Monday, May 4, 2009

The American vs. French economy

A lot of people on the far left are almost filled with glee claiming that American-style capitalism has failed. They leave out a few facts. First, this is just the downside of the business cycle. Our economy will be back to normal before you know it. Second, it was a quasi-governmental agency, the Federal Reserve, that is primarily responsible for the housing bubble, and thus the housing bust. Third, even in this downturn Europe's economy is doing worse than ours.

The benefit of the American economic system is that it produces greater economic growth (and thus greater overall wealth) in the long run, but the trade-off is that you get greater economic disparity.

Note: In the video, she claims that "the American way makes everyone better off." This overstates the case. The American way makes most people better off. In general, Americans are better off in the middle and top of the economic ladder, but worse off at the bottom.

1 comment:

  1. Anyone who's ever had any experience investing successfully over the long run knows that you don't want to buy equities which see huge gains; rather, you want stocks which avoid large declines. As Warren Buffet says, "Your first goal as an investor is to avoid losing money. If you can do that, making money will take care of itself."

    So to it is with national economies: over time, slow and steady wins the race.

    I predict that when all is said and done, and we look at the performance of the French and US economies from, say, 1970-2020, the French will trounce the Americans. The US economy right now is a total sham, and it's in for a massive depression. While we'll no doubt drag the rest of the world down temporarily, the issues in the US are structural, and will take a very long time to resolve. Frankly, we've yet to even acknowledge what those issues are, much less craft solutions.

    France is certainly not without its problems, but unlike the US, it does have a solid industrial base; sound, productive, high-tech, high-value industrial firms; an intelligent, well-educated workforce possessing a wide range of skill-sets; much lower dead-weight in terms of military spending and the cost burdens of an overseas empire; and an assertive, socially-aware working class which makes the ruling class continually justify their position by demanding positive social outcomes.