The Economist's Armchair: A Discussion of American Exceptionalism
"Everyone wants to live at the expense of the state. They forgot that the state lives at the expense of everyone." So posited economist Frederic Bastiat almost 200 years ago. While not credited with any innovative economic ideas that blazed the trail for the discipline's evolution, Bastiat was onto an idea novel even to so many modern minds.
Indeed, Bastiat's definition of the state is one at which so many politicians and economists, especially of the conservative variety, would begrudgingly agree: "The State is the great fiction through which everyone endeavours to live at the expense of everyone else" (Bastiat 1848).
It is far from an uncommon occurrence that Americans, both citizens and leaders, bewail the taxes the commoners are forced to surrender in the name of hoisting up an allegedly inefficient and interruptive government. This is a popular notion among even the most brilliant economists: the government that governs least governs best.
However, in the same breath so many will decry the poor pay of public educators, of the need to subsidize the farming industry, to pave better roads, and so forth. It is as if there exists some world wherein opportunity costs become ethereal and nonexistent, where the necessary tax revenue is drawn from either some fantastical money tree or evil Wall Street banker who treats his millions like chump change.
As may be apparent already, it is not the goal of this contributor to segregate the political and economic spheres of public discourse. While political matters often obscure practical economics, insofar as it is necessary to employ political processes for economic policy, it is impossible to elude their hybrid.
November's election demonstrated most supremely this common grievance over tax policy and its cultural contradictions. The two combatting sides were dueling more over ideas regarding the proper size, scope, and role the government ought to play - particularly in the economy, though as well in the social sphere -than over specific policies and concrete ideas.
This was an unmistakably necessary argument for the American public to endure. "America needs a serious debate about the size and scope of government, and how to pay for it. .. it taxes itself like a small-government country, but spends like a big-government one" (Economist 2012). Perhaps Bastiat was on to something.
It is high time to rethink America's paradoxical persuasion, to reconceptualize the American exceptionalism that allows its citizens to think that they can pay no taxes and still live at the expense of the state. More importantly, what implications these considerations have for economic policy.
To do so requires a comparative analysis that places America in relation to the nation-states around it -not at center stage, but caught, as it is, in the wake of today's global economic challenge.
According to The National Interest:
[American Exceptionalism is] the widespread public belief ... that the United States is uniquely virtuous in word and deed. This axiom derives from our historical democratic perspective and overwhelming power since World War II. Today, it assumes that we are the greatest force for good in the world (Abramowitz 2012).
Often one will hear that America is a "center-right" nation. From high school civics teachers to others parroting the sentiment, it is a commonplace assumption. It is likely that most square with this on the basis of the understanding that America is fundamentally different from the rest of the world. Though there is some truth to that sentiment, there are nuances not often understood. Indeed, America does enjoy her paradoxes.
For instance, social security has been in place for decades in many forms. However, there is a growing "grassroots" movement of constitution-crying Tea Partiers that consider it all some big Ponzi scheme conspiracy. There may be some disconnect here.
Medicare and Medicaid offer help to the elderly and the poor, respectively, so that they may have greater access to health care. However, the second the Affordable Care Act was born, every resource has been heaved first at its legislative dilution and then at its judicial repeal.
Getting beyond the idea that America is the greatest country on earth allows an insight into the rest of the world's take on these matters and on how America handles them. American exceptional ism can mire its citizens in an inability to compare America to the rest of the world on the grounds that the United States should be setting the example for others to follow.
That mindset becomes a problem. Take the healthcare example. According to the World Health Organization, America spends more of its GDP than any other country in the world but ranks 37th in health care. France comes in first. While France spends four international dollars per person on healthcare compared to America's one, its citizens probably spare the hellfire-and-brimstone sentiments on taxes when the government covers 77% of their medical bills (World Health Organization 2000).
France's culture is different, however, and carries its own problems. Their new leader, Francois Hollande of the Socialist Party, campaigned to raise the top income tax rate to 75%. While "Hollande never pretended that the 75% tax rate would raise much cash, but hailed it as a 'symbolic' measure," such a gesture can "bring lasting trouble" (Economist 2013). Entrepreneurs and businesses have threatened fleeing a country they now perceive as hostile to wealth generation. Departing business does not help France's struggling economy.
