The Economy of the Open Road

By Kevin D. Williamson

Thursday, July 09, 2020

 

In the United States, the road to economic success is open because the road to economic failure is open.

 

That’s the basic American proposition: We have an unregimented business culture, easy credit, a forgiving bankruptcy regime, and a “hold my beer” model of entrepreneurship. Sure, we are savages, but we invent basically all the cool stuff. You want to invent cool stuff, too, go to Palo Alto; you want to work in a bank, go to Zurich; you want to be a bureaucrat, go to Toulouse. There isn’t anything wrong with being a banker or a bureaucrat — the world needs both. But the United States is oriented in a different direction, which is why the class of people who want to be nonprofit executives sometimes long for a more European mode of life while the people who want to pound Four Loko and crash their Lamborghinis into 7-Elevens at 4 a.m. prefer the American way.

 

It’s not about class, obviously. For all of our democratic, post-class pretensions, it isn’t the case that everybody in the United States starts from the same place. Not by a damned sight. And that’s what really gets up some people’s noses. Some people believe — the way only fanatics can believe — that any unfairness in a situation or a system morally invalidates the situation or system as a whole. And the basic complaint is pretty easy to understand. Some people have to work really hard just to get to the place where some other people start off with not much effort at all. Some people have to save for years to put a responsible down payment on a house, and some people just get the money from their parents. Some people get their shot at their first big job or big project because they know somebody in the field already, while other people are on the outside looking in, in spite of their talent or ambition. Relationships matter enormously, especially in elite occupations and enterprises. Most people don’t get a big job on Wall Street or in media or publishing because they answered a “Help Wanted” ad. (But those ads in the back of The Economist are pretty awesome.) You can read Chaucer anywhere — you go to Harvard to meet the people who are going to hook you up.

 

And so it isn’t really the case that the United States doesn’t have a kind of class system, though it is by no means the kind of network of rigid and controlling hierarchies that you still see in some other places around the world, including a lot of the countries that many of us admire. If you have two parents who met at Princeton, life is likely to look different for you than if you have two parents who dropped out of high school. But, in spite of that, we do not have much of a hereditary economic elite. Of course we have the usual inevitable smattering of Waltons and Hiltons and Trumps, who go about the business of being heirs with varying degrees of good taste and public-mindedness. But as the Bureau of Labor Statistics runs the numbers, inherited assets and gifts make up only about 15 percent of the wealth of the wealthiest 20 percent of Americans — in fact, inherited assets make up a much larger share of the wealth of the poor than of the rich, about 43 percent for the least wealthy quintile and 31 percent for the next quintile.

 

Of course 15 percent of $1 million is more than 40 percent of $80,000, but that isn’t the point. The point is that the difference in wealth between wealthy and non-wealthy Americans is overwhelmingly the result of work and investment, not of picking the right parents. You don’t get to choose where you start, but the basic tools of prosperity on the American plan are widely available. Americans should make more and better use of them.

 

Almost all of the wealthiest Americans are people who were involved in starting companies, not people who inherited fortunes: Bezos, Gates, Buffett, Zuckerberg, Ellison, Page, Bloomberg, Ballmer, Knight, Adelson, Dell, Musk, Icahn. (The Kochs inherited a small fortune and made it into a vast one.) Among the wealthiest Americans, there are a few Waltons, a Lauder, the Widow Jobs, and the former Mrs. Bezos — and a whole lot of people who started new important enterprises in our own time: Amazon, Microsoft, Facebook, Oracle, Google, Bloomberg, Dell, Tesla, eBay. Those companies have produced a few billionaires, many thousands of millionaires, countless high-paying jobs, and big returns for investors everywhere from Sand Hill Road to teachers’ retirement funds. You don’t need a Harvard Business School degree to make money on Wall Street — you need five minutes to set up an online brokerage account.

