In the U.S. today, two camps are battling for the hearts and minds of Americans. Both enjoy the friendly forum of a 24-hour cable-TV news network to express and promote their views. And both surely overdo it in their drive to recruit voters. Commentators on one side decry every Obama administration idea or program as rooted in some kind of Bolshevik plot. The other side creates the impression that there are no entrepreneurs or business ideas advancing society.
One camp presents a nation "under siege." The other, a nation whose economic system verges on collapse if reforms aren't implemented. Each is a distortion. The U.S. is dealing with a crisis, a severe recession, but it's not under siege. We live in times with serious problems, but so far social conditions don't come close to the problems, divisions and unrest of 1968, let alone 1860.
The warring "dialogue of the ideologues" (using "dialogue" loosely here) sometimes is so noisy that it blots out a far more important point: The inherent advantages of the American economic system itself. It's those advantages that investors -- and all Americans -- should keep in mind as the nation works its way through the current crisis. The American economic system has many characteristics that are reasons for optimism. Here are three:
No matter what some critics assert about "an America that's changed forever" or "an America on the verge of Armageddon," the U.S. remains one of the freest, fairest nations in the world -- and this has led to wave after wave of innovation. Critics speak of an America in the current and future decades not being conducive to business start-ups and entrepreneurs. Tell that to the hundreds of thousands of foreign citizens/businessowners who would jump at the chance at U.S. citizenship. This country will continue to attract talented, industrious, enterprising people from abroad and others pursuing their dreams, and many of these individuals will contribute to the innovation that will revitalize the U.S. economy.
Another characteristic you can trace across centuries is the American economy's ability to adapt, reorganize and find new engines of growth. The early period of mechanization was supposed to lead to economic decline because all the local craftsmen who made things by hand were displaced. The rise of Japan's electronics industry in the 1960s and 1970s was supposed to do the same because the U.S. couldn't possibly survive without a domestic TV and radio manufacturing sector. Now it's the rise of China, India and other emerging nations that's supposed to lead to the great American decline. But investors will carefully note that during each period of structural change, the U.S economy adapted and retooled, workers retrained and new sectors were created where Americans performed value-added jobs.
Another overlooked advantaged -- perhaps because the current recession has reduced its prevalence -- concerns job mobility. Among industrialized economies, U.S. workers are highly mobile. Of course, that has a big downside: Unless workers have a contract, companies can eliminate jobs quickly. But the reverse is also true: Employees can secure employment in better/more suitable positions more quickly than they can in many European economies. True, job scarcity and the excruciatingly high U.S. unemployment rate have reduced this natural flow of talent to its highest and best use. But that flow will increase again once the economy starts adding jobs in a sustained way.
The new U.S. health care system could further unleash this talent pool. Many professionals, blue-collar employees and others stay in their current job, not because it's their preference but because they get employer-provided health care. However, because the new system gives everyone the opportunity to buy health insurance at an affordable price, regardless of preexisting conditions, workers will likely feel much freer to pursue the most suitable employment. That could unlock creativity, increase productivity and spark a new wave of business start-ups.
So when you hear the dueling diatribes on 24-hour cable news shows, it's worth remembering that more people still want to come to the U.S. than to leave it. And that most international investors still consider the country an excellent place to invest their money. The reason is the American economic system itself.
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