Good Values at the Root of Utah’s Success

By Paolo von Schirach

WASHINGTON – A recent article pointed out how, year after year, Utah is on top of the national list of the best states to do business in America, not to mention that the state gets very high marks on good governance, while in Utah there is very low unemployment. And in Utah kids attending public schools on average do rather well compared to the rest of the U.S., notwithstanding the fact that in Utah spending per pupil is quite below the national average. Well, what is the secret of this success?

Nothing special about Utah

There is absolutely nothing special about this Western landlocked state. Sure, there are mountains, and parks and a great deal of pristine nature. But this natural beauty is not the foundation of Utah’s growth, and therefore it cannot explain sustained prosperity. And yet, year after year, Utah stays on top of many significant national rankings dealing with easiness to do business, governance, quality of life, and more.

The secret is the people and their values

Well, here is the reason: the people. Yes, the people of Utah and their values. We know that many people in Utah are Mormons. Whatever your opinion about this rather mysterious religion, we know that this faith strongly promotes values of thrift, frugality, honesty and charitable giving. Could this –deeply held values that promote best practices in education, business and government– be Utah’s, secret sauce? I think so. The spiritual values held by many of Utah’s citizens do have a beneficial impact on the society they built.

So, there you have it. Sustained economic growth and good governance reinforce each other, and they are the byproduct of good values sincerely embraced by the people.

No proprietary economic development strategies

Utah’s, “economic miracle” is not the outcome of following complex investment and development strategies, or proprietary computer models developed by a team of management super gurus.

The truth is disarmingly simple. Values that hold in high regard a good education, entrepreneurship, honesty, frugality and lean but effective government inspire productive, honest behavior and good public administration. And all this eventually translates into prosperity.

“You mean, that’s it?”

Yes, that’s it.




The Fake Aramco IPO

By Paolo von Schirach

WASHINGTON – There were great expectations about the Aramco IPO. It was announced long ago by Saudi authorities, and then postponed several times. Well, now we know why it took so long, and why in the end the IPO did not take place in New York or London. Indeed, the Saudi government, the sole owner of this energy giant, could not be sure about the response of savvy international investors. Would they really buy shares at a price that implies an overall $ 2 trillion valuation for Aramco? May be not. And so the Saudis, decided to play it safe. They would do this at home, in an environment and with investors they could control. And so they used the Riyadh Tadawul stock exchange (where less than 200 stocks are traded) as the venue for this “historic” IPO.

Home made IPO

And, sure enough, the compliant, super wealthy Saudi elites bought the Aramco shares at the set price and bid up the stock so that Aramco would reach the $ 2 trillion valuation This choice of venue and how all this was arranged tells us that this is is no genuine IPO.

This is a (forced?) purchase, at a preset, dubious valuation of a very small number number of Aramco shares by a few wealthy Saudis and some Saudi companies. Prince Mohammad Bin Sultan, MBS, the de facto ruler of Saudi Arabia, wanted the valuation of Aramco –no doubt the world’s largest energy conglomerate– to be at or close to $ 2 trillion. And so the shares had to be priced accordingly, and the compliant buyers –all of them Saudis– had to pay and sustain that price.

Not the real thing

Anyway, because of all this maneuvering, it is clear that this is not a genuine IPO in which the market eventually sets the value of the newly offered company based on available, scrutinized financial data and on their interpretation of market trends.

This IPO is a Saudi government gimmick aimed at getting essentially free cash in exchange for a tiny sliver of Aramco for which several compliant Saudi buyers paid a preset political (and therefore most likely inflated) price.

The risks involved in a real IPO

If Saudi Arabia had wanted to attract serious international buyers, it would have had to disclose a lot more, and then let the market decide what the value of Aramco really is. But this orthodox approach carried the risk of a lower overall valuation for Aramco after the IPO, had investors decided that the company, however enormous, is not worth $ 2 trillion. And this would have hurt the prestige of the Saudi Kingdom. For Saudi Arabia, Aramco is “it”. There is not much else in the Kingdom beyond oil and oil products.

Cognizant of these risks, MBS opted for a safe IPO. The offering took place at home, in Saudi Arabia, using the tiny Saudi stock exchange. The Saudi elites were persuaded (forced?) to buy the Aramco shares, so that the government could prove to the world that Aramco is the most valuable company on earth. In other words, this is not serious.

What is Aramco’s true market value?

There is no doubt that Aramco is an energy giant. In fact, “the” energy giant. But, based on all we know about the company and most importantly about the future of global oil demand and oil prices in this new era of electric vehicles and carbon taxes, what is a fair valuation for Aramco? Is it close to to $ 2 trillion as the “local buyers only” IPO would suggest? Or is it less, perhaps half of that, as many analysts indicated? We did not know for sure before this IPO, and we still do not know today.

Clearly, executing a proper IPO in an internationally recognized exchange would have exposed the Saudi government to the scrutiny of international investors, and therefore a possible embarrassment, had investors decided that the shares were too expensive and consequently the touted $ 2 trillion pre IPO valuation excessive. In order to guarantee a “success” MBS engineered this “friends and family only” IPO.

Big questions about the Saudi reform agenda

That said, one thing is clear. If the manner in which this long delayed IPO took place is illustrative of the seriousness of MBS’ ambitious economic reform agenda for Saudi Arabia, I am not impressed; and consequently not very optimistic about the future success of MBS’ plans to diversify and grow the non oil Saudi economy.




Thanks to Fracking, No Panic in the US After The Attacks on Saudi Oil

WASHINGTON – The most astonishing consequence of the unprecedented, devastating attack on Saudi Arabia which crippled the Kingdom’s oil production and refining facilities is what did not happen, especially in the USA.

There was no panic in the US or worldwide; no skyrocketing, out of control oil prices. Yes, crude prices went up, significantly; but not in a dramatic way, if you consider that the supplies of Saudi Arabia, the leading world exporter, (along with Russia), have just been cut down by 50%! That 50% represents 5% of total world supply. In an environment where strong demand matched tight supply, this sudden shortfall would be a disaster, especially for the US, along with China the leading oil consumer. But right now world oil supplies are not stretched, notwithstanding steady demand, thanks to the US fracking revolution which added millions of barrels of oil a day to global energy markets. More on this in a moment.

Surprise but no shock

Obviously, world markets took this unexpected and sadly successful attack against well defended (we all thought) and vitally important Saudi oil facilities quite seriously. But again, there was no panic; no stock market crazy gyrations. In contrast, you can rest assured that if the very same attack on Saudi Arabia had taken place 10 or 15 years ago, the reaction would have been chaos and mayhem –especially in Washington, DC and on Wall Street. Similar shortfalls caused the oil crises of 1973-74 and 1979.

What happened in the last 15 years?

So, what is the difference between now and then? The difference is the US fracking revolution. The almost unthinkable surge in US oil and gas production made possible by the adoption of fracking technologies by many US energy companies , (a successful combination of hydraulic fracturing and horizontal drilling), which began 10 to 15 years ago has given the United States millions of additional barrels of oil a day; and, as a consequence, also a much higher degree of energy self-sufficiency. Not total self-sufficiency, mind you, but close. Heavy reliance on distant (and it turns out not so reliable) oil suppliers was drastically diminished along with massive increases in domestic oil production. 

