeptics will prove prescient. On the other hand, should American exceptionalism be permitted to thrive, talk of declinism will be remitted to the dustbins of history.

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