THERE are many reasons why for 100 years, the United States was the global center of economic power and innovation.
The US was isolated from military invasion. The land was rich with mineral wealth and, more important, vast farmlands capable of producing an abundance of food and agricultural raw materials. While the European nations all had colonies in every corner of the world providing both natural resources and markets for their goods, the US had to rely on creating its own wealth.
The Industrial Revolution began and was in full swing in Europe long before the US entered its darkest period, the civil war, which tore the country apart. But it was the US that took the advancements brought about by the Industrial Revolution and made the country the most prosperous in history.
The one defining characteristic of the US that separated it from every other nation on earth was economic mobility, the freedom and ability for virtually everyone to move up the economic ladder. The social and economic structure of every other country severely limited a person’s opportunity to become wealthier. The social and economic-class structure was fixed. A peasant would always be a peasant. One who was born into a family of shopkeepers would never become part of the ruling elite class. And by the same token, a member of the aristocracy could never understand what starting from the ground up would mean.
The Industrial Revolution slightly opened the door of economic mobility but it was the very rare exception of a man who started at the bottom and could work his way to the top of any private or public organization.
The US was the exact opposite. Each man had the chance to excel and achieve, based on merit and effort, not the status and station into which he was born. Of course, there were many rich families that savagely protected their own interests; oligarchs we call them today. But the system was designed to reward initiative and smart work.
Some of the most successful men in US history made the move up the economic food chain. John D. Rockefeller, in his time the wealthiest man in the world, was the son of a traveling salesman. Rockefeller’s first job at 16 was as an assistant bookkeeper. Railroad and shipping magnate Cornelius Vanderbilt quit school at 11 and at 16 ran a small sailboat ferry in New York City. The founder of US Steel Corp., Andrew Carnegie, came with his family as poor immigrants from Scotland, borrowing money to make the voyage. Henry Ford started as an apprentice machinist and owned a small sawmill to pay the bills while he studied engineering and bookkeeping. Wall Street icon Jesse Livermore ran away from home at 14 because he did not want to work on the family farm. Another stock-market name, James Fisk, ran away from home and worked at a circus. Fourteen years later he became a stockbroker.
The US was a nation where a person could start by cleaning tables at a fast-food restaurant with the idea that someday he/she could own their own restaurant. That is economic mobility.
But since the 1970s, economic mobility has disappeared in the US at an alarming rate. We know that small- and medium-size businesses are the economic drivers of an economy. The number of self-employed Americans at the end of World War II was roughly one-quarter of the country’s population. Now it is at a historic low of 7 percent.
US economic mobility has been destroyed to the point where one person may own 20 McDonald’s restaurants serving tens of thousands of customers who will never have a chance at business ownership. In 2013 more than 50 percent of all working American earn less than $30,000 a year, the minimum wage.
Economic mobility is not a government program. It is a mindset of the people. The “rags-to-riches” success stories of our now elderly taipans are still being repeated. The one-man food kiosk that 10 years later is 300 strong. The small factory that worked to develop an export market. The tricycle driver who believes one day he can own his own tricycle, his own business.
The West is dying. Countries like the Philippines will eventually be the economic drivers of global wealth creation. The reason is that these nations are embracing and using the same formulas for economic success that made the West strong.
Disclaimer: This is not my personal piece. This is written by Mr. John Mangun via http://businessmirror.com.ph of the same title. This piece carries a healthy opinion and perspective about a. what could have been the cause of America’s economic decline, b. what can individual do about it and c. why this (economic mobility) can help other nations as well.
E-mail to email@example.com. My web site is http://www.mangunonmarkets.com and Twitter me @mangunonmarkets. PSE stock-market information and technical analysis tools provided by COL Financial Group Inc.