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America’s Exceptional Economy (Episode 1)

hi I'm Ed lazier I'm a senior fellow at

Stanford's Hoover Institution I believe

that America is exceptional and here's

why I remember as a young child my dad

telling me that like all Americans we

were individuals we could do anything we

wanted this is the land of opportunity

but while most Americans may have heard

that from their parents when they were

growing up that message is not a

universal one when I conveyed my

father's words to a European colleague

she said really we were told exactly the

opposite our parents told us don't think

you're so special you're not so special

is America special are we exceptional

part of the answer is revealed in the

growth of GDP for various countries over

time going back to the 1820s not

surprisingly our political parents the

British had led the world in terms of

GDP per capita but that changed over

time we caught them in eventually after

World War Two we started to pull ahead

quite significantly so that in 2010 we

were 28% richer than Britain 22% richer

than our Canadian counterparts and 65%

richer than Italy well quite a bit

wealthier than most of the other

countries with which we would compare

ourselves and that is why we are

exceptional despite all efforts to the

contrary

the American economy has been robust the

US growth rate during the last four

years during their recovery has been 2%

why do I say efforts to the contrary

well in terms of public policy we've

raised taxes on capital which virtually

every economist who studied this thing

thinks is the worst possible thing you

can do for economic growth and we've had

significant increases in what most would

think of as non business friendly

regulations

despite that we've managed to grow to be

among the world leaders we're better

than Germany better than Japan better

than France certainly better than Italy

what this tells us is that the American

economy is resilient as measured by the

outcomes that people care about the

first thing we care about is earning a

good living having a good source of

income a standard of living that's high

enough to allow us to live comfortably

the second thing we want is job security

freedom from the worry that our source

of income is in jeopardy third factor is

the desire for our children to be able

to

better than we did I think we all share

that aspiration even if we don't think

that it's necessarily going to be the

case what we want is the ability for our

children to be upwardly mobile in our

society the American economy in terms of

income has done quite well in terms of

growth it looks pretty good how about in

the job security front one indicator is

average unemployment rates over about

the last thirty years the unemployment

rates in the United States on average

have been lower than just about every

comparable country in the world

the one exception is Japan Japan has

very low unemployment rates and it's

fair to ask why aren't we beating them

at the risk of sounding a bit like an

American apologist I'd say that there's

such a thing as too low an unemployment

rate Japan has a kind of stagnant impact

at labour force that doesn't churn

enough that's not the case in the u.s.

we have low unemployment rates despite

the fact that we have the most dynamic

labor market in the world most American

children actually do better than their

parents despite the rhetoric and fears

to the contrary according to a data set

called the panel study of income

dynamics 84 percent of children in real

buying power terms which means

accounting for inflation are earning

more than their parents 93 percent of

children in the lowest quintile that is

people whose parents were born in the

bottom 20% do better than their parents

if you start out at the bottom it's

easier to rise to the top but even among

those who were born in the top 20% 70

percent of those children do better than

their parents that's pretty good in

terms of mobility is it possible for

Americans to move up or are we stuck

where we were born the answer is that we

move up very successfully of the people

who are currently in the top 20% of

earners in the United States 60 percent

came from families that were in

quintiles other than the top 20% the

majority of people who are at the top

now were not living in families that

were at the top when they were growing

up it's also true that the majority of

those people who are born into families

in the lowest 20% will escape that

category

to be fair America has been criticized

for some lack of mobility across

generations

and this is particularly true within

certain communities especially among the

poorest individuals in our society

there's some tendency to get locked in

but most of the income is not explained

by where you were born

that's not exceptional it's true in

other g7 countries as well for example

in Canada the leader in mobility 95% of

income is not determined by parental

income that means that factors other

than parental income account for 95

percent of personal income in that

country in the United States that figure

is a lot lower but it's still 78 percent

this means that almost 80 percent of the

variation in income across America is

determined by factors other than

parental income the bulk of where you

end up in this economy is independent of

where you were born in terms of your

income or your status despite the fact

that we're not doing quite as well as

some other countries in this measure we

actually do very well in terms of

mobility and the truth is so do most g7

countries now I believe the best

indicator of whether we are exceptional

is the market test are people buying our

products do people who want to come here

look at the length of the queue of

people waiting for green cards relative

to the number of green cards issued over

the past 5 years or so what we see is

that four times as many people are in

the queue for green cards as are

actually issued one in any given year we

are without question the place that

people want to come to the evidence for

that is the fact that this is the

toughest country to get into or

certainly one of them a survey of

Europeans asking in which country they

would prefer to work found that for the

plurality the answer is the United

States with the UK second followed by a

variety of other countries but we don't

tend to see on that list of countries

like Russia or China even Brazil is on

their beat Russia and China which are at

the bottom we're the team everybody

wants to play for we're the people you

want to hang out with if we are market

oriented and we believe that people put

their money where their mouths are this

is telling us that we are exceptional

you

you