Good news for the U.S. economy. The August 2020 unemployment rate is 8.4%, down from 10.2% in July. This shows how well the U.S. economy is recovering from the coronavirus pandemic.
Of course, the pandemic is a hit to the economy but it is a temporary hit as our rapid recovery demonstrates. The key factor is the underlying strength of American business. A robust free enterprise system coupled with a free democratic political system.
Edward Conard from the American Enterprise Institute describes the power of the American economy in his recent book, “The Upside of Inequality.” As Mr. Conard says:
- U.S. employment has grown twice as fast as employment in Germany and France since 1980. America has achieved this employment growth at medium household incomes that are 15 to 30 points higher than other high wage economies such as Germany, France and Japan.
- As the economy grows, it values innovation more. Successful innovators such as Jeff Bezos and Bill Gates, become wealthier than innovators have in the past.
- Information technology has opened a window of new investment opportunities and increased the productivity of the most productive workers. Moreover, in today’s knowledge-based economy, companies can scale to economy-wide success with little need for capital. Successful innovators need not share their success with investors.
- Without much need for capital, start-ups become all-or-nothing lotteries. The chance for enormous payoffs attracts a larger number of more talented gamblers. More gamblers produce more outsized winners and more innovation.
- Their success provides American workers with more valuable on-the-job training, at companies like Google, Facebook and Apple, than they can get in other high-wage, but slower growing manufacturing-based jobs.
Conclusion. The outsized success of America’s 1% has been the chief source of growth exerting upward pressure on domestic employment and wages. The success of America’s top 1% is an asset, not a liability.
Next: If the public mistakenly blames the success of the top 1% for the stagnant wages of the middle class, while leaving the true sources of slow-growing wages – trade, trade deficits and immigration – unaddressed, a dangerous feedback loop is likely to ensue. More on this soon!