Why America Isn't Way Ahead

Tibor R. Machan

In his recent book, Post American World (W. W. Norton, 2008), Fareed Zakaria, host of the disappointingly drab and no longer original CNN TV program GPS (Global Public Square), made some excellent points about how it is with the U.S.A. these days. The central point of his thesis was that America hasn't so much deteriorated, economically and otherwise, but that other countries are beginning to catch up with it now. I myself had compared this phenomenon several years ago to that famous U.S. basketball "dream team" which for a while was way superior to others around the world. In time, however, the national teams of other countries caught up and by now the Americans aren't certain winners at the various international tournaments.

Similarly, the United States, which had been an exceptional country for a long time--despite some of its serious flaws (slavery, military conscription)--is no longer alone in the world with its substantially free institutions. It is no longer the only major country that has a substantially free market economy. Its civil libertarian legal system is also beginning to be replicated elsewhere. And some of the drastically different countries, which had been out and out tyrannies and in which human advancement had been nearly completely retarded, are no longer so different. Take China, for an example, where although much of the old communist ideology is given lip service, the actual economic policies have freed up much of the society's economic energies. Indeed, this is evident in many other countries where there are no fully free institutions but elements of free market capitalism are gradually becoming prominent.

Because the U.S.A. was virtually alone for the better portion of its existence with many free institutions, especially those bearing on economics and the free development of ideas, enormous development occurred here. The immense wealth of the country, as economists like Adam Smith had predicted, arose from removing the government as the primary director of economic affairs. The Wealth of Nations, Smith's famous and path-breaking book that practically invented free market economic science, came out in 1776 and America had followed its advice pretty closely (though by no means fully). In consequence, the country lurched ahead economically, of all others around the globe.

This also produced some undesirable but subtle side effects. The welfare state feature of the American system also grew tremendously; the political power of big labor unions and industries became nearly unchecked so that members could cut some truly awesome (though less than fully voluntary) deals to gain high wages, subsidies, protectionist measures, etc. Indeed, it is arguable that compared to those around the rest of the world, American industries became spoiled. Like the dream team, they could pretty much sit on their laurels.

This is not about whether they deserved it. This is about whether the economic conditions in America made the flourishing of enterprise at all levels quite impressive. The country became the economic model to emulate throughout the world, the economic leader. And this position engendered a great many features of American society that became entrenched, practically fixed. High salaries and wages, good credit ratings, comfortable living for millions, and there-through the envy of the world.

But as other countries started to learn from the Americans, they made progress too, including in their competitiveness with American industry. Given that economic agents around the world had far lower expectations than did American ones, their ability to pose serious competition to Americans grew by leaps and bounds. In time the Americans had to realize that they were no longer able to coast so easy in various areas of the economy and maybe had to tighten their belts, lest they be dispossessed of their economic superiority. The auto industry is a good case in point.

But once people get used to living exceptionally well, it's not an easy thing to say good bye to this advantage over the rest of the world. Great expectations, dreams and all, do get checked by new realities but the mind tends to resist this. And that is where we are now, along with some stupid mistakes made by the ever meddling politicians and bureaucrats who populate our welfare state.

Still, this isn't the end of the world. Once it is acknowledged that the substantially free ride that came from comparatively superior institutions is over, effort and innovation will have to double up and America could well remain on top, though not by default. That is the hope that president-elect Obama ought to be telling us about, not the vague stuff most folks associate with getting a free ride, by way of the largess of the welfare state which is no longer affordable.