Notwithstanding the fact that even the much respect magazine, The Economist, now admits to America being a Ponzi scheme (a troubling development), let's see an opposite view to this morning's take by Eric Sprott

 
In this article, the magazine argues that the key ingrediant for long term success of any Ponzi - that is new investors - is the key reason the U.S. can keep the balls juggling for a very long time.  One might take issue with this thesis as many policies of the past decade, along with the associated future costs (higher taxes in the future without associated benefits many Western European socialist countries may offer) might make the US less appealing of a destination.  Not to mention the dearth of job opportunities outside of the public and pseudo public (healthcare, education) sectors.  [Sep 21, 2009: USA Today - More of the World's Talented Workers Opt to Leave USA] [Dec 23 2009: WSJ - With US Opportunities Dim, Expats Return Home]  But it's good food for thought and one should always look at both sides of the story as circumstances in 5-1 years could be different than today.

  • Joshua Lee sits on a sofa and explains why he likes living in America. He grew up poor: his father was a day labourer. He did his military service on an American base in Seoul, where he polished his English and learned to like hot dogs. He moved to America in 1990, when he was 27, to study theology in Kentucky. He painted houses to support himself.
  • He met his wife, a Korean-American, and moved to northern Virginia, home to a hefty cluster of Korean-Americans. Eventually, he found a job writing for a Korean-language newspaper about Korean-American issues.
  • When he arrived, Mr Lee was astonished by how rich nearly everyone was. He recalls his first dinner with Americans: the huge bowls and immense portions. He was startled to see lights left on in empty rooms. He is still impressed: “The roads are so wide, the cars so big, the houses so large—everything is abundant,” he says.
  • Yet this is not why he came, and it is not why he stayed and became a citizen. For Mr Lee, America is a land that offers “the chance to be whatever you want to be”. More prosaically, it is a place where nearly any immigrant can find a niche.
  • ....he never liked the way his neighbours in Korea stuck their noses into each other’s business. Everyone knew how you were doing in school. You could not get a good job without connections. There was constant social pressure not to lose face. When Mr Lee went back to visit, he remembers slipping into the old straitjacket. He wanted to pop out to the corner shop, but realised he would have to put on a smart shirt and trousers, despite the intense humidity. What would the neighbours think if they saw him in shorts and flip-flops? In America, no one cares.  In Korea, he says, to express an unusual opinion is to court isolation. In America, you can say what you think.

A nation of immigrants:

  • Because America is so big and diverse, immigrants have an incredible array of choices. The proportion of Americans who are foreign-born, at 13%, is higher than the rich-country average of 8.4%. In absolute terms, the gulf is much wider. America’s foreign-born population of 38m is nearly four times larger than those of Russia or Germany, the nearest contenders. It dwarfs the number of migrants in Japan (below 2m) or China (under 1m). The recession has dramatically slowed the influx of immigrants and prompted quite a few to move back to Mexico. But the economy will eventually recover and the influx will resume.
  • Nearly all Americans are descended from people who came from somewhere else in the past couple of centuries. And the variety of countries from which immigrants come—roughly all of them, and usually in significant numbers—is unmatched. No matter where an immigrant hails from, he can find a cluster of his ethnic kin somewhere in America.
  • In a European country, if you want Korean food and a particular denomination of Korean church, you might find it in the capital but you will struggle in the suburbs. In America, it is easier to find just the niche you want: Polish or Vietnamese, metropolitan or exurban, gay or straight, Episcopalian or Muslim, or any combination of the above.
  • People move for a variety of reasons. Alejandro Mayorkas, the head of the United States Citizenship and Immigration Services, cites two. People come to America, he says, either because they yearn for freedom or because they are fleeing something. That something could be a civil war, or it could be a culture that irks them.

50 states, 50 rules:

  • America has 50 states with 50 sets of laws.  In America, people with unusual hobbies are generally left alone. And power is so devolved that you can more or less choose which rules you want to live under.
  • If you like low taxes and the death penalty, try Texas. For good public schools and subsidised cycle paths, try Portland, Oregon. Even within states, the rules vary widely. Bath County, Kentucky is dry. Next-door Bourbon County, as the name implies, is not. Nearby Montgomery County is in between: a “moist” county where the sale of alcohol is banned except in one city. Liberal foreign students let it all hang out at Berkeley; those from traditional backgrounds may prefer a campus where there is no peer pressure to drink or fornicate, such as Brigham Young in Utah.

While I agree with the premise below what it does not point out is as manufacturing leaves the US much of the R&D has recently left to go with it; especially in lower cost locales teeming with engineering talent (Chindia):

  • Migration matters. Economic growth depends on productivity, and the most productive people are often the most mobile.
  • A quarter of America’s engineering and technology firms founded between 1995 and 2005 had an immigrant founder, according to Vivek Wadhwa of Harvard Law School. (something those declaring we need to keep out immigrants should consider)
  • A quarter of international patent applications filed from America were the work of foreign nationals.
  • And such measures ignore the children of immigrants. Jeff Bezos, the founder of Amazon, is the stepson of a man who fled Cuba at the age of 15 and arrived without even a high-school diploma.

Once again, we come to the point of global competition for talent.  America has been rich legacy advantages - but we seem content to slowly but surely throw them away.  In the world I foresee, borders will continue to mean less and less, and the talent will move to where the opportunity is.  Already we can read reports of young Americans leaving for Asia since job opportunites are lacking here - a short term situation or long term trend?  One of the questions of our era.

  • Richard Florida, the author of such books as “The Flight of the Creative Class” and “Who’s Your City?”, argues that countries and regions and cities are engaged in a global battle for talent. The most creative people can live more or less where they want. They tend to pick places that offer not only material comfort but also the stimulation of being surrounded by other creative types.  

This used to be the situation among cities in America - trying to create an atmosphere to attract this type of person (Austin, San Francisco, Boston).  Now I believe it will turn into a global competition.  Can Shanghai or Sao Paulo offer all these things today?  Perhaps not - but in 5, 10 years?  What about Hong Kong?  Seoul?  Perhaps already.

  • This makes life more fun. It also fosters technological progress. When clever people cluster, they can bounce ideas off each other. This is why rents are so high in Manhattan. Robert Lucas, a Nobel economics laureate, argues that the clustering of talent is the primary driver of economic growth.