Why is America so rich?

**astralis** · 23 Nov 10,, 19:19

these "random" environmental factors also had a huge effect on whether or not a society was going to industrialize, too. it's no accident the UK industrialized first of all powers-- she had rivers for easy transportation and huge deposits of easy coal (along with an already existing big export trade, a fairly well-off middling-sized populace). this reduced the significant costs of early industrialization.

most new technologies are actually somewhat less efficient than the last iteration of the previous perfected set of technologies. it usually requires some localized incentive or massive state support to make the jump. that was one of the main reasons why china didn't industrialize in the ming era (or for that matter the song!) despite having almost all the prerequisites for industrialization-- the previous set of technologies was so efficient, and china had so many people, that there just wasn't the incentive to industrialize.

**cdude** · 23 Nov 10,, 19:43

Originally Posted by gunnut

Mongols had many horses. They never developed into a technological society. Chinese used cattle to farm.

That's why they built a great empire on the back of horses and the north American Indians built nothing. The thesis of "Guns, Germs, and Steel" is that these seeminlgy irrelavent enviromental factors add up.

**cr9527** · 23 Nov 10,, 20:22

My take on this is that US has extremely relaxed business regulations and taxes, which allows for a huge booming economy.

This however doesn't explain everything, but it has become one I find most believable.

Anyhow, here's something else that the US breaks the rule of...

**Double Edge** · 23 Nov 10,, 20:33

Originally Posted by astralis

yeah, WW2 took out a lot of close competitors to the US. close being relative of course; by 1940 the US was already considerably stronger industrial wise than all of the old Great Powers. but it didn't achieve Superpower status until the UK, Germany, and USSR was laid low.

Right, so the US might have become the richest but not a superpower, that is one that left the rest behind by miles and with the requisite defense budget to match.

This implies there'd be just the USSR as the sole superpower.

Boggles the mind

call for what-if WW2 did not happen thread

**Parihaka** · 23 Nov 10,, 21:30

Originally Posted by gunnut

I understand the reasoning. I just want to hear the "why."

Why didn't they achieve the population density? Why were they in a nomadic lifestyle for millenia? No one starts with large population. Why did the colonist achieve the population density? There was a lot of room to spread out. They did, but still maintained cities and towns. What was different?

We know culture can't be a factor because that would mean their culture was inferior for development and that's politically incorrect to suggest.

We know intelligence can't be a factor because that would mean some people are dumb and that's politically incorrect to suggest.

So what's left?

I really don't see where you're going with this. You could just as easily ask why did a single century produce Leibnitz, Newton, Boyle, Huygens, Flamsteed, Wren, Hooke et al, all within a tiny area? More especially, what has this to do with the $US being chosen as fiat?

**cdude** · 23 Nov 10,, 21:31

What's the source of the plot?

Second, US is to big to be ONE data point, it'd be more interesting to see where the individual states are at.

Originally Posted by cr9527

My take on this is that US has extremely relaxed business regulations and taxes, which allows for a huge booming economy.

This however doesn't explain everything, but it has become one I find most believable.

Anyhow, here's something else that the US breaks the rule of...

**cr9527** · 23 Nov 10,, 21:40

Originally Posted by cdude

What's the source of the plot?

Second, US is to big to be ONE data point, it'd be more interesting to see where the individual states are at.

Don't take it too seriously :P
There are a few sources, some from discover magazine
Religiosity vs. GDP PPP Per Capita | Gene Expression | Discover Magazine

**gunnut** · 23 Nov 10,, 21:47

Originally Posted by cdude

That's why they built a great empire on the back of horses and the north American Indians built nothing. The thesis of "Guns, Germs, and Steel" is that these seeminlgy irrelavent enviromental factors add up.

And what have they left us with?

**gunnut** · 23 Nov 10,, 22:00

Originally Posted by Parihaka

I really don't see where you're going with this. You could just as easily ask why did a single century produce Leibnitz, Newton, Boyle, Huygens, Flamsteed, Wren, Hooke et al, all within a tiny area? More especially, what has this to do with the $US being chosen as fiat?

The whole point is that US $ being chosen as fiat was that we had the biggest industrial capacity, farthest away from potential warzones, politically stable, free trade, and of course a powerful military. Where did these things come from? They don't just pop out of thin air.

Yellerbelly said "location, location, location." That of course was the most important part. But then it was up to the people to develop this potential. The natives never did develop a highly advanced society. The immigrants from the old world did. What did they do right? Temperature couldn't have been the only factory limiting Canada and Mexico from developing close to what the US did.

Canada was tied to the old British Empire. Old habits break hard. Mexico became independent from Spain in the early 19th century, but did not adopt a society based on individualism like the US did. We are different from the rest of the world because we value individualism. We don't trust the government. We like free enterprise. That sets us apart from the rest of the world. Combined with a huge land and abundant resources, we were able to develop into the pre-eminent power on the planet.

The UK was the first super power of the technical age since the industrial revolution. Why did it start there? Resources, of course, and being isolated (but not too far) from the continent also helped. Then there's the devotion toward innovation. People were encouraged to read and learn. There were numerous learning centers set up in the UK, and many of them still exist today.

The difference was the British Empire needed colonies to feed the industry. The US has nearly all the resources we need, plus land.

It was the system of individualism and valuing freedom and innovation combined with plentiful resources that made us rich.

**astralis** · 23 Nov 10,, 23:17

DE,

Right, so the US might have become the richest but not a superpower, that is one that left the rest behind by miles and with the requisite defense budget to match.

This implies there'd be just the USSR as the sole superpower.

no, there would be a multipolar world instead.

