While U.S. economic mobility plummets, China emerges as cradle of opportunity

America’s economic dominance is a key aspect of its national history. It has cemented itself substantially since our nation won independence more than two centuries ago. Today the United States continues to hum along as the largest economy in the world, having been an economic powerhouse since the late 19th century and maintaining prestige as the largest national economy since the end of World War II.

In 1776 Adam Smith, a Scottish philosopher, published The Wealth of Nations, which outlined the free market system that has since become a cornerstone in values for United States economics. Free enterprises, owned by private individuals and operating with a limited amount of government regulations, make markets non-excludable and enticing to creative and ambitious individuals.

Beginning in the 1790s, the first examiner in the American Patent Office, Thomas Jefferson, made innovation the core of the American patent process, and thanks in part to his efforts American income per capita increased to become the highest in the world by the 1830s, bringing an end to western Europe’s theretofore unchallenged dominance.

In more recent decades, America’s growing interest in venture capital has created a hub of young and ambitious entrepreneurs that constitute the tightest and most advertised core of self-made people. In the 1950s, as Dean of Engineering at Stanford University, Frederick Terman launched the first-ever industrial park—an accessible space designed for start-ups to blossom. Many consider it to be at the origin of Silicon Valley. And it is these spaces for bright ideas that have caused leaders like San Antonio, Tex. Mayor Julian Castro to describe America as, “a country like no other, a place where great journeys can be made in a single generation.”

America continues to be a cradle of life for many self-made individuals as a country of upward social mobility, but today such journeys are fewer and farther between here compared to other wealthy nation. Although the collective commitment to the American dream remains solid, the government is buried beneath debt, education has become increasingly costly and jobs continue to be scarce. The prospect of improvement seems out of reach for ordinary people.

Income equality, having grown for years, is now at it’s highest in decades. In a time where the question of economic growth is accompanied by fear, it seems that the reduction of social opportunity is a structural problem that will be a barrier in the long run. This contributes to a vicious circle; in precarious situations, investors are only willing to invest in enterprises with predictable payoffs. They don’t see gold mines in innovation anymore—they only see risk. And as innovation is pushed to the side, the trend of social divergence continues. The elite becomes entrenched and poverty sclerotic.

The loss of social mobility in America is an issue that former Florida Governor and potential 2016 presidential candidate Jeb Bush has begun to draw attention to. “It’s just so un-American,” Bush said, adding, “And yet none of the conversation and the debates are really about this. But upward mobility is the chance to solve a lot of problems…”

A study led by Jo Blanden, Paul Gregg and Stephen Machin, from the London School of Economics, demonstrated American social stagnation by pointing out that, in the United States, a father’s income was a better predictor of his son’s income than in seven other countries—including Germany, Norway, Finland, Canada and the United Kingdom.

“Going forward, we have to deal with our longer [term] structural problems. The biggest one, as far as I’m concerned, is that we’re no longer socially mobile as a country,” said Bush on MSNBC’s “Morning Joe” program on March 7, 2013. Bush concluded by warning his audience that, as the global economy becomes more competitive, “We need to raise the level of our game to the 21st century”.

And while the United States has failed to accomplish this so far, many Asian countries like China have not. In the last two decades China’s economy has been growing at about twice the rate of that of the United States, and it has come a long way in terms of privatization.

Until the late 1980s China was built on a Soviet model; there were no private businesses or aspects of capitalism. But Deng Xiaoping, who rose to power in the years after Mao Zedong’s death, enacted broad reforms to shift to a more market-oriented mixed economy. Though more symbolic than fruitful, even its agricultural collectives were privatized to boost productivity. Western-style management systems were introduced and inefficient state-owned enterprises were closed. China beat us at our own game.

Most of today’s Chinese billionaires are children of capitalists and intellectuals who were crushed by Mao during the Cultural Revolution. Increasingly often they are coming back to China after a European upbringing, on the prowl for the success that was denied to their parents. This generation built China’s 7% economic growth and helped make it the prettiest house on the ugly block in this period of recession.

America’s historical hegemony has made us numb to the roots of our economic success. Its economic downfall has answered a question we had never felt the need to ask: what was making America the economic leader of the world? To which we now have the answer: it’s social mobility.

 

—Heloise Mercier ‘16 is a student at Vassar College.

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