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Friday, July 5, 2024

5 Reasons to Celebrate American Dynamism

Dynamists are the engine of the creative destruction that Austrian economist Joseph Schumpeter spoke of.

Image Credit: DALL·E

An electoral year is a time when America’s challenges and shortcomings often take center stage in public discourse. However, amidst the political debates and scrutiny, we should take a moment to reflect on the marvel that is American dynamism. This enduring spirit of innovation, risk-taking, and adaptability has been a defining characteristic of the United States since its inception, propelling the nation to remarkable achievements and global leadership.

To celebrate America is to celebrate dynamism. In her book The Future and Its Enemies, Virginia Postrel identifies “dynamists” as individuals who embrace change, experimentation, and progress. Dynamists are characterized by their willingness to challenge the status quo, take calculated risks, and put their ideas to the test in the free market. They see change as an opportunity rather than a threat, and value the continuous process of discovery and improvement.

Dynamists are the engine of the creative destruction that Austrian economist Joseph Schumpeter spoke of. At the opposite pole we find the “stasists,” who in a desire for stability (i.e., stasis) fear change and favor policies of government control. They are the modern Luddites, who fight trade and technological development, no longer with sledgehammers, but with regulations, taxes, and price controls.

The dynamists are the homo creativus of whom economic historian Joel Mokyr speaks in The Level of Riches:

Economists and historians alike realize that there is a deep difference between homo economicus and homo creativus. One makes the most of what nature permits him to have. The other rebels against nature’s dictates. Technological creativity, like all creativity, is an act of rebellion. Without it, we would all still live nasty and short lives of toil, drudgery, and discomfort.

American pioneers and entrepreneurs were some of the greatest dynamists in history. When we celebrate Independence Day in the United States, it is worth celebrating the rebels, those innovators and entrepreneurs who helped turn the country into an oasis of freedom 248 years ago and who led us away from “lives of toil, drudgery, and discomfort.”

Here are 5 reasons to celebrate American dynamism.

1. Entrepreneurial Leadership

Entrepreneurs drive a market economy. They are those who specialize in being alert to the needs of consumers and finding opportunities for mutually beneficial exchange. America, the birthplace of inventors like Thomas Edison or entrepreneurs like Henry Ford or Steve Jobs, maintains a remarkable culture of entrepreneurship. According to the Global Entrepreneurship Monitor 2020/2021, 15.4% of the adult population was engaged in early-stage entrepreneurial activity, almost double that of the United Kingdom (7.8%). In the same year, despite the decline caused by the pandemic, Americans filed papers to create 4.3 million businesses, up 24% from the previous year. The result of that entrepreneurship is wealth creation. A mere $100 invested in the S&P 500—an index of America’s largest companies—in 1990 would have blossomed into an astounding $2,300 by 2023. This remarkable growth far outpaces other developed markets, where the same investment excluding American equities would have yielded only $510. Furthermore, between 1990 and 2022, American labor productivity surged by 67%, significantly outperforming Europe (55%) and Japan (51%).

2. Unparalleled Technological Development

We can produce more goods and services by applying greater labor effort or by investing in labor-saving technologies. Market economies provide the incentives to choose the second path. As Artificial Intelligence eats the world, the United States stands as the undisputed leader in attracting top-tier AI talent, hosting 60% of the world’s leading AI institutions. The United States remains a leading example of investment in the development of new technologies, funding more AI startups than any other country by far. Between 2013 and 2023, the US funded 5,509 new AI startups, nearly four times the number funded by China, its closest competitor with 1,446.

3. Extraordinary Economic Resilience

Free economies are more resilient to recessionary periods. A recession generates a shock to economic activity and the need to reallocate resources to more urgent tasks. The United States maintains one of the highest rankings in the indices of economic freedom. For instance, it ranks fifth out of 165 countries in the Fraser Institute’s Economic Freedom of the World 2023 Report. Thanks to its level of economic freedom, the United States is able to weather economic crises better than less free countries, which often must tolerate prolonged periods of stagnation.

4. Ongoing Educational Innovation

Thanks to educational dynamists, Americans are experiencing a revolution in schooling. The school choice movement has gained significant momentum in recent years, with eleven states passing universal or near-universal education choice initiatives since 2021. Kerry McDonald, Senior Education Fellow at the Foundation for Economic Education, has worked to advance the growing diversity of educational options available to families, including homeschooling, microschools, and learning pods.

One of the earliest proponents of educational choice was Milton Friedman, whose proposal for school vouchers has been successful outside the United States. (In Chile, for example, there is evidence that the implementation of the educational voucher program improved students’ academic performance.)

The educational innovation movement has also embraced technology, with ed-tech companies like Khan Academy and Coursera continuing to revolutionize online learning. These platforms offer accessible, high-quality educational resources to students nationwide, complementing traditional schooling and supporting alternative education models.

5. Openness to Commerce and Labor

Protectionism is popular, but if there is one thing that has characterized the United States since its beginnings, it has been the adoption of free trade. Trade, functioning as a technology that transforms exports into imports, has been a cornerstone of American prosperity. The US trade-to-GDP ratio rose through the 1990s to the 2000s. This embrace of globalization provided a crucial backdrop for America’s extended period of robust growth in the 1990s and 2000s.

Foreign competition spurred American companies to enhance operational efficiency, while international markets offered expanded growth opportunities. The US has also demonstrated a remarkable openness to foreign labor, with the share of foreign-born workers in the US labor force reaching a record high in 2022. That year, the number of foreign-born workers rose to 29.8 million, a 6% increase from the previous year, compared to just a 1% growth in native-born workers.

While protectionist sentiments persist, the United States has historically championed free trade and openness to foreign labor. This openness has been instrumental in fostering deep specialization, enhancing productivity, and expanding consumption opportunities for all inhabitants, thereby contributing to America’s enduring economic dynamism.

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By recognizing and celebrating these aspects of American dynamism, we gain a deeper appreciation for the country’s unique strengths and potential. This reflection serves not only as a source of national pride but also as a reminder of the importance of nurturing and protecting the conditions that allow such dynamism to flourish. As we navigate the complexities of an election year, let us not lose sight of the remarkable spirit that has consistently driven America forward, inspiring progress and innovation on a global scale. This Independence Day, let us honor the rebels and entrepreneurs who have propelled the nation forward, transforming it into a beacon of freedom and opportunity.