On the other side of the Channel, England is not too far different from its grandchild. London is one of the world's financial centers precisely because of its tendency towards deregulation of the financial industry. English citizens are not as tolerant of high tax rates as some may
These are valuable lessons. Deregulation and tax reductions can and do encourage business, which does stimulate the economy. The Occupy Wall Street movement was cute but misguided in the sense that corporations and financial markets help hold up the economy. From job-creation to consumption multipliers, the suits of the world play their part.
Not every economic policy costs money. Trade is one area of economics for which many Americans have an exceptionally self-centered, if not delusional understanding. There is a commonplace understanding, however inaccurate, that outsourcing, immigration, and buying from other countries inherently hurts the economy. To be clear, these assumptions are incorrect.
First, outsourcing is not an insufferable ill for the American economy so much as it is an indicator that the national economy is progressing, moving from manufacturing to more developed sectors, like services. Perceiving outsourcing as a grand theft of American employment sees the world from an ethnocentric perspective that fails to understand that those jobs are not only being created for less developed economies that also need them, but that such outsourcing makes the domestic economy more efficient and creates different kinds of employment.
Second, a growing pool of research has been indicating that immigration is a practice with positive economic outcomes. "A change of political tune is badly needed. Evidence suggests that increased flows of people across borders could ignite global growth" (Economist 2012). There are several reasons, but at some point Americans must think twice before blaming immigrants for poor economic growth and start to look inward for ways to maximize the potential wealth to be derived from other countries.
Finally, buying from other countries does not do immediate harm to the American economy. This practice not only stimulates growth in other nations, which comes back to America in a positive way, but it also encourages innovation and efficiency in the U.S. while supporting global growth through trade. Not to mention the fact that many American firms have operations in other countries. That won't be counted in GDP, but it counts in both GNP and building a healthy, interconnected global economy.
Were these global economic phenomena to in fact be immediately detrimental to the American economy, they aid in the long run by helping developing nations evolve. As the world is becoming more and more globalized, interconnected, and interdependent, in the long run a developing economy elsewhere will be in America's best interests.
For economic policies that do require capital, however, a population willing to provide that capital is necessary. Sweden's people exemplify a citizenry that is more understanding of liberal tax codes. "For most Swedes paying high taxes is a benefit, not a problem" (Fouche 2008). While many Swedes do work in the public sphere, there also exists a greater trust in the government to handle the money well, simply because the Swedish government is more efficient.
Such a trust is virtually nowhere to be found in the United States, and for good reason. "A Swede pays tax more willingly than a Californian because he gets decent schools and free health care" (Economist 2013). Politicians use debt ceilings and phenomena like the "fiscal cliff' as means to help them play games of political chicken, as happened in the summer 2011 debt ceiling negotiations. Such a problem exemplifies another structural issue that implicates concerns for global economics.
America's two-party system is often taken for granted by its citizens. Though a considerable aid in providing simplicity to complex political matters, it overcorrects by blurring the nuances to discourse and brightening the imaginary lines between the aisles, making it easier to take sides. The system makes it easier to perceive "friends" and "enemies," which can have devastating results.
For example, the 2011 government shutdown that came from political gridlock over raising the debt ceiling - which should have been a no-brainer - resulted in a downgrade of the U.S. credit rating and a resulting cascade of economic turmoil. Republicans had an incentive to slow negotiations because poor economic times are typically blamed on the president, which would hurt President Obama's reelection prospects. Put in as basic of terms as possible, citizens' livelihoods were used as political poker chips for political ends, and such games played no small part in the relapse of economic hardship.
The two-party system has become so familiar that other modes of operation seem, well, foreign. While they are indeed foreign, multi-party systems are not uncommon. Countries with more than two parties include France, Germany, the Netherlands, Norway, Italy, Ireland, Portugal, and Sweden. Perhaps such a popular model is worth attempting.
As more people become disillusioned with mainstream politics, however, the opportunity arises for third parties to gain greater visibility and, in turn, potential to challenge two-party dominance and introduce a refreshing brand of moderation and iconoclasm. Americans may get so frustrated that structural change occurs. Such a departure from the present standard could move its bickering leaders away from the dysfunctional gridlock that has been plaguing the national and global economy.
America could also afford to learn from other countries in a moral sense. "Unlike some other Western countries, the United States remains an overwhelmingly religious society," (Land 2004) and that influence carries a sense of morality that keeps society from falling into chaos. There are, however, areas of social and moral economics in which America could learn some things from its Western friends.
