In an earlier blog I talked about the fact that there is nothing unusual about ordinary Americans and yet I see young Americans in their late 20's walking down the street who are earning $100,000 a year. What shocks me is that these people have no unique talents as Americans whereas there are countries that have entire populations with more talent appropriate to business. The Japanese are harder working and more conscientious. Germans are more precise and persistent. Israelis and Singaporean are better educated. Israelis are more intelligent and ingenious . Scandinavians are more honest in business dealings. The Dutch and the overseas Chinese are much better at small business.
What makes Americans unique is our institutions. I am going to list seven of them. Each one of the seven will be discussed in a separate blog.
*1) No hereditary elite. At the end of the 1950s the United States was able to eliminate its hereditary social class. No other society has done this. The consequence of this is that meritocratic people in American society are able to rise to the top of management, to the tops of their own businesses and provide us with the strongest most vital commercial society on the planet.
*2) Immigration. We have a fairly open and successful immigration system. It could be much more effective. Canadians and Israelis have better access to the talented people of the world than United States. But what we have is still adequate. Many studies have been done that show how immigrants contribute disproportionately to the success of businesses, especially hi tech and innovative businesses.
*3) Free trade. We have the most extensive free trade system in the world. Economists, for 250 years, have explained how this is the most efficient way of allocating resources in the world and for any specific nation. There were changes in our trade at the beginning of the 1960s. We dramatically increased our imports and exports. This resulted in vast expansion of American corporate sales to a global market and brought competition to hundreds of domestic fields as well as dramatically lowering the cost of goods and services in most American markets.
*4) Weak government. The U.S. is unique in the way its government and governments have been formed. Always from the bottom up. Everywhere else in the world governments created their own new governments and the subsidiary governments. Top down. In the U.S., each locality created its own government which in turn created its own regional agencies and created it's state agencies. These in turn, at the beginning, created the national government.
The advantage of this has been incompetent administration and steady deadlock on critical political issues. It was Mancur Olson who explained the enormous benefits of incompetent or semi-incompetent government. He used the metaphor of a saucer. At the center of the saucer is the realm of anarchy in which business cannot operate. Commerce does exist but businesses cannot grow. They do require laws and stability and recurrent markets. At the outer periphery of the saucer is where the government is too strong and you have tyrants. The tyrants confiscate successful businesses and give them to the tyrant's brother. The United States is and always has been on the relatively flat part of the saucer where the government is semi-competent. This is the ideal place for business.
*5) Union decline and corruption. I have put two institutions together because they have become closely related. Unions in the private commercial world have been on a straight-line decline for 50 years. This is good. Unions have always been harmful to United States business because unions suppress meritocracy and champion poor productivity and low output. Unions now exist almost entirely in government. That is the connection to corruption. Corruption is an attribute of government.
Corruption is necessary because government is often intrusive and incompetent in the marketplace. Unions and corruption are related because today the only happy home for unions is government. It is government that needs to be bribed. A low level of bribery is precisely what business and commerce need. Corruption gets things done for everyone who understands bribery, but it doesn't destroy the actual market when it operates at a low level.
*6) We have fairly strong property rights. People do not carry out innovative projects or take risks in their life unless they can hope to retain the benefits of those risks. Our property rights are superior to most of those in the Latin world and in Africa. They are not anywhere near perfect because we still condemn private property to build irrelevant new structures and we seize private property before a criminal trial.