Following President Obama’s reelection last Tuesday, the No. 1 question I’ve been asked by family, friends, colleagues, and even a few philosophical sparring partners is whether America is now nothing more than just another (albeit rather larger) Western European country slouching down the road to economic turpitude while basking in a government-subsidized, debt-fuelled twilight of faded glories.
My short answer to such queries is: “No — at least not yet. And it is not too late to change course.” Let me explain.
Yes, the president’s reelection is reflective of enormous and disturbing cultural and economic trends in America. Millions of Americans do, for instance, seem committed to the expansion of government, either because they have intellectually rejected the free-enterprise system or, to be frank, because they personally benefit from interventionist arrangements. Why, for example, bother going through the hard work of turning around a company (which might involve telling unions that we’re not living in 1974 anymore) in order to compete in the global market, when you can get piles of taxpayer money to produce cars that no one apparently wants to buy? Incentives matter, including the perverse ones.
Nor can we deny the clear parallels between particular developments in America and Europe. Whether it is the welfare state’s growth via Obamacare, the ongoing acceleration of public-sector debt, the demonizing of the economically successful, our declining competitiveness vis-à-vis the rest of the world, the spread of crony capitalism, the obsessive living for me-myself-and-now, or our intellectually corrupt universities (which will surely be the next financial bubble to explode, and good riddance) — all the data suggest that, in important ways, we are on the path to becoming Europe.
That said, I’m not one of those who, in recent days, have seemed inclined to indulge their inner curmudgeon, apparently convinced that it’s more or less game-over for America and we’re doomed to Euro-serfdom. Why? One reason is that, in some very important ways, America is still not Europe. Here are a few of the more pertinent differences.
For one thing, we’re not involved in the grand political experiment of the euro: the altar at which Europe’s political class is apparently willing to sacrifice almost anything in the name of a unified-from-the-top-down Eurotopia. Granted, we have our own problems with a Federal Reserve that’s surely looking forward to a fourth round of quantitative easing as its way of helping the administration avoid the macro and micro reforms that are the only real way to restore American competitiveness — reforms that will upset key administration constituencies (such as those living in 1974).
Our little Fed difficulty, however, can — eventually — be addressed by changing the people who make monetary policy. That’s small potatoes compared with the prospect of a failed currency experiment that’s haunting the EU right now, not to mention the sheer economic dysfunction that efforts to preserve the euro are magnifying throughout Europe.
Second, the strength and persistence of private entrepreneurship continues to substantially differentiate America’s economic culture from that of Europe. America remains ahead — and, in some areas, continues to pull ahead — of most of Europe when it comes to private innovation. As noted in a World Bank report earlier this year, the elements that fuel innovation, such as ease in obtaining patents and availability of venture capital, continue (at least for now) to be far stronger in America than in most of Europe.
The same report specified that it is young firms driving innovative growth in America. Among America’s leading innovators in the Industrial R&D Investment Scoreboard, more than half were created after 1975. They include firms such as eBay, Microsoft, Cisco, Amgen, Oracle, Google, and of course Apple. By contrast, only one in five leading innovators in Europe is young. In America, young firms make up an incredible 35 percent of total research and development done by leading innovators. Their European counterparts account for a mere 7 percent in the old continent. That’s great news for America and a major headache for Europe over the long term.
Third, we need to remember that America’s been here before. You need only read Amity Shlaes’s The Forgotten Manto know just how far America was driven from its economic moorings by Franklin Roosevelt. Then we had to endure the economic disaster of Lyndon Johnson’s Great Society. Yet not even Roosevelt and Johnson could completely overturn the workings of the American experiment in the economy. And twelve years after Johnson left office, Ronald Reagan began his revolution.