The broader impact of the US fracking
revolution

This gigantic increase in domestic oil and gas production made possible by extracting oil and gas from shale formations, coupled with increased oil imports from Canada, a friendly neighbor, have created a new scenario of quasi “Hemispheric Energy Independence”. In simple terms, North America, (Canada, USA and Mexico combined), can soon become energy self-sufficient.

Let’s be clear, we are not there yet. But we are almost there. The US still imports some OPEC oil, as well as crude from other regions of the world, but most of the oil we consume now in America is either domestically produced or imported from reliable neighbors.

Relaxed atmosphere

Hence the relatively relaxed atmosphere both in Washington and on Wall Street, in the aftermath of the attack on Saudi oil facilities, when it comes to confidence in our ability to ensure continuity of energy supplies to industry and consumers.

Notwithstanding the shockingly bad news of the brazen attacks that knocked down half of Saudi Arabia’s oil production and refining facilities, with the ensuing cuts in global supplies, there is no panic in America.

This is an incredibly important achievement. And we owe this to a multitude of small, medium and some large fracking companies that are behind this American energy revolution.

Global benefits

And the fracking revolution obviously benefits the rest of the world as well. Since America’s imports have been cut down by millions of barrels a day, there is more oil in the global market place available to all other importers. Abundant supply means lower energy prices for all, ample reserves, and (almost) guaranteed deliveries to all importers.

So, here is the story. Thanks to fracking and massively increased US oil production, even an unprecedented, catastrophic event like the attack on Saudi oil facilities can be handled without resorting to extraordinary measures such as price controls, rationing, etc.

A private sector effort

Where am I going with all this? Very simple. Fracking was not a US government program. Fracking is all about old fashioned Yankee ingenuity. The US private sector, often small energy entrepreneurs, largely unhindered by suffocating state or federal rules and restrictions, had the freedom to invest in drilling in shale –an endeavor what at the beginning seemed to most experts a perfectly crazy idea, destined to failure.

Well, the seasoned experts were wrong. After a few years of trial and error, the daring energy entrepreneurs were proven right, and America now –thanks to fracking—is in the midst of this incredible “Energy Renaissance”. This huge additional domestic production, in this moment of international bewilderment caused by the brazen attacks on Saudi oil facilities, provides precious support and reassurance to both the US economy and US national security.

Broader lesson: encourage free enterprise

So, here is the broader lesson. As a Nation, let us do all we can to encourage more innovation and entrepreneurship –in all sectors. Do not place roadblocks on the path of those who seek to create new products, new systems and new solutions. And I am not just talking about energy here. I am talking about all economic sectors.

Sure, all
economic activities have to be conducted within the boundaries of the law,
while they have to comply with all necessary safety and public health
standards. These are the common sense rules of a modern, civilized society.
But, once reassured that there is genuine compliance with the basic norms of
our nation, let people be free to do what they want to do.

In the case of fracking we see the enormous economic and now national security benefits brought about by daring spirits, ingenuity and enterprise. About other economic sectors, God only knows what new benefits commercially viable innovation may bring to us. 




America Lost Its Ill-Conceived War in Afghanistan

WASHINGTON – The longest American war is finally coming to an (unhappy) end. America is negotiating its departure from Afghanistan. A draft deal sketching a time line for US troops withdrawal has been hammered by US Envoy Zalmay Khalilzad and the Taliban.

Good news? Not really. Let’s be clear. America is not negotiating from a position of strength, after having inflicted painful losses on the Taliban, our enemy. This is not a carefully crafted peace treaty, with credible built-in conditionalities and safeguards. Whatever the wording of the final agreement, whatever euphemism you may choose to characterize this peace process, this is in essence US surrender.

Inglorious end

It is clear to all observers that America is negotiating with the Taliban from a position of extreme weakness. The other side, the Taliban, is winning on the ground, and we simply cannot take this nightmare of daily attacks followed by feeble and ineffective Afghan responses anymore.

Sadly, this is the inglorious end to a terribly ill-advised October 2001 US invasion of Afghanistan, followed by an ill-conceived military occupation, and an even worse economic development strategy concocted under the assumption (bordering on lunacy) that America and its NATO Allies had the resources, the will and the skills to transform an extremely backward, war-torn Afghanistan into an at least passable modern, working democracy.  

A bad idea

Sadly, this negotiation with the Taliban is the end of the American poorly planned and poorly executed adventure in Afghanistan. The occupation of Afghanistan was and is a bad idea doggedly pursued for almost 20 years by national leaders who should have known better; or who at least, after a few years of failures, could have paused and thought the whole thing over again.

Foreign
policy mistakes unfortunately happen. But Afghanistan is much worse. This is
about hatching a completely unrealistic plan and then clinging to its failed
policies, year after year, in the vain hope that –maybe—someday things will
improve, without any evidence that anything was getting any better.

It all started after 9/11

Let’s go back to the beginning of this sad story, and that is 9/11. After it became clear that this major terror attack against the US homeland had been directed by Osama bin Laden, the founder of al Qaeda who had found sanctuary in Afghanistan, the Bush administration decided “to go get him”. However, Washington almost immediately decided also on a much bigger agenda. Indeed, the Bush administration decided that it had to punish not just the al Qaeda leadership, but also its Afghan willing hosts, that is the Taliban government.

Therefore the more narrowly focused “punitive expedition against Osama and al Qaeda” almost immediately morphed into “regime change” for Afghanistan. This rather grandiose objective was in fact an act of vainglorious superficiality. In so doing, Washington, while trying to get Osama who was hiding somewhere in the mountains of Afghanistan, (without any success, by the way!), at the same time declared to the world that it needed to “fix” Afghanistan once and for all, so that in the future this sorry country would become a responsible, modern democracy, and no longer the friendly home of terrorists.

Insane policy

In
principle, this may sound nice: “Clean up
the place and engage in a make-over”
so that in the future Afghanistan will
not be used as a base for Islamic terrorists.
In practice, anybody with a brain at the time would have been able to see that
this –“fixing Afghanistan”– was a
next to impossible task.

Anybody with an even scant knowledge of decades of failure in trying to promote development in Africa and other under developed regions through large amounts of outside assistance could have pointed out that this was mission impossible.

Indeed, if promoting development in Africa is extremely challenging, it should have been clear to all top decision-makers that engaging in a development effort in an extremely poor, and completely ruined post-conflict Afghanistan would take extraordinary resources, and many, many decades.

A dauntingly
tall agenda, by the way, even assuming peace and a cooperative society willing
to buy into this rapid modernization strategy hatched and dished out by outside
experts.

Impossible goals

Again, everybody knew or should have known that at the end of 2001 Afghanistan was an incredibly backward, tribal country that lacked almost all the underpinnings necessary to even start a development agenda. And that includes: some meaningful productive activities, (no, poppy cultivation should not be on this list), at least some basic infrastructure,  a modicum of electricity generation and transmission, reasonably modern health care facilities, functioning schools, an educated middle class, a reasonably competent government. Afghanistan had almost none of that at the end of 2001. On top of that, it had suffered for years under a communist dictatorship, then it had to endure the Soviet invasion which was followed by a bloody war against the Soviets, and then civil strife followed by the medieval Taliban regime.

A record of failure

Anyway, the
whole US-led Afghanistan enterprise that began at the end of 2001 failed
–miserably. This is well documented. For instance, to this day, the US
government has no idea of what happened to billions of dollars targeted for
development in Afghanistan that simply vanished.

