The Magic Sauce of American Economic Dynamism Is Not Based on Personal Greed

Without doubt the United States of America is an incredible nation.

Many successful Americans, along with those that “made it good” in America, talk about a “magic sauce” that has created the economic dynamism that drives American business and society. One of the greatest proponents of there being a “secret sauce” is Warren Buffett, widely regarded as the greatest investor of all time, whose confidence in the US economy and society is often relied upon in challenging times such as during the stockmarket turbulence heralding the Global Financial Crisis or The Great Recession.

In this essay I do not dispute the existence of special characteristics that made the US economy the envy of the world which might be defined as a “special sauce”. I question what is the character of that “special sauce”.

The US became the predominant power at the end of the Second World War when Britain knew it had no chance of winning without the assistance of the US. By the conclusion of WW2 there was no doubt which country was the dominant power in the world, and with the fall of the Berlin Wall it became clear that there had been no real competitor to that hegemonic status. The feats of the American nation need no repeating – they are very well understood throughout the world.

All peoples throughout the world are familiar with US society through various media. It is accurate to say that for many, via this saturated channel (television, movies, music, sports, newspapers, internet, etc), they understand American culture second only to the culture in which they live.

I have never lived in the US, and I have not spent more than a few weeks at a time there. What I have observed during those visits largely confirms the perceptions that I have gathered through the media.

We in anglophone countries tend to take even greater notice of American culture and trends because what takes place in the US affects us. The media saturation means that the cultural influence is enormous especially on our youth; our need to maintain ties for security reasons ensures that we are certain to support the US on major security operations including major conflicts; and our business and political ties are so great that trends emanating from the US are certain to arrive at our shores very quickly indeed. 

Thus what is occurring in the US today is likely to become our reality tomorrow.

The inequality in society that is occurring in the US is quite alarming with rich becoming richer and the middle class being hollowed out as the owners of capital (the already wealthy) have long been taking a greater share of profits than the workers. The rate of income increase from senior executives has also outstripped that of “ordinary” workers by several orders of magnitude. And the response to The Great Recession (GFC) has made the wealthy vastly more wealthy.

The Wikipedia page on Wealth Inequality in the United States provides stark reading.

This trend has made a position in the American middle class very precarious. We frequently hear stories of how the low level of Government-payments, a mix  of minimal health and employment or social support financing, means that all middle class American families are just one serious illness, marriage breakdown and/or recession away from homelessness.

It was unfathomable to me, as an Australian who has enjoyed the benefits of a free quality public health system for my entire life, to comprehend how those on the right of politics were able to mobilise some of the most financially precarious Americans to rally against President Obama’s health care reforms. In other words those that stood to gain the most from the measure became the foot soldiers for having it minimised and then reduced. How on Earth did that come about?

The only conclusion that I can reach is that it is an indictment of the degree of anxiety these people felt because of their financial and societal precariousness. It could only be that they have become so used to having social supports stripped from low and middle-class Americans through their lives that they could not countenance a Government actually seeking to improve support. Sadly, it is the most vulnerable – those anxious skeptics – that are most susceptible to misinformation campaigns. Consequently they lost a rare opportunity to have their social support significantly strengthened.

Citizens of other western countries are often confused by why the US is upheld as the country that an aspiring migrant would want to go in the hope of entering the middle class. Perhaps it is a testament to the brilliant selling job the media, or “the market”, has done on espousing the virtues of the US culture.

Sure, if you want to be super wealthy, then it is the best place to go in the world. European old money is not highly regarded and anybody can make it big in the US. But on a balance of probability and risks – to attain a comfortable level of financial security for your family enduringly – then it is one of the least desirable developed nations to seek to migrate in comparison with other Anglophone or European nations.

Current affair programs showing the emergence of the working poor with tenuous accommodation and people getting paid for their blood (which they do several times a week for their survival) is a stark reminder of a harsh existence for many in the lower classes.

For a while I thought that this harsh reality, juxtaposed by the ostentatious displays of wealth by the one percenters holding up the promise of what is on offer to those who find their own perfect mix of hard and smart work, might be what was the base recipe for that magic sauce. I suspect that it is the common perception that it is, based on my observation of how anybody who believes in a fairer society in America is immediately attacked for being a “socialist”.

Then I read Rutger Bregman’s book “Utopia for Realists” and I learned that US society was very different 50 years ago – which encompasses at least the 20 years that followed it being recognised as the mightiest nation on Earth, able to swing the outcome of the toughest war of the last 600 years and land humans on the moon.

In the late 60s the US almost implemented a Universal Basic Income (UBI). It is almost surreal to consider that the developed country with the most precarious middle class, with weak national social safety networks, might have introduced what might be considered the ultimate social safety program 50 years ago!

The virtues of a UBI are only just beginning to be discussed again, and unfortunately it is such a great departure from what has occurred over the last 50 years in the US that even many Democrats simply can not fathom how it could work. I heard Larry Summers talk about his view of how Americans need to work for a sense of self worth. Well, as Bregman discusses, just because people do not need to devote as many hours to income-generating activities does not mean that they will be idle at other times!

Bregman details the history of the UBI debate in American politics in the late 60s and highlights that both sides of politics supported its introduction. In fact, it was the Republican President Nixon that first supported its introduction, and the only reason it failed was because the Democrats felt it did not go far enough!

It is amazing to then consider how far American culture and beliefs have drifted since the late 1960s.

Undoubtedly there will be much propaganda thrown at why a UBI “cannot be done”, as there has been for two centuries. Finland’s recent trial will be highlighted, especially the decision to end it because impacts were minimal. Anybody inclined to accept that as proof that it should not be implemented in the US should compare the standard social safety network within Finland and the US. The issue in Finland is that its social safety network is already about the best in the world – in part the reason for why they were so open to testing an actual UBI – so strong, in fact, that the benefits of the UBI were difficult to detect. Still, when it begins to be implemented elsewhere, they will still go ahead and implement, of course.

In the 80s there was the emergence of the Gordon Gekko “Greed is Good” credo. While Oliver Stone put his finger perfectly on the emerging trend, and Michael Douglas and Charlie Sheen brought the characters to life so luminously, it was far from sufficient to bring the trend to screeching halt. In fact, perhaps it was swallowed in some way by the middle class that thought it was worth putting at risk enduring security for the chances of untold riches.

Then again, I don’t know how it happened. I am not here to speculate on that.

But what I am pointing out is that the greed of the 1% and the vulnerability of the 99% was not in any way the magic sauce that made the US the dynamic superpower that was so strong as to become the hegemonic state 80 years ago.

Moreover, the drift in American society over the last 50 years – since the late 60s when there was a political consensus on the benefits of a UBI – has most likely weakened that magic sauce.

As well as the rightful push back on China’s emergence as a global power, while it remains autocratic and suppresses its peoples, the US needs to admit that it has allowed itself to weaken by its own lack of societal progression.

Anybody who truly wants to “Make America Great Again” must pick up the momentum towards the course that was in place until the 70s and begin to work on a truly inclusive and open society.

One person who I would feel confident would agree is Warren Buffett because he has regularly argued over the last decade or more that he and other wealthy people should be paying far higher taxes than they currently do. Perhaps, instead of just using Warren at times of national anxiety, the roof should be repaired in the fashion Warren suggests before it rains.

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© Copyright Brett Edgerton 2020

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