A religious demeanor carries its own paradoxes as well. The stereotypical American conservative - that liberals just love to use as an example of their archenemy - loves God, guns, and above all, 'murica.' While this categorization is little more than a drastic oversimplification, there remain some inconsistencies that need to be addressed.
Especially between God and guns. That deserves reiteration. There is some inconsistency between the love of God and the love of guns. More than that, it is a truly American inconsistency. The Economist summarized this point as aptly as is possible:
If America is ever to confront its obsession with guns, that time is now. America's murder
rate is four times higher than Britain's and six times higher than Germany's Only an idiot,
or an anti-American bigot prepared to maintain that Americans are four times more
murderous than Britons, could possibly pretend that no connection exists between those
figures and the fact that 300m guns are "out there" in the United States, more than one for
every adult (Economist 2013).
Britain and Germany are not the only ones that could teach America some lessons on social policy. Sweden embodies a juxtaposition with America in one of these more nuanced fields of economics, a social and moral domain: prostitution. Make no mistake, prostitution's implications are not confined to studies of morality and ethics. Economics plays an unmistakable role both in its motivations and its outcome. And Sweden's model provides an example of how creative policy can serve considerable social good.
Prostitution in the United States is illegal, with a few exceptions for select locations. Prostitution is also illegal in Sweden, but in a different way. It is illegal to purchase prostitution, but selling it is legal. Put another way, the policy attacks the demand side of the equation while leaving the supply untouched, a brilliantly simplistic strategy that is proving effective.
This policy allows prostitutes an out. If they were forced into the profession unwillingly or have been beaten by either employer or client, they may go to the police without the fear of getting arrested. In America, prostitutes do not have that luxury (for the most part).
Sweden's policy also makes it so a prostitute is safe if caught, while a customer is not. Such a demand-focused policy serves the moral purpose of slashing the prevalence of the act while not hurting those forced into it. From an empirical standpoint, the policy is actually reducing the prevalence of prostitution.
Comparatively, America's policy - outright illegalization premised on moral outrage - becomes tragically myopic. This moral absolutism clouds an economic analysis that could take steps towards righting some of the ills posed by such perceived indiscriminate immorality.
This brand of economic morality has been controversial. In Freakonomics, the authors employ severe economic analysis to show that Roe v. Wade, the Supreme Court decision making abortion legal, was responsible for the seemingly inexplicable drop in the crime rate during the 1990s (Levitt and Dubner 2005). Peering at the world through the lens of economics is an easily despised practice, and rightfully so in many respects, but it can reveal some telling and helpful information.
So many Americans would like to have their cake and eat it too, to ignore opportunity costs, to tax like a small country and spend like a big one, to maintain Christian morality and stop the sex trade. Such paradoxes are attractive, alluring, and easy, but any introductory economics class will be quick to point out that "there ain't no such thing as a free lunch." There are more factors to analyze than most are ready to accept.
In that same Freakonomics book, the authors discuss the value - or often lack thereof - of conventional wisdom. Perhaps the most ubiquitous of wisdom in American culture is that the United States is exceptional. Comparatively, though, there are certainly some lessons to learn that other countries, cultures, and worldviews offer. It is high time that American citizens expand their vision, and learn some lessons that the rest of the world may be keen to teach.
Abramowitz, Morton. "Hot American Exceptionalism Dooms U.D. Foreign Policy." The National Interest, October 22, 2012.
Bastiat, Frederic. Selected Essays on Political Economy. Trans. Seymour Cain. Library of Economics and Liberty, 1848.
Economist. "A. Bas Les Riches!" The Economist, January 5, 2013. Web.
Economist. "Another Fine Mess." The Economist, July 28, 2012. Web.
Economist. "Border Follies." The Economist, November 17, 2012. Web.
Economist. "Newton's Horror." The Economist, January 2, 2013. Web.
Economist. "The Next Supermodel" The Economist,February 2, 2012. Web.
Fouche, Gwladys. "Where Tax Goes Up to 60 Per Cent, and Everybody's Happy Paying It." The Guardian, November 15, 2008. Web.
Land, Richard. "How Religion Defines America." BBC News. February 25, 2004. Web.
Levitt, Steven, and Stephen Dubner. Freakonomics. New York: Harper Perennial, 2005. Print.
World Health Organization. The World Health Report. World Health Organization, 2000. Web.