The biggest failure is of course the strong resurgence of the Taliban and the utter inability of the US-trained and equipped Afghan military and police to even hold their ground –let alone go after the Taliban insurgents and defeat them.

Right now, the Kabul government is unable to guarantee even a modicum of security almost anywhere in the country. The Taliban can hit almost city, including well defended targets in Kabul itself. On top of that, in the last few years, other extremists and terror groups have found fertile ground in Afghanistan. On a daily basis, there are attacks, bombs, suicide missions, and what not. And this is happening after 18 years of American and NATO military assistance, combined with gigantic development packages aimed at building a modern government, peace and new prosperity.

The negotiations with the Taliban

I guess this is why the Trump administration FINALLY decided to cut America’s losses and get the troops home. The fig leaf here are the bilateral “peace negotiations” with the Taliban. Through this charade hosted by Qatar, Washington would like to convey to the world that this is no cut and run. On the contrary, Washington will implement an orderly and careful incremental drawdown of US forces –but only if and when the Taliban will meet certain non-negotiable conditions.

The message
is: “This is no unilateral withdrawal. We
are negotiating an honorable and sound peace agreement. We Americans shall make
sure that the interests of the Afghan people are protected. We shall also make
sure that the new (and still fragile) Afghan democratic institutions will be
safeguarded and will continue to define the country long after the last
American soldier has departed”.

Of course,
this is pure fiction.

Whatever
they may say now, the Taliban leaders do not believe in either democracy or
power sharing. To believe in a well-functioning future coalition government featuring
the current Afghan leadership and the Taliban working together for the benefit
of the Afghan people is ridiculous. Which is to say that these negotiations are
only about saving face. Whatever you may want to call this process, in essence,
this is surrender. We failed –in a spectacular way– and now we are leaving an
impossible situation that cost US taxpayers hundreds of billions. No more good
money after bad.

What do we make of all this?

So, what do we make of this absurd tragedy? Sadly, the only plausible conclusion is that in the highly charged, emotional days after 9/11 our national leaders literally lost their minds. There is no doubt that the terror attack we suffered on September 11, 2001 was unprecedented in scale and loss of American lives.

But 9/11 was
not the end of the world. The notion that America, in order to prevent future
attacks and be safe, had to “redo
Afghanistan”
was megalomaniac and stupid. Going after the bad guys, the
masterminds of 9/11, was absolutely justified. But the notion that creating a
new country in Afghanistan was necessary in order to guarantee future US
security was fatally flawed.

And, by the way, let’s
not forget: even the more focused mission of capturing or killing the al Qaeda
senior leadership FAILED, TOTALLY. The US forces were there, on the ground.
Osama and his cohorts were on the run. And still we failed to capture Osama, for
more than a decade.

That said,
the Afghanistan operation was the beginning of the “War on Terror”, an ill-defined,
grandiose strategy that created what was ultimately an unreachable goal.

“War on Terror” does not mean
anything

Terrorism is not a place you can attack and conquer or a clearly identifiable enemy located in one place. Terrorism is a modus operandi that can be adopted by several small groups, or even isolated individuals all over the world. Terrorism is about dramatic violent actions that will gain a great deal of publicity.

How do you “win” this war? How can you ensure that all the bad guys, and the would-be bad guys, have been apprehended or killed? This is impossible. You can and should do your best to monitor and infiltrate terror cells. You should prevent when possible acts of terror and go after the bad guys when something bad tragically happened. But this is mostly about doing your best to manage an elusive threat using intelligence and special forces. You cannot “win” this conflict once and for all; just as police forces, even the best ones, cannot inflict a final defeat on all criminals and criminal activities.

There are more than 7 billion people on this planet. Even if the smallest fraction of this large world population engages in terror plots, you still have a problem. And yet this open ended goal –the War on Terror– became the fundamental pillar of US foreign policy under George W. Bush. America was committed to fight this global War on Terror to the very end, and we would not rest until the last terrorist had been killed or apprehended. This was and is an impractical, in fact fatuous goal.

No doubt, terrorism is serious business, to be treated seriously. And this is why we have sophisticated intelligence services and specially trained forces. But terrorism is not an existential threat that justifies making it into our number one national security priority, engaging in a global war in which the entire world, by the way, has to actively participate in order to show that they are with us.

Wrong policies continued under Obama

But here is the thing. The stupidity of that Bush administration policy did not disappear when President Bush left office. What is bizarre and unexplainable is that even though George W. Bush left the stage in January 2009, and no one talked about his War on Terror anymore, the failed Afghanistan project that was an integral part of the initial War on Terror strategy kept going, and going.

Indeed, President Obama declared that the war in Afghanistan was the good war that needed to be fought, as opposed to the bad war in Iraq that was discretionary and ill-advised. And so Obama, the Nobel Peace Prize winner, kept going and going in Afghanistan even though he and his team should have known better. After all they were not bound to justify and continue on a flawed commitment created by the previous administration. And it took Trump, the president elected with the open pledge to end all the stupid wars started and continued by his predecessors, more than two years to finally come to grips with the need to end this madness.

Taking stock

So, here is the balance sheet. It took 18 years to finally recognize a colossal foreign policy mistake. How could America be so wrong for such a long time without any serious debate on this record of failure followed by more failure? How could this happen? I am not entirely sure. Still, as a minimum we need to recognize that there is a nefarious inertia, combined with mental laziness, enveloping the entire upper layer of the analytical and decision-making centers of this nation.

In Afghanistan, America started something big and expensive with all the wrong assumptions regarding the size and scope of the undertaking and a realistic time line to achieve the stated goals. Alright, mistakes are made.

But then, how can we justify that Washington, despite a solid record of failure in Afghanistan, kept going and going, year after year, without anybody in a position of power and responsibility pausing and asking the most elementary question: “Is this really working as intended?”

American policy-makers lost the
ability to reflect

Here is my conclusion. As a nation, notwithstanding hundreds of billions of dollars spent every year on intelligence gathering, scenario planning, and war games, not to mention the largest defense budget in the world, we seem to have lost even a modicum of self-reflection ability.

An outside observer looking into this mess might find this record of systemic failure by the leaders of the most advanced country on Earth, and the attendant epic waste of resources stemming from totally misguided policies, quite funny. But it is in fact tragic. In the end, finally getting out of Afghanistan is a good thing. But I am not sure that America’s leaders learnt any enduring lessons.




No Action on Failing US Public Schools

For many years we have been debating the sorry state of US public education: too many drop outs, large percentages of high school graduates who cannot read or count, and how education could and should be improved. Alas, there has been and there is much talk –and very little remedial action.

No accountability

Nationwide, the public schools sector seems to belong to a different universe, a universe in which professionalism, the pursuit of academic excellence, merit-based pay and promotions for teachers, accountability, and cost-effectiveness are unknown concepts.  

Awful record in Colorado

Below, you can look at yet another illustration of this catastrophic failure that essentially condemns students educated in bad schools to a life of under achievement. (Letters to the Editor, The Wall Street Journal, August 21, 2019)

In Colorado, not a poor under resourced state, most high school students perform well below grade. Many of them cannot pass a simple test that would allow them to join the Army. This is simply outrageous. But you do not hear any public outcry.

The children of the elites are taken care of

Here is my theory about this general indifference on the part of all American elites regarding this colossal societal failure when it comes to educating so many of our kids –and these are mostly poor kids.

