Conclusion: American Distinctiveness and Private Wealth

This raises again the crucial point: How is it that America has avoided becoming a providential society? Surely we are affluent enough that, long ago, we ought to have begun building postindustrial walls around our prosperity, ought to have begun to fear progress, competition, to worry more about losing what we have than about producing ever more; we ought to have reduced our military spending and avoided confrontations that might endanger the lives of our citizens. America ought, in short, to have led the headlong rush into providentiality, but we haven't. Well past two centuries old, America acts more like a young economic stallion, posting economic productivity numbers that look suspiciously like those of emerging economies, demanding ever more, not less, competitiveness from our corporations, expecting ever smarter work, ever longer hours, from our workforce. And no one on earth has the slightest doubt that, when freedom is attacked, America will respond swiftly and massively, and that the cost in dollars—and, unfortunately, in lives—will be paid as necessary.

Far from succumbing to providentiality, America, even in the minds of its detractors, seems if anything to have evolved too much in the opposite direction: We are too aggressive, too independent-minded, too bold, “interventionist bullies with no regard for the sovereignty of [other] countries.”²⁸ America, it is argued, ought to grow up, to settle into a kind of sociopolitical middle age, to become softer, more malleable, more predictable. This is, after all, what has happened in every other advanced postindustrial free market democracy. Why hasn't it happened in the United States?

Continuing American vigor is accounted for principally by the ongoing competitive spirit that animates a society in which virtually anyone can become rich by doing something spectacularly useful for the broader society. If that spirit were to become constrained by political or cultural mechanisms, America would rather quickly come to resemble its European cousins. In order for the lure of wealth to be meaningful, America must be willing to tolerate the consequences of competition, including the possibility that some people will lose in that competition and including the possibility that some people will become very wealthy.

Most free market economies long ago placed serious constraints on the ability of citizens to prosper. In effect, these societies have said, “Up to this point we want you to work hard and work smart, to ensure that our society remains competitive. But beyond this point we want you to stop working hard and working smart, and if you don't we will confiscate the fruits of your labors.” However well motivated this approach might be, it simply can't work. One reason it can't work is because the truly spectacular ideas that drive civilization and that lead to dominance are invariably snuffed out by economies that confiscate wealth above a certain point.

More fundamentally, no society can know at what point the trade-off between the desire to “eliminate the rich elite” begins to conflict with the desire to remain competitive. Sure, we could go ahead and place Bill Gates and the Wall Street titans into the category of “Evil Rich to be Liquidated.” But what about Dan and Eve Eckels, who used their (paltry) life savings to organize the Eckels Steel Fabricating Company in 1950 and sold it for $45 million in 1998? Eckels Steel Fabricating Company didn't have anything like the impact on national productivity and competitiveness that Microsoft had. But the Eckels Company did have an important impact on competitive conditions in its own industry (which is why it flourished), and, whereas there is only one Microsoft, there are thousands of Eckels.

The fact is that constraining the fruits of hard and smart work have the same effect on a society as trying to blow up a balloon that has a hole in the other end. Competitive societies recognize the contributions of the Bill Gateses of the world by showering them with billions of dollars, and competitive societies recognize the contributions of the Dan and Eve Eckleses of the world by showering them with millions of dollars. And so on in a seamless parade of extraordinary contributions to remarkable contributions to useful contributions to no contributions to negative contributions.

It is only a kind of shorthand, therefore, to say that America dominates other free market economies because of the contributions of wealthy families to its competitive spirit. The profuse creation of private capital through the intense pursuit of the best business ideas is what distinguishes America from other capitalist systems. The possibility of becoming wealthy motivates millions of Americans to take risks and to work harder than they would otherwise be inclined to do—and than they would do if they lived in other countries.

Moreover, the competitive spirit that animates the most successful Americans creates a culture that is internalized by almost all Americans, even those who have virtually no chance of becoming wealthy. In an open society, citizens will eventually internalize the values that they observe to be legitimate and valuable. If a society claims that it wishes its citizens to be competitive, but then discourages the pursuit of wealth (via taxation or cultural disapproval, for example), citizens in that society will internalize not the message to be competitive, but the message not to be too competitive. As the most successful people in America become rich, other citizens observe the legitimacy of that activity and its value to themselves, and they internalize the competitive spirit that led to those riches. At length, all of American society is permeated with the spirit of hard work, smart work, competition, and progress. Other societies can only watch in astonishment.

If the sheer economic vigor of a society were the sole measure of its success, that would be the end of the story. We could all see clearly that America's economic success is driven by the wealth creation process, and that the possessors of that wealth are the key to understanding American competitiveness. But the lure of wealth and its impact on economic vigor is only half the story. The other half is the creative use of private capital after it has been earned. Let's turn to that subject in Chapter 2.