You are welcome to use any evidence to support your arguments. When you explain “why”, try not to repeat what the author says. Your post should be 300 words in total
1. Which attributes of the United States listed in this article do you think best explain U.S. prosperity? Why?
2. Which of the attributes listed in this article do you think are most at risk of being undermined by poor policy choices? Why?
Why the U.S. Is Still Richer
Than Every Other Large
by Martin S. Feldstein
April 20, 2017
Summary. The U.S. remains richer than its peers. But why? A plausible list of
explanations might include: A culture of entrepreneurship and a financial system
that supports it, abundant energy, immigration, smaller and more decentralized
government, long work…
Each year, the United States produces more per person than most
other advanced economies. In 2015 real GDP per capita was
$56,000 in the United States. The real GDP per capita in that same
year was only $47,000 in Germany, $41,000 in France and the
United Kingdom, and just $36,000 in Italy, adjusting for
In short, the U.S. remains richer than its peers. But why?
I can think of 10 features that distinguish America from other
industrial economies, which I outline in a recent essay for the
National Bureau of Economic Research, from which this article is
An entrepreneurial culture. Individuals in the U.S. demonstrate
a desire to start businesses and grow them, as well as a willingness
to take risks. There is less penalty in U.S. culture for failing and
starting again. Even students who have gone to college or a
business school show this entrepreneurial desire, and it is self-
reinforcing: Silicon Valley successes like Facebook inspire further
A financial system that supports entrepreneurship. The U.S.
has a more developed system of equity finance than the countries
of Europe, including angel investors willing to finance startups
and a very active venture capital market that helps finance the
growth of those firms. We also have a decentralized banking
system, including more than 7,000 small banks, that provides
loans to entrepreneurs.
World-class research universities. U.S. universities produce
much of the basic research that drives high-tech
entrepreneurship. Faculty members and doctoral graduates often
spend time with nearby startups, and the culture of both the
universities and the businesses encourage this overlap. Top
research universities attract talented students from around the
world, many of whom end up remaining in the United States.
Labor markets that generally link workers and jobs
unimpeded by large trade unions, state-owned enterprises, or
excessively restrictive labor regulations. Less than 7% of the
private sector U.S. labor force is unionized, and there are virtually
no state-owned enterprises. While the U.S. does regulate working
conditions and hiring, the rules are much less onerous than in
Europe. As a result, workers have a better chance of finding the
right job, firms find it easier to innovate, and new firms find it
easier to get started.
A growing population, including from immigration. Americas
growing population means a younger and therefore more flexible
and trainable workforce. Although there are restrictions on
immigration to the United States, there are also special rules that
provide access to the U.S. economy and a path for citizenship
(green cards), based on individual talent and industrial
sponsorship. A separate green card lottery provides a way for
eager people to come to the United States. The countrys ability to
attract immigrants has been an important reason for its
A culture (and a tax system) that encourages hard work and
long hours. The average employee in the United States works
1,800 hours per year, substantially more than the 1,500 hours
worked in France and the 1,400 hours worked in Germany
(though not as much as the 2,200+ in Hong Kong, Singapore, and
South Korea). In general, working longer means producing more,
which means higher real incomes.
A supply of energy that makes North America energy
independent. Natural gas fracking in particular has provided U.S.
businesses with plentiful and relatively inexpensive energy.
A favorable regulatory environment. Although U.S. regulations
are far from perfect, they are less burdensome on businesses than
the regulations imposed by European countries and the European
A smaller size of government than in other industrial
countries. According to the OECD, outlays of the U.S.
government at the federal, state, and local levels totaled 38% of
GDP, while the corresponding figure was 44% in Germany, 51% in
Italy, and 57% in France. The higher level of government
spending in other countries implies not only a higher share of
income taken in taxes but also higher transfer payments that
reduce incentives to work. Its no surprise that Americans work a
lot; they have extra incentive to do so.
A decentralized political system in which states compete.
Competition among states encourages entrepreneurship and
work, and states compete for businesses and for individual
residents with their legal rules and tax regimes. Some states have
no income taxes and have labor laws that limit unionization.
States provide high-quality universities with low tuition for in-
state students. They compete in their legal liability rules, too. The
legal systems attract both new entrepreneurs and large
corporations. The United States is perhaps unique among high-
income nations in its degree of political decentralization.
Will America maintain these advantages? In his 1942 book,
Socialism, Capitalism, and Democracy, Joseph Schumpeter
warned that capitalism would decline and fail because the
political and intellectual environment needed for capitalism to
flourish would be undermined by the success of capitalism and by
the critique of intellectuals. He argued that popularly elected
social democratic parties would create a welfare state that would
Although Schumpeters book was published more than 20 years
after he had moved from Europe to the United States, his warning
seems more appropriate to Europe today than to the United
States. The welfare state has grown in the United States, but much
less than it has grown in Europe. And the intellectual climate in
the United States is much more supportive of capitalism.
If Schumpeter were with us today, he might point to the growth of
the social democratic parties in Europe and the resulting
expansion of the welfare state as reasons why the industrial
countries of Europe have not enjoyed the same robust economic
growth that has prevailed in the United States.
Martin S. Feldstein is the George F. Baker
Professor of Economics at Harvard University and
President Emeritus of the National Bureau of