The truth is that the children of key policy-makers, at all levels, in most cases do have access to quality education. As they normally live in good areas, they can enroll in higher quality public schools. If these are not available, they can always go to charter schools or private schools. In other words, their parents are reassured that their kids will get a good or even superior high school education, itself the ticket to a good university and eventually a rewarding, well remunerated career. The children of the American elites are taken care of.

And what about all the others? The others, oh well the others will go to the regular (bad to failing) public schools. They will graduate (those who do) with minimal skills and knowledge, while they will often be functionally illiterate, as the Letter to the Editor reproduced below illustrates.  

From: Letters to the Editor, The Wall Street Journal, August 21, 2019

“Regarding Baker A. Miller’s “The
Smear Campaign Against Charters” (op-ed, Aug. 14): Last week our state test
results were released here in Colorado:
Only 45.8% of our students read at grade level, and only 34.7% can do math at
grade level.”
[Bold
added]

“These results have changed little
over the last 20 years. This is noteworthy because our current governor, Jared
Polis, worked to pass an amendment to the state constitution in 2000 that
required education spending to increase at the rate of inflation plus 1% every
year. This should put to rest the notion that more money is the answer. No
doubt we will hear the usual calls for increased funding of public education,
but even if we gave the system a billion dollars tomorrow, it wouldn’t know
what to do with the money.”

“I own a remedial-education business
and have lost count of the number of students I’ve taught who hold high-school
diplomas from the Denver and Aurora Public Schools systems but are functionally
illiterate and innumerate. Many want to join the military but can’t pass the
entrance exam (the ASVAB). It’s official—the academic standards required to
join the Army are higher than those needed to earn a Colorado high-school
diploma.”

“Isn’t it high time we moved this
incompetence from the realm of the merely scandalous to the specifically
criminal? What’s to stop U.S. attorneys around the country from filing RICO
[The Racketeer Influenced and Corrupt
Organizations Act] charges against school
boards, superintendents and union officials? If there’s a bigger racket than
public education in the U.S., I’m unaware of it.”

(Signed) Nate Braden, Denver www.wsj.com

Criminal conspiracy?

The author of this sad letter suggests that all the players involved in this public education drama are in fact members of a criminal conspiracy. Of course, this should not be taken literally. However, the enduring gap between education standards and disastrous outcomes at the very least indicates irresponsibility and neglect.

America is now a two tier society

And this neglect has and will have horrible consequences for our country. Because of this public education disaster, America’s leaders, wittingly or unwittingly, are creating a two tier society. The top tier belongs to the well educated and affluent who have the means and the opportunity to educate their children, so that they will earn good degrees leading to great careers and well rewarded employment.

The bottom tier is for everybody else. The children of the poor and lower middle classes cannot afford private education. Higher quality charter schools may not be available in their areas. And so they are stuck with bad or failing schools where they will learn little or nothing.

Birth is destiny

And we should all be clear as to the implications of all this. In this super charged, hyper competitive knowledge economy, there is no chance to land a good job without a good or superior education.

Sadly, all this means that in America now “birth is destiny” –just like in many poor countries, with rigid barriers that prevent upper mobility. Indeed, in today’s America –the exceptional country once upon a time known as The Land of Opportunity— if you were born poor and live in a bad area, your chances of getting a good education –the essential tool to move up in life– are practically zero.

This being the case, you will spend your life in the bottom tier. Hard work alone will not allow you to climb the socio-economic ladder. Now, and even more so in the future, in order to make it, young people need increasingly sophisticated knowledge. If they do not acquire it while in school, the chances of getting it later on through other means are slim.




Type Two Diabetes Is Preventable, But Nobody Says It

WASHINGTON – I recently read a very well
researched article on the growing cost of treating millions of diabetics in the
United States. It appeared in a major national newspaper and it was written by
a well-known public policy scholar. The writer  provided up to date data on the alarmingly
large dimension of this disease and how much it costs to the affected individuals,
insures and the US Government. The scholar in the end provided his thoughtful policy
recommendations.

It is a preventable disease

All in all, a good, balanced piece. Except for one thing. In his article, the author started from the implicit premise that type two diabetes “just happened” in America. It seems that for some (unexplored and unexplained) reasons it came about and has now reached incredibly large proportions. Millions of Americans, including young people, are now its victims.  Now, according to the author, our problem as a society is how to pay for the monstrous and increasing costs of caring for millions of patients. Not a word –repeat, not a word– about the genesis of this explosion, even though it is well known.

Well, this approach to this US health care crisis is totally wrong. I repeat: totally wrong; because it fails to mention how type two diabetes came about and –most fundamentally—that type two diabetes is a preventable disease. Yes, preventable, and this means avoidable. Which is to say that the analysis included in the article is fatally flawed, because it starts from the false premise that this health care crisis just “happened”. The implicit assumption is that, as a nation, we have to accept this reality, and now going forward our job as a society is to figure out how to pay for its immense cost.

The author says: “We have an explosion of a disease that cost billions. Let’s discuss the best way to apportion the cost”. Wrong! A good analyst would ask a very different question:

“Why is it that we are doing nothing to prevent a preventable disease that has now gained monstrous dimensions, this way causing misery to millions of Americans, while burdening the health care systems with billions of dollars in therapies that could be completely avoided”?

Let me clarify.  The ballooning of diabetes in recent years is mostly about type two diabetes. (Type one diabetes is a different story. It has some genetic roots that make certain individuals more susceptible. But the explosion of diabetes in recent years in America is overwhelmingly about type two which has no genetic roots).

Unlike other health care scourges, this is not a conventional epidemic. Type two diabetes is not genetic, and it is not a communicable malady, carried by a virus or bacteria. You do not get type two diabetes because you have been in the proximity of someone who has it.

A consequence of bad life style

Type two diabetes is a pretty horrible chronic disease that manifests itself as a consequence of years of bad eating habits (too much sugar, too many carbohydrates), and bad lifestyle (no exercise).

Which is to say that if most Americans would embrace and sustain a healthy life style, (eat mostly lean proteins including fish, vegetables, fruits, salads, go to the gym 3 or 4 times a week, and keep a normal weight), the chances of developing type two diabetes are practically zero.

Just like that? Yes, just like that.

Again, type two diabetes is not genetic, and it is not an epidemic. This is a bad life style disease. The fact that millions of Americans get it and collectively end up spending billions of dollars to treat it does not change any of these facts. It simply means that millions of Americans, regrettably, embraced bad personal habits that caused them to develop type two diabetes while piling up skyrocketing medical costs.

That said, amazingly, almost no one (including the author mentioned above) points that this is a preventable disease while discussing the consequences of the massive increase of type two diabetes cases. And yet, these are well-known facts.

You realize what this means. If people had a chance to be properly educated about the critical importance of a good diet and exercise and consequently changed their eating and exercise habits in order to stay healthy, type two diabetes would practically disappear –with enormous health care cost savings, and immense quality of life gains for millions of diseased people.

It is preventable!

At least
some tell you the real story. The Harvard School of Public Health website explains
that:

“The good news is that prediabetes
and type two diabetes are largely preventable. About 9 in 10 cases in the U.S.
can be avoided by making lifestyle changes. These same changes can also lower
the chances of developing heart disease and some cancers. The key to prevention
can be boiled down to five words: Stay lean and stay active.”

Got that? At least 9 out of 10 cases are preventable. The secret? Five words: “Stay lean and stay active”. Yes, that’s all there is to it.

And it is also reversible!

