[This post is the first in a series on American Exceptionalism. I’ve written on this subject elsewhere, so some of you may want to skip this one.]

Since at least de Tocqueville, observers of America have tried to put their finger on what it is that makes us so different from other countries. The question is an urgent one because America isn’t just different – it’s been much more successful.

In the long history of human societies, no country has so utterly dominated the world in so many ways, and with so light a hand. If the world’s peoples were shot up with truth serum and had to pick a country to dominate everything, they would unhesitatingly pick the US. Some countries might be, um, “nicer,” (say, Finland) but those countries bring a whole new meaning to the word impotent. If you picked them to dominate the world, the world would quickly be dominated by China.

All previously dominant societies were empires, countries that subjugated others and kept them down. America isn’t exactly a shrinking violet when it comes to intervening violently when its interests are threatened, but we don’t subjugate other peoples, except to the extent of suggesting (and while our troops are still on site) that they might try democracy.

So why is America different? My view is that we are different because the United States and the Industrial Revolution were born at the same moment in human history. Setting aside religious happenings, the Industrial Revolution was the most important event in the long course of human civilization. Why? Because before that time human wealth – and therefore human welfare and happiness and intellectual potential – had grown dreadfully slowly over the centuries. From Periclean Athens (about 450 BC) until 1800, human wealth grew hardly at all. Perhaps worse, what wealth there was was hogged by a tiny group of dominant folks: kings, princes, aristocrats. Everyone else was dirt poor. Then, suddenly, human wealth exploded, growing 4,000% from 1800 to 2000, a mere 200 years.

This “separated at birth” relationship between the Industrial Revolution and the US is a crucial point: every other important country in the world had existed for centuries (or millennia) by the time the Industrial Revolution began, and they therefore had developed robust cultures that were overwhelmingly hostile to the creation of private wealth.

Imagine that you were an aristocrat in Europe in 1800. Your family had been wealthy and powerful for untold generations. Now, suddenly, untitled upstarts were creating enormous wealth and power that rivaled, or in many cases exceeded, your own. Consider the case of Andrew Carnegie, an immigrant boy who arrived in America in 1848 too poor to afford schooling. By 1901, when he sold Carnegie Steel to a group of investors who formed the United States Steel Corporation, Carnegie was the wealthiest man in the world – king, prince, aristocrat or otherwise.

Or look at it from the other end of the social spectrum. If you were a member of the bottom rungs of society in most countries after the Industrial Revolution (Marx’s proletariat), you would die in those bottom rungs, and so would your children and grandchildren. Virtually every society on the planet – Europe,  Asia, India, China – maintained rigid class systems that kept people in their places.

This might have been tolerable when everyone was poor except the king, but it quickly became intolerable when ordinary citizens suddenly began to build their capital. If we want to understand the powerful appeal of Marxism, and his hatred of the bourgeoisie, we only need to look at the class structures of legacy societies.

But America had no such problems with the Industrial Revolution and its consequences. We had no titled aristocrats, no kings, no princes of the blood. And we had no rigid class structures. Americans tended to view the opportunity to create wealth as an unalloyed good, in stark contrast to – well, everyone else on the planet.

Thus my assertion: Of all the attributes that have led to American exceptionalism, the most important is our attitude toward private capital.

Ok, so that’s why America is different. But why is it better? See my next few posts.

Next up: American Exceptionalism: Private Capital As the Decisive Competitive Advantage

 

Please note that this post is intended to provide interested persons with an insight on the capital markets and is not intended to promote any manager or firm, nor does it intend to advertise their performance. All opinions expressed are those of Gregory Curtis and do not necessarily represent the views of Greycourt & Co., Inc., the wealth management firm with which he is associated. The information in this report is not intended to address the needs of any particular investor.