**Parihaka** · 23 Nov 10,, 23:29

Originally Posted by gunnut

The whole point is that US $ being chosen as fiat was that we had the biggest industrial capacity, farthest away from potential warzones, politically stable, free trade, and of course a powerful military. Where did these things come from? They don't just pop out of thin air.

Yellerbelly said "location, location, location." That of course was the most important part. But then it was up to the people to develop this potential. The natives never did develop a highly advanced society. The immigrants from the old world did. What did they do right? Temperature couldn't have been the only factory limiting Canada and Mexico from developing close to what the US did.

Canada was tied to the old British Empire. Old habits break hard. Mexico became independent from Spain in the early 19th century, but did not adopt a society based on individualism like the US did. We are different from the rest of the world because we value individualism. We don't trust the government. We like free enterprise. That sets us apart from the rest of the world. Combined with a huge land and abundant resources, we were able to develop into the pre-eminent power on the planet.

The UK was the first super power of the technical age since the industrial revolution. Why did it start there? Resources, of course, and being isolated (but not too far) from the continent also helped. Then there's the devotion toward innovation. People were encouraged to read and learn. There were numerous learning centers set up in the UK, and many of them still exist today.

The difference was the British Empire needed colonies to feed the industry. The US has nearly all the resources we need, plus land.

It was the system of individualism and valuing freedom and innovation combined with plentiful resources that made us rich.

So how do those statements square with the answers to these questions

Originally Posted by Parihaka

If Bretton Woods (the establishment of $US as fiat) is such an insignificant factor, how come more dollars are still held overseas than within the US? In other words the US's script lending economy is still larger then the US domestic economy.
How does this effect the US's ability to consistently run a deficit?
Is the size of that deficit historically commensurate with world economic growth?
As the US dollar is decreasing as a ratio of all currencies held in foreign reserves, what effect is this having on the US economy?
Historically, what is the relationship of internal US interest rates in comparison to those of the rest of the world?

Best answer gets an economics smiley named after them, all answers in an envelope with €50 to cover expenses.

**gunnut** · 23 Nov 10,, 23:45

Originally Posted by Parihaka

So how do those statements square with the answers to these questions

They led to the reaon why US dollar was established as a reserve currency of the world. The fact that the dollar is the reserve currency does help, but not the major factor of the US being a dominant power.

US dollar as the reserve currency does not alter:
1. land size
2. resources
3. climate
4. government structure
5. individualism

US currency as the reserve does make it easy for us to borrow money and fuel the consumerism that we all know and love.

We can have a mental exercise on what would happen if the dollar were replaced by the euro or the rmb as the reserve currency of the world. I don't know what would happen.

**Parihaka** · 24 Nov 10,, 00:32

Originally Posted by gunnut

They led to the reaon why US dollar was established as a reserve currency of the world. The fact that the dollar is the reserve currency does help, but not the major factor of the US being a dominant power.

US dollar as the reserve currency does not alter:
1. land size
2. resources
3. climate
4. government structure
5. individualism

US currency as the reserve does make it easy for us to borrow money and fuel the consumerism that we all know and love.

We can have a mental exercise on what would happen if the dollar were replaced by the euro or the rmb as the reserve currency of the world. I don't know what would happen.

Are you aware of Henry C.K. Liu's theories of dollar hegemony, how that supposed hegemony came about and the advantages to the US of that hegemony?

**gunnut** · 24 Nov 10,, 01:30

Originally Posted by Parihaka

Are you aware of Henry C.K. Liu's theories of dollar hegemony, how that supposed hegemony came about and the advantages to the US of that hegemony?

Nope. Just checked it on wiki real quick.

My point stands. The US dollar was chosen as the reserve currency due to the powerful industrial base and military strength. The US dollar as a reserve currency did not cause US to become powerful in the first place. It may have furthered our reign, but that's another topic.

**Parihaka** · 24 Nov 10,, 02:16

Originally Posted by gunnut

Nope. Just checked it on wiki real quick.

My point stands. The US dollar was chosen as the reserve currency due to the powerful industrial base and military strength. The US dollar as a reserve currency did not cause US to become powerful in the first place. It may have furthered our reign, but that's another topic.

Well no it's not, because the original question was Why is America so rich? We're all agreed that its geographical location and layout plus its human capital were all contributors to its rise. We seem to be in agreement that the massive influx of capital during WWII contributed to that growth. I still adhere to the statement that it was further chosen as the worlds reserve currency during Bretton Woods as it was best placed for the reasons above to act as a counter to the rise of the Soviet Union, strategic depth in the battle of capitalism vs communism.
As the worlds reserve currency it gives the US enormous advantages in competition with other economies.
As an example: during the recent economic crisis, triggered primarily by the US lead derivatives market all the worlds reserve bank governors dramatically increased liquidity to stabilise the international markets. Our official interest rates dropped virtually overnight from 8 percent to 2.5 percent.
The US response was to dramatically increase borrowing and more recently for the Fed to print trillions of new dollars. Any other economy, no matter how big or small that did that would have immediately seen massive inflation and devaluation of the currency. Instead we've seen a slow managed drop in the value of the dollar while every other country worth a damn has seen contractions of their economies and austerity measures i.e. reduced government spending in an effort to mitigate that profligacy.
In short, the global economy cannot allow a sudden collapse of the US dollar and so are cutting spending to try and soak up as much of the excess dollars as possible.
The US is in the enviable position over the short to medium term of being "to big to be allowed to fail" because it would destroy swathes of other countries reserves were it allowed to do so and decimate world trade as a consequence.
That is why America is so rich. Any other country that employed such measures would fail.
What happens over twenty years or so is another matter. Reserve bank governors have long memories and unless the US stops destroying international wealth you're not going to be rich much longer, geography and human capital regardless.