And this is not the whole story. Type two diabetes is actually reversible. Not always. But in many, if not most cases you can get rid of it.

Here is what US News recently reported:

“It’s not impossible at all to
reverse diabetes,” says Dr. Peter Arvan, chief of the division of
metabolism, endocrinology and diabetes at the University of Michigan.
Certainly, though, experts are quick to point out that often what it takes to
do so, such as wholesale changes to completely alter the way one eats and
shifting one’s schedule to prioritize exercise, can be challenging to say the
least.”

“Sometimes diabetes remission is
achieved following bariatric weight loss surgery. But for the majority, it’s
intensive changes to a diet, such as consuming lots of fruits and veggies and
complex carbs and little sugar, and accompanying weight loss that seems to be a
core driver in lowering blood-sugar.”

“Of course there are a lot of
patients who have difficulty complying with those lifestyle changes,”
Arvan says. “It is not the case that reversing their diabetes is the one
and only thing that’s on that person’s mind all day long.” So the same
struggles people may have in properly controlling diabetes can dog even loftier
goals of achieving remission.”

It is imperative to change lifestyle

So, according to this eminent physician, the main obstacle to getting rid of this nasty disease is the willingness on the part of the patients to completely change their lifestyle. Difficult, perhaps. But not an impossible task, if the affected individuals are properly guided and counseled by nutritionists and doctors.

So, given the fact that we can both prevent and reverse this nasty disease, why is it that we do not have well-crafted public education campaigns aimed at explaining the critical value of good nutrition and regular exercise? Why are we not teaching “wellness” in America?

As a nation we certainly have the skills and the resources to do this. We did launch massive education campaigns when it came to raising awareness about the horrible health consequences of smoking.

No interest in promoting wellness

If we are into conspiracy theories, we could argue that not creating prevention programs focusing on wellness education aimed at the general public is in fact deliberate. Indeed, it is very much in the financial interest of the health care industry, (pharmaceutical companies, hospitals, and doctors), not to teach anybody about how to adopt a healthy nutrition program, while engaging in moderate physical activities.

How so? Well, if you think about it, this type two diabetes explosion is really a big money bonanza for the health care sector. If you are a pharmaceutical company that makes and sells insulin, (the medication prescribed to all diabetics), or if you are a physician who regularly monitors affected patients, type two diabetes is a veritable gold mine. For medical practitioners who are paid based on the number of treatments, there is nothing better than millions of chronically ill patients who need life time treatment. Which is to say that the entire US health care industry benefits financially from the bad habits of millions of sick Americans.

Save money, improve lives

Needless to say, drastically curtailing the incidence of type two diabetes cases through targeted wellness education campaigns would save America billions of dollars every year, while improving the quality of life for millions of chronically ill patients. But you do not see the headlines explaining any of this. in the absence of wellness programs, diabetics keep doing what they are told. They have to keep monitoring their blood sugar levels (yes, sell more of those monitoring devices!) and take more insulin.




Argentina: From Bad to Worse

Once a prosperous nation, for decades Argentina has been a country in semi-perpetual economic crisis. In 2015 it seemed that the voters had gained some common sense. After years of catastrophic mismanagement by the populist Peronist President Cristina Fernandez de Kirchner, (preceded by her husband who died in office), characterized by a mix of subsidies, protectionism and massive state interventions, plus a bankruptcy, the voters turned to Mauricio Macri, a pro-business moderate conservative, as the right person to turn things around, restore business confidence, and convince foreign investors to come back to Argentina.

He would fail

While there
was hope for real improvement, my Argentine friends told me from the very
beginning that Macri would fail, simply because the economic disaster he had inherited
was just too big.

Well, it turned out they were right. In hindsight, we could agree that Macri’s “gradualism”, his effort at implementing pro-market reforms a little bit at the time, was just too little too late. The truth is that his reformist policies, at least in the short and medium term, caused additional pain, (higher inflation, more unemployment), without much to show that could be seen by the voters as the proverbial light at the end of the tunnel.

Notwithstanding a gigantic International Monetary Fund loan ($ 56.3 billion) aimed at stabilizing public finances, the Argentine economy is stagnating, the currency lost value, while inflation keeps eating into modest salaries. A pretty bad record for President Macri.

Back to the old playbook

And so, what did the Argentine voters do? Well, voting recently in primaries that are an effective dress rehearsal for the actual national vote scheduled for October 27, they clobbered Macri and blessed again the Peronists, with the same Cristina Fernandez (former President) as candidate for Vice President. She is the number two in a ticket headed by Alberto Fernandez, (no relation). The winners got 48%, while Macri was humiliated with a distant 32%.

Call back the Peronists

And so, since Mauricio Macri, the new leader who was supposed to fix the country, has failed, in their wisdom, the Argentines seem keen to elect the well known old arsonists as the new Fire Department Chiefs.

Look, I appreciate that Macri did not do such a good job. But where is the evidence that going back to the old playbook that manifestly failed in a spectacular way is the best way to improve the lot of the beleaguered people of Argentina?

Financial markets share my concern. As soon as the news of Macri’s stinging political defeat came out, the Argentine stock market took a dive, while the peso lost a lot of value against the US dollar. This market collapse is not a vote of confidence in the ability of the old guard to fix the economic problems they created in the first place.

Desperation is a bad counsel

I understand the unhappy voters who decided against Macri. I also understand that desperation is often a bad counsel. However, seeking real help from the primary architects of the economic disaster that engulfed Argentina years ago is beyond wishful thinking. It is sheer stupidity.




US Fiscal Irresponsibility Will Lead to Bankruptcy

WASHINGTON – The Democrats in Congress and Republican President Donald Trump agree practically on nothing. Therefore, it is impossible to think of any major piece of legislation that can be passed between now and November 2020, when Americans will go the polls to pick a new President and a new Congress and new political majorities may be formed.

Sharply divided government

Since the Democratic control the House of Representatives, while the Republicans control the Senate and the White House, and considering the increasingly toxic political climate that makes compromise impossible, we have not just a divided government. We have a sharply divided government. So, do not hold your breath. No significant legislative actions between now and the next presidential and congressional elections in November 2020.

The spending deal

That said, there is a huge exception –and a very shameful one—in this political stalemate. And that is federal spending. Very recently, and very quietly, Republicans and Democrats hammered a major spending deal. There was no fight. No public posturing to defend this plan and attack the other side spending priorities. No grandstanding.

Very quietly
the two arch enemies came rather quickly to a spending agreement. How so?
Because they decided to increase spending across the board. Essentially, the Republicans
got some more money for Defense. The Democrats got a bit of this and that in
other areas of non-defense discretionary spending.

Larger deficits

In case you
were wondering, these increases will not be offset by spending cuts in other
areas. This means that a large and growing US Federal Budget deficit, for
decades now a structural feature of our public finances, will become much bigger
much sooner than expected. Think of a $ 1 trillion billion deficit, (that is 1
thousand billion), year after year, unless something rather drastic is done.

This is a
colossal figure. In simple language, this means that Uncle Sam every year
spends more money –a lot more– than it takes in via tax revenues. In principle,
overspending could be justifiable; but only when the government goes into
overdrive with extraordinary fiscal stimulus in order to counter a major
recession, like the most dreadful one we had beginning in 2008. Borrowing money
could also make sense if the funds are to be invested in important capital
projects, (new highways, ports or airports, for instance), that would improve our
national infrastructure networks this way benefiting the economy. But we are
not doing any of this. Indeed, this is not money borrowed for stimulus or for
financing needed infrastructure. This is mostly money to be used to finance
current spending. In other words, as a nation, we are living beyond our means, while
we obviously think that we can keep our lifestyle by borrowing the difference –indefinitely.

