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The Secret of American Wealth

Written By Geoffrey Pike

Posted January 21, 2014

wealthhWhile the U.S. has been in a period of slow growth lately, there is no question that Americans are the wealthiest people in the world, at least when considering major countries. It is possible that a few small countries such as Switzerland and Hong Kong may have more wealth per capita.

There’s a lot of misunderstanding about the reasons for this wealth and it spreads across the political spectrum.

The left simply does not understand capitalism and therefore cannot understand the reasoning for great wealth. Some, like Obama, attribute it to government. But this doesn’t make much sense, because there is government activity in virtually every country in the world. The only way this reasoning is possible is to say that the U.S. government is somehow more efficient, wiser, and more benevolent than all of the others.

Many on the left will say that Americans are rich at the expense of the rest of the world. They will say that Americans consume the greatest percentage of the world’s resources. Actually, it is true that Americans are the biggest consumers, but they are consuming things that have either been produced by Americans or have been obtained through trade.

This is really where the left fails to understand capitalism. They think the only way someone (or some country) can get rich is at the expense of others. They do not understand the basic concept that we don’t live in a world of limited wealth.

They do not understand that wealth can be increased through increased production. They think that there is a wealth pie that should be divided up equally (unless they are talking about themselves). They think the pie can’t grow. They think there is limited pie to go around. They don’t understand the pie will grow under capitalism.

Now, there are also those on the left who think that America is wealthy because of the American empire. They think America is rich from occupying other countries and stealing from them.

These people aren’t completely off base, but they are mixing cause and effect. The only reason that the U.S. government can have such an interventionist foreign policy is because it has a lot of resources to draw from. This is because of American wealth. But it would be a huge mistake to think that wars and occupations are any kind of a financial benefit to Americans. It may be a benefit to certain sectors that make military equipment, but as a whole, it is a net loss for Americans when the government tries to run the world. Does anyone really think that the wars in Iraq and Afghanistan have been any kind of a financial benefit to the American public?

On the other side of the coin, some conservatives, and even some libertarians, mistakenly think that America is wealthy because of the great freedom that we have today.

While there is certainly still some semblance of a free market in the U.S., it is far away from what it once was. Overall, the gap has narrowed, if not closed completely, between the U.S. and many other major countries. Is there really much difference between the U.S. and Canada, New Zealand, and Australia?

In fact, in terms of economic liberty, countries like Hong Kong and Singapore are far freer than the U.S.

I think some people forget to remember the history of the U.S. The 19th and 20th centuries saw phenomenal growth. People living in the year 2000 would have had almost nothing in common with people living in 1800. The difference in living standards is amazing. People living in 1800 would have had far more in common with those living 2,000 years before them.

So, during the last two centuries, Americans created an amazing amount of wealth. It is incredible what compounding growth does over time. And while the U.S. is no longer as free as it once was, Americans have been able to keep most of their wealth and even continue to grow it, even if at a much slower pace.

In conclusion, capitalism should get credit for Americans being relatively wealthy. But it isn’t so much the capitalism of today, as there is a lot less economic freedom than there once was. Instead, we should credit over two centuries of capitalism, along with an entrepreneurial spirit that still remains today, even if to a lesser extent.