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America’s Last Great Asset

By Vedran Vuk

The rest of the world loves to berate Americans with endless insults: obese, ignorant, and uneducated. To some extent, they’re right. Our education system is pitiful, and I won’t comment on the obesity statistics. We all know the story there. But there’s one characteristic where Americans dominate the world intellectually: economic philosophy.

Many U.S. citizens are remarkably well spoken on matters of free enterprise versus big government. I’m not claiming that everyone digs through Hayek, Friedman, and Mises, but certainly more of the population understands basic concepts than most nations. As one example, consider think tanks and free-market organizations. Where are biggest and most important ones located? In the United States, of course…there’s the Heritage Foundation, Cato Institute, Mises Institute, FEE, FFF, the Independent Institute… I could go on and on. The United States is the intellectual light tower for the world on free-market issues.

And it’s more than just these institutions. I’ve met amazing Americans from all walks of life who really understand markets. From salt-of-the-earth farmers to high-brow professors, our society has a better grasp of free enterprise in general.

For most countries, politics is simply a struggle between party XYZ versus party ABC. The voter chooses XYZ in favor of superior benefits to ABC’s offer. Though the parties still identify themselves as Left or Right, they are in reality choices between the moderate Left and radical Left.

In much of the world, politics has been boiled down to its purest form – simple redistribution.

While the average American might be lacking in geography, science, and mathematics, the rest of the world is full of economic ignoramuses. Our citizens aren’t spitting images of Adam Smith but are still far superior to the competition. Few foreigners even understand the success of the United States. Many believe that America’s wealth comes from either exploitation or sheer luck. Some may name capitalism, but few will define it accurately.

Instead, what you’ll hear throughout the world is usually a blame game to explain national economic failures. “Oh, if we could only get rid of Chavez. If only the people ran the government.” And, always the favorite excuse, “If only our government weren’t corrupt, we’d be like the United States or Switzerland.”

I’ve even met Venezuelans who were pro-socialism but anti-Chavez. This sort of political and economic ignorance is hardly uncommon around the globe.

Countries in the Eastern Bloc are another good example. When the Berlin Wall fell, they had an opportunity for absolute freedom. But quickly the population demanded the same old socialist policies. Despite the obvious failures of communism, socialism still thrives. The government programs have grown, and expenditures have exploded. The debt-to-GDP levels for some of these young countries are astounding. Their political philosophy follows the same Chavez symptom mentioned above in a different format. People will speak harshly of communism’s past while supporting today’s socialist policies.

America’s limited-government tradition is its greatest asset. And thanks to history, this heritage will be hard to destroy. Every American student still learns the anti-tax and anti-government origins of the American Revolution. Further, other historical periods reinforce the anti-government spirit, such as the Wild West and the Civil War. Unless history books are burned, the anti-government element will always remain intact to an extent.

Our political process utilizes this historical link all the time. Just look at the Tea Party crowds dressed in Revolutionary War outfits. Or think about free-market political speeches that recall the Founding Fathers. You couldn’t make the same speech in Colombia, Kenya, or Russia.

But unfortunately, America’s limited-government tradition has also become its Achilles ’ heel. With the world’s endless purchases of U.S. Treasuries, no one keeps a check on our political system. We’re simply expected to continue being the same old world engine of growth. Sometimes pressure is more valuable than historical precedence. No matter how confused the Greeks may be on economics, they get the idea when the international community smacks them over the snout with a rolled-up newspaper.

With an endless supply of loans from the rest of the world, no one has forced us similarly to get serious. Hence we’ll ride the big government gravy train as long as possible. We’ll need more than the small Greek changes to solve America’s inevitable problems. Because when the international community abandons U.S. Treasuries, our smack won’t come from the rolled-up sports section but instead from the whole Sunday edition.

Hopefully, our political traditions will come to the rescue. They’re our last hope in the end. And whether investors in Treasuries know it or not, this tradition is exactly what they’re betting on. There’s nothing else on America’s long-run balance sheet worth a dime.