Everybody knows

By the way,
everybody in Washington who is even remotely familiar with federal spending
trends knows this. But the fact is that nobody seems to care. The sad and
worrisome conclusion is that chronic overspending is now accepted by most Washington
policy makers –both left and right– as the normal way to run the government of
America, a major modern country which used to be run according to established
principles of fiscal balance. Namely: in the long run you should not spend more
money than you can raise through taxation. By the same token, if you have
accumulated a large public debt, you must change tax and spending patterns in
order to return to a healthy balance.

The roots of the US deficit and debt

Now, as to
the actual roots of this systemic overspending, obviously they are not in the
deal just struck by the two political parties. This recent deal just made a bad
situation a lot worse.

The roots of
US overspending are in the incremental but steady growth of large entitlement
program that cannot possibly be funded as they are currently structured, unless
taxes will be substantially increased and/or benefits reduced. 

No, US overspending is not about “fraud, waste and abuse”. It is not about too much foreign aid, as many believe. It is mostly rooted in our big federal entitlement programs. Social Security, Medicare, Food Stamps and other related programs, absorb about 2/3 (yes, that is a lot more than half!) of the US total federal budget, currently at $ 4.7 trillion (again: a trillion is 1,000 billion).

Good programs designed in a different
era

The problem about these programs (most of them) aimed at providing for our senior citizens is that they were designed in another era, (Social Security goes back to FDR in the 1930s, Medicare goes back to the 1960s when Lyndon Johnson was president).

Clearly that was a different America, with completely different demographics. The programs as designed were solvent and meant to be self-sustaining. But this is no longer the case. The way the system works, the payroll taxes paid by current workers and their employers go directly to fund the benefits for the retirees. The problem is that the US population is slowly shrinking, which means fewer active people are supporting the benefit for a larger number of retirees, while health care costs for seniors have been increasing. Simply stated, the programs are no longer self-sustaining.

Kicking the can down the road

This trend of the growing cost of entitlements, year after year, both in absolute terms and as a percentage of the federal budget, is not news. This has been going on for decades. But lawmakers and presidents of both parties simply ignored the problem, in large measure because they believe you cannot tell the truth to the American voters. Even talking about serious reforms that would modify or potentially decrease benefits to retirees is deemed to be political suicide in Washington.

The Debt Commission recommendations went
nowhere

For example, back in 2010, then President Barack Obama created a bipartisan commission to review federal spending and make recommendations on ways to reduce deficits in the future. It became known as “The Debt Commission”.  The two co-chairmen were Erskine Bowles (Democrat), and Alan Simpson (Republican). These two elder statesmen took the job very seriously, without any partisan animosities. This was no Washington wishy-washy anodyne process marked by generalities and obfuscations. Indeed, their 59-page report was entitled “The Moment of Truth”. It included actionable plans to reform entitlements, while also raising taxes; so that these key programs providing needed benefits to millions of American retirees would remain solvent and available to all beneficiaries, now and in the future, without bankrupting the federal government.

Well, nothing, absolutely nothing, happened after the report was issued. President Obama, just like all the other presidents before him, did not want to kill his chances of re-election in 2012 by becoming “The president who killed Social Security and Medicare”. So, notwithstanding the serious work done by these two elder statesmen whom I consider true American patriots, no action to reform entitlements, defense spending and raise some taxes was undertaken under president Obama.

And, by the way, no action whatsoever under President Trump. Trump fully understands that his political is made up mostly of blue-collar white workers. And these are precisely the people who need these programs aimed at low income retirees the most.

How else could we save money?

Well, if we cannot reform costly entitlements, what else could be done to restrain public spending, this way reducing the deficits, and down the line slowing down the monstrous growth of the US national debt? Well, not much. “Oh come on, many would scream. We could start by cutting our gigantic defense budget!” Sure we could. But it would not solve our structural fiscal imbalance.

And by the way, believe or not, US defense spending is now close to a historic low as a percentage of GDP. Yes, while America spends more than $ 700 billion on the Pentagon, this large figure is only 3% of GDP. During the Cold War the US routinely spent close to 10% on the military. Which is to say that current defense spending levels are not an aberration.

While it may be possible to spend less or at least more wisely on defense, contrary to popular opinion, most of the Pentagon budget is not devoted to procuring new super expensive, unnecessary weapons. Most of the money goes to salaries (we must pay for an all-volunteer force), and operations and maintenance. This includes all that is needed to keep at least a percentage of a large force ready. Think of training, housing, food, deployments, fuel for an enormous fleet of vehicles, airplanes and vessels, and a lot more.

While we can and should have a sensible discussion about better ways to spend defense dollars, do not expect even significant savings to make a big difference. Indeed, our federal budget deficits are so huge that even if we abolished the Defense Department altogether, (an unlikely scenario), Uncle Sam would still be in the red.

Well, what about other areas of spending? Where else could we cut in order to achieve big savings? Well, no fat targets out there. As a percentage of total federal spending, transportation, energy, agriculture, commerce, and so on, claim relatively little money. Again, even if we abolished the Departments of Education or Energy, we would still run a large deficit. By the same token, cutting 10% or 15% here and there would impair basic functions without saving much money.

And do not forget another budget line item that keeps growing and cannot be cut. That is the interest on the existing national debt, now about 10% of total federal spending. To put it in perspective, this enormous number is about half of all defense spending.

Not on the verge of bankruptcy

To put all this in perspective, America right now is not –I repeat is not—on the verge of bankruptcy. Investors and foreign governments still eagerly buy our Treasury Bonds. They believe that America will be able to meet all its financial obligations.

Still, unless federal spending is seriously reformed –and by that I mean mostly a serious revision of our key entitlement programs, via a bipartisan agreement– we are definitely headed towards bankruptcy.

More money for everybody

If not today, pretty soon something drastic will have to be done. Either we cut spending, (remember: the fat target is entitlement reform), or we raise taxes, or a combination of both. But, right now, we are going in exactly the opposite direction.

With no public debate, and in a completely irresponsible fashion, our national leaders, in both parties, one year before the 2020 elections have decided that they want to tell voters that the free money party is still on. “Cheer up everybody! More spending, therefore more goodies for everyone: Mid-West farmers and Boeing”.

Deficits do not matter?

One last note. While our elected leaders act myopically to pursue the immediate goals of currying favors with the voters ahead of a major national election, at least some academics have come up with the bizarre “theory” that –guess what— in America federal deficits do not matter. When you have a country like the US that can borrow in its own currency, assuming tame inflation, large deficits are not an issue. According to these economists, Washington can just keep borrowing and borrowing and nothing bad will even happen. There are no limits. Apparently, our growing national debt (the cumulative result of chronic annual deficits) does not have to be paid back. Got that?

I would say
that if this preposterous idea is accepted as a sound foundation for managing
our public finances, then we truly deserve to go bankrupt.




Why America is a Unique Country – Part 2

WASHINGTON – Thomas Jefferson and the other Founding Fathers of America sincerely believed that “Life, Liberty and the Pursuit of Happiness” were and are indeed self-evident and unalienable rights, given to each human being by a Supreme Being. These attributes, “attached” to each person from birth, were described as Natural Rights, and therefore something that no government could legitimately take away from any and all the individuals who collectively constitute The People.