 

On the Forbes list, you won’t see very many fortunes based on old companies, though there are a few, including Mars and Kohler. The Hilton fortune has proved surprisingly durable, but other famous fortunes have not: Poor Anderson Cooper, a Vanderbilt, has to work for a living; the Hartford fortune was gone in a generation; Michael Jackson was a half billion dollars in debt when he died. (His estate has since made a nice recovery.) There’s a fair chance that Chelsea Clinton’s grandkids will work at Starbucks. Or maybe they won’t. American capitalism can be a wild ride.

 

We do not have the kind of deeply egalitarian culture that you may see in the Nordic countries, but we also do not have Janteloven, the inescapable informal law of the northern village that demands: Who are you to think you know better? Who are you to try to change things? Who are you to think you’re smarter than we are? That kind of culture may encourage a certain kind of solidarity, but it also inhibits risk-taking and entrepreneurship. That’s why if you look at the list of biggest American companies, you will see names such as Amazon, Apple, and Alphabet, whereas the biggest German companies are thriving creatures of the 19th century such as Allianz and big automotive conglomerates: Volkswagen, BMW, etc. Norway’s biggest businesses are a state-owned oil company, a partly state-owned aluminum company, and a state-owned telecom. France’s billionaires are on-brand: the Louis Vuitton guy, the Chanel guys, the Château Latour guy, the Aga Khan out there in Aiglemont . . .

 

Rich European countries with big welfare states have some very enviable characteristics, among them high levels of social mobility, with Denmark, Sweden, and Norway leading the world rankings on that score. The United States does not do as well, though it outperforms the United Kingdom and big European countries such as France and Germany. The American model — which is as much a matter of culture as a matter of policy — produces more pie-eyed billionaire dreams, but also more actual billionaires and businesses of global significance. Maybe you don’t care about billionaires. I don’t care very much about them, either, but the entrepreneurial dynamism that creates those billionaires matters for the prosperity of people far removed from the commanding heights of Silicon Valley and Wall Street: U.S. GDP per capita is about 20 percent higher than that of Denmark, Sweden, or Germany, as the IMF runs the numbers for 2020, and 39 percent higher than that of France. The United States could — and should — do much more in the pursuit of what the politicians like to call “shared prosperity” (they call it that mainly because they do not understand the ways in which our prosperity already is shared), but the more prosperity you have, the more you have to share.

 

In the great contest between predictability and dynamism, the United States has traditionally leaned pretty hard on dynamism, at least in comparison to the welfare states of Western Europe and the Nordic countries that our progressives profess to admire so intensely. That presents trade-offs, like everything else in life. If you want to have a nice life as a college professor, you’d probably be happier in Denmark, where there is a very comfortable welfare state, or in Switzerland, where universities pay the highest academic salaries in the world. If you want to launch a technology startup or take your technology-startup money and create a new automobile company from scratch — ask yourself this: Who is the big Danish innovator on the Internet? Denmark’s biggest company, by far, is Maersk, a firm whose fundamental technology dates from about 3000 b.c. That is not intended as a snub of Denmark or Maersk — there is a great deal to admire about both. But if you are of a mind to try something radical and new, you get on the airplane in CPH and you land at SFO.

 

Progressives are down on American capitalism because they are the people who are, or want to be, college professors and the like. And, if that’s you, I get why you might prefer Denmark. It’s no mystery. There’s a lot to like about it. But it is not a moral failing of the United States that the political and aesthetic preferences of that blessed class of people do not prevail from sea to shining sea. We do things differently here — bonkers, dangerous, ingenious, beautiful.

 

Steve Jobs you know — how about Yaakoub Hijazi? He took over his immigrant father’s failing commercial-laundry business when he was 19 years old and his father died of cancer. The business had tax and sewer liens on it and was on the verge of insolvency. He had to take out a $300,000 loan to reorganize, and getting a $300,000 loan is something a 19-year-old commercial-laundry neophyte can do here. That laundry is a $150 million concern today, according to Forbes. Lebanon, where the Hijazi family comes from, is a proud old country, but it runs on family and patronage, not big ideas and easy credit. So Yaakoub Hijazi found his success here.

 

Maybe you will, too. Maybe you won’t. Not everybody wins, but anybody can get in the game.