Why is the us economy so successful
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