Man is a rational creature

The Founders also subscribed to the belief, very popular in that Age of Reason, that human beings, while sometimes possessed by passions that may obfuscate clear judgment, are fundamentally rational creatures who most of the time reason and think rationally, especially so when their judgement is improved by proper scientific learning.

Therefore, it is expected that in general human beings will think and behave rationally on most issues, including matters of governance and public policy. Based on their optimistic view of human nature, the Founders also shared the belief that most human beings would be good, ethical, tolerant and just citizens and office holders, most of the time.

Self-government is impossible if people are ruled by emotions

Yes, passions at times would interfere with proper rational analysis and right action –some of the time. But, according to the beliefs of America’s Founders, emotions and factionalism, while recognized as threats to good governance, would not rule human thinking and behavior most of the time.

This is really important. According to America’s Founders, human beings are mostly good. And it is this basic human feature –deeply rooted in the foundations of the Enlightenment political philosophy embraced by the Founders — that makes successful self-government possible.

Indeed, the Founders fully acknowledged that if human beings were constantly ruled by uncontrollable emotions and irrational ideas it would be impossible for them to create and preserve a viable republican self-government. The institutions aimed at protecting freedom, however well crafted, would be easily destroyed by the uncontrolled passions of irrational people.

Optimistic view of human nature, with some cautionary notes

So, all in all, the prevailing view of human nature at the time was mostly optimistic. Self-government would be possible because most people most of the time would behave rationally. There were however some cautionary notes. How do we protect the republic from the dangers created by occasional but potentially serious irrational behavior? 

The “remedy” was in establishing separate constitutional powers competing with one another, a system of “checks and balances”. This would make government more complicated, as it required agreement among different centers of power. But it would also make concentration of power and therefore tyranny unlikely, this way allowing the People to enjoy their Freedoms, granted to them by Natural Law.

So here is the antidote to human irrationality. The US Constitution of 1787 explicitly divides power among the President, the Congress or the Judiciary. According to the Founders, divided powers would make government prevarication unlikely, this way safeguarding liberty by preventing concentration of power, and therefore unjust government coercion.

The Western Frontier 

Beyond this revolutionary constitution aimed at preserving Liberty, America had the unique added feature of an open Western Frontier. Thanks to the Louisiana Purchase of 1803, a $15 million deal between the U.S. and France engineered by President Thomas Jefferson, America almost doubled its territory, (at about four cents an acre, an incredibly good deal). Without firing a single shot, thanks to the Louisiana Purchase, America had acquired vast, mostly unexplored territories henceforth available to new, adventurous and gutsy settlers.

The open Western Frontier created an almost magic appeal for many early Americans. In their view, America was not just a great nation founded on Freedom. It was actually an ever-expanding Free Republic which offered what no European state could ever offer: almost free land for all who wanted to go West, settle there, and claim a piece of it. Old settlers and new immigrants alike could have a real chance to make their way West, legally claim virgin land as their own, and become legitimate property owners by using their own virtues of courage, stamina, and spirit of adventure.

Plenty of land

Think about it. Where else in Europe could the children of landless peasants dream of owning the land they worked on that since time immemorial had been the uncontested property of the rapacious aristocracy? Short of a revolution that would destroy the entire political and economic order, (this happened with the French Revolution of 1789; but the Old Order eventually prevailed), this was an impossible dream. But here in America this dream of owning land was quite possible, and fully legal. Difficult and arduous, of course, but nonetheless possible.

Hence the almost irresistible appeal of a Wild American West that simply needed hard working new settlers who would turn the uncultivated prairie into beautiful and productive farm land.

Adventure for the common man

And here it is important to observe how the American Frontier evoked similar deep strands existing within some old European traditions. While unevenly spread, the drive to travel, explore and settle new lands is an old European theme.

For example, centuries before the Christian Era, sailing across the Mediterranean on rather primitive ships, the ancient Greeks colonized Sicily and parts of Southern Italy. And, as we know, classical Greek literature gave us the Odyssey, the incredible tale of a hero’s adventurous journey back to his native island, after a long war in a distant land.

And in later centuries, we have countless European travelers and navigators, from Marco Polo to Columbus, from Vespucci to Vasco da Gama and Magellan. These are the people who discovered new continents and brought back exotic riches and specimens of unknown plants and animals.

This vast heritage of journeys and explorations was in large measure transformed by legends, inaccuracies and fantastic exaggerations. But it kept alive an underlying European yearning for new places, usually imagined as better than the old ones.

The Frontier

Well, the American Western Frontier made the prospect of discovery and adventure possible and available not just to uncommon heroes and skilled navigators, but to the common folks. Driven by the vision of “conquering” the new virgin lands, ordinary people, with no special skills or prior experience, were motivated to embark in the incredible adventure of discovery, eventually claiming new lands for themselves and their families in the American Western Territories.

The caravans of covered wagons that traveled West were driven by ordinary people often with little education and rudimentary skills. These were not captains and admirals bankrolled by kings or rich merchants. They were common people animated by the hope to find good land and settle there, this way achieving the highest aspiration of landless farmers. And it is in large part for this reason that the push West by countless pioneers has become legend. This way, the drive to the American West became a glorified Everyman’s Odyssey.

American uniqueness

So, there you have it. Here is the exhilarating picture of America. There is this New State, founded by a Sovereign, Free People who created strong institutions of Self-Government, whose main purpose was and is to protect Individual Freedoms. On top of that, this New Blessed Land was luckily removed from backward Europe and its constant wars. Thanks to the American Constitution and the Bill of Rights, in this New Blessed Land people, including all newcomers, can be and are free.

And, to top it all off, people who arrived from Europe almost penniless, with some effort could figure out a way to be outfitted and travel towards the seemingly infinite West, where they would find plenty of land that they could claim as their own, according to clear laws and statutes.

Yes, this attractive picture is in large measure myth. Most likely, reality was much harsher and unforgiving for tens of thousands of ill-equipped, naive immigrants. Nonethless, the myth of a Good America became the established narrative. And this positive narrative sustained the American Republic in its early decades.

Freedom and land

Whatever the exaggerations about what America could offer, for the common man and woman for sure no other country in Europe could match such an attractive prospect. By the standards of the time, America was indeed exceptional: Freedom and Land for all well-meaning, hard-working people.

Over time, this country became successful not because of its size, resources and open land –Brazil and Russia also have size, resources and open land– but because it was founded by people who shared the firm determination to affirm a constitutional arrangement that would uphold and preserve the God-given individual liberties of its citizens.

Protection of Individual Freedom is the core principle at the foundation of America, and its most precious gift to new settlers. Over time, vast prosperity was created by millions of free people who engaged in diverse productive activities, being reassured that their government would protect their endeavors, and not hinder them.




Why America is a unique country – Part 1

America is a truly unique country. But not for the most commonly held reasons: “Come to America ,so that you will have a great chance to make money and be rich”. In truth, throughout the world America is viewed (sometimes with envy, sometimes with contempt) mostly as a country of great economic opportunity for those who are willing to push forward with determination, grit, passion and sometimes heartless aggression. America is the Promised Land where making money, advancing one’s social position, and building a better future for oneself is easier than elsewhere.

