Author, The Origins of Business, Money, and Markets (Columbia Business School Press, 2011); Harvard College 65, Harvard Law 68, President of Roberts Proprietaries, Inc.
As a liberal Democrat, I favor regulation. But I also think business has a point when it complains about inappropriate or unreasonable regulation. Indeed, if the Democrats would better publicize the attention they pay to this complaint, they might do better at the polls. What never seems to get discussed, though, is WHY so much regulation generates complaint. Let me suggest a reason that is not ideological:
Our regulatory agencies, legally required to ensure fair comment and to provide credible studies of environmental and economic impact, now enact regulations only after a grueling and lengthy period of gestation. Once the regulation becomes final, nobody wants to go through that horrific process to make "minor" adjustments. As a result, as encumberments of the rule making process have proliferated, regulations have become rigid and too often ill-suited to a rapidly changing business environment.
There does exist a solution: the common law. The common law is a regulatory process based on brief, general regulations like the antitrust laws that inherently provides flexibility, in that