The other side of the coin is that America is viewed as the country where only money and material achievement are worthwhile goals, pursued singlehandedly by most people, sometimes in a heartless and unscrupulous (and at times even illegal) manner. According to many critics, because of this narrow focus on getting rich, the Americans have created a materialistic and somewhat decadent, soulless society. Some of this, both the positives and negatives, may be true.

But this is not what America, at its core, is about.    

It is all about Freedom

Indeed, both admirers and critics of America get it wrong. They focus on outcomes –material success—and neglect to appreciate and understand what inspires people to engage in activities. In other words, they do not understand the deep drivers leading to prosperity.

The truth is that material success in America is possible because all citizens know that, thanks to the protection of individual rights guaranteed by the US Constitution, they are truly free citizens.

And individual freedom, of course, includes economic freedom, that is freedom to engage in profit-oriented enterprises. When motivated people engage in enterprises without the constant fear of arbitrary obstacles placed on their way by a tyrannical, unaccountable government, economic success, while certainly not guaranteed, is more likely.

So, here is the thing about America. The fundamental idea at the foundation of the United States of America was not and is not “Come here to America to Make Money”. The main idea was and continues to be “Come here to America to be Free”. From this perspective, prosperity (again, possible, aspired to, but not guaranteed) is a welcome outcome of a life in which the individual, being free from state-imposed coercion, has the luxury to focus his/her efforts on the pursuit of his/her passions.

“In America you have a better chance to prosper because you are truly free to pursue your own dreams. You are free because you enjoy the protection of basic Individual Rights provided by the US Constitution. As the US Government protects your Freedoms, in America you do not have to worry about a rapacious, arbitrary government interfering with your affairs, or punitive regulations and taxes that will ultimately suffocate your enterprise”.

Indeed, it was this single fundamental principle –achieving and securing Freedom for all Americans—that inspired the Revolutionary War of 1776 and subsequently the creation of the US political institutions whose primary purpose is the protection of Individual Liberty. After the Constitution of 1787 established the institutions aimed at securing and protecting political and personal Freedoms, millions of Americans, old settlers and new settlers, could peacefully unleash their personal creativity without any fear of interference by the state, confiscatory taxes or other impediments to private sector economic activities so common in Europe at that time.

Freedom to do

So, having secured “Freedom from Tyranny”, the Americans could unleash their collective “Freedom to Do”, freeing up individual creativity, (if it was and is exercised within the boundaries of the Law). And, as we know, creativity often turned into innovation and entrepreneurship. Over time, entrepreneurship and the pursuit of commercially viable innovation made millions of Americans into successful professionals, inventors and business owners. 

In a word, in America, widespread prosperity is the welcome consequence of constitutionally guaranteed Individual Freedoms. Individual Freedom is at the foundation of economic success. America became rich not because becoming rich was the declared goal; but because it upheld and protected the Freedom of its citizens.

The European intellectual roots of the American political culture

How did America come to embrace this unique notion whereby government’s primary purpose is not to get on with public administration and “get things done” but to protect individual liberties? The answer is in the enthusiastic embrace by the intellectual elites in the British Colonies in North America of the ideas elaborated by European political philosophers who belong to the intellectual current known as the “Enlightenment”.

Indeed, the XVIII Century is generally known as the “Age of Light”. Yes, this was the age of the “Enlightenment”. Locke, Montesquieu, Voltaire, d’Alembert and Diderot are among the mostly French and British thinkers and authors of that prolific era.

The Enlightenment started with a renewed and vigorous focus on science, the rigorous observation of nature, experiments and emphasis on physics, mathematics and geometry. Many educated people, especially in France and Britain, over time developed the firm belief that the Universe surrounding human beings is a beautiful, harmonious whole designed by a Benign Creator, according to clear mathematical principles.

From this perspective, while much about the Universe was still unknown, everything was deemed to be knowable. Provided consistent effort and a keen desire to educate oneself about the proper ways to open the secrets of the natural world, eventually everything would become clear.

This is the meaning of “Enlightenment”, literally a process leading to expanding the light of knowledge. In turn, this approach would bring the light of science-based knowledge into the world –for the benefit of all human beings. Hence the emphasis on engaging in new scientific endeavors, described in many new books aimed at the general public, and education. Most fundamentally, via education, all people, including the common man of modest means, would become enlightened. 

Rational Man

According to most of the thinkers of the Enlightenment, rationality and reason –the essential organizing principles of the physical universe– are also essential human features. If men often behave irrationally, this is due to ignorance, lack of education, or bad teachings that instill superstitions, false ideas, and bigotry.

But for all these ills there was an excellent remedy: proper, science-based education. Education inspired by rigorous science would offer precious, scientific knowledge to all human beings, this way strengthening man’s natural foundations of reasoned thinking, rationality and even handed tolerance vis a vis other humans. 

Relying on these strong philosophical foundations, the European thinkers created new –and truly revolutionary– notions about the proper foundations of a political society, including the concept of the Natural Rights of Man, while elaborating the construct of a new type of rational, organized state populated and governed mostly by reasonable, “enlightened” men. This new political society would be based on voluntary arrangements agreed to by free people –a “Social Contract” — aimed at setting up just and accountable governments.    

Well, needless to say, given the prevailing reality of mostly medieval states ruled by absolute monarchs, there was almost no chance to see any of this come to fruition within Europe.

The American elites embraced the Enlightenment

It was instead in the New World, in the British Colonies of North America, that these truly revolutionary European ideas about science, learning, knowledge, Natural Rights, Individual Freedom and self-Government found a truly dedicated audience. And therefore, a truly fertile ground.

The middle class elites of the New World seemed to be animated by a spontaneous yearning for science and learning. Many early Americans had received just some or little formal education. Still, they were keen students and avid readers of the great works of the European thinkers of the Enlightenment.

Eventually, these self-taught American Colonists came to believe that, once free of the yoke imposed on them by the oppressive and unjust British Monarchy, in this New World they could give life to a new society ruled justly through a well balanced self-government, just as theorized by their favorite Enlightenment philosophers. 

And it worked. These ideas inspired the first clashes with the British authorities and eventually the Declaration of Independence of 1776 and the ultimately successful Revolutionary War which led to the end of British rule. With the notable ghastly exception of the long and bloody Civil War –a conflict between the supposedly universal principles of freedom and equality and the horrendous practice of slavery in the South– America seems to present an almost linear picture of the happy evolution of a free society that became prosperous because the citizens could freely engage in productive, money-making enterprises.

A beacon of light across the Atlantic

And this mostly benign picture, of course, inspired millions of unhappy Europeans. While there were many drivers behind the migratory waves of Europeans into America –and the pursuit of better economic opportunity was definitely a major factor–  the notion of leaving behind misery and poverty caused by political oppression, while embracing a New World ruled by benign laws that protect individual freedom, was definitely a powerful magnet which motivated millions to sail from Europe and its rather miserable conditions to America –never to come back.

And there is more. Owing to its geographic position, this New Blessed Land was conveniently separated by a vast Atlantic Ocean from the constant fracas caused by quarrelsome European states.

Indeed, this New Republic was situated in a pristine New World. It had no enemy states at its borders. (Of course, we should not forget how the American settlers over many decades essentially destroyed the Native American Nations that were pushed away by the colonists from the lands they had inhabited for centuries. The “Indians” were eventually confined into small reservations with few if any opportunities).

Which is to say that America became something like a controlled laboratory experiment. It could grow and develop without the constant worries of threats to its national security and the need to go to war to preserve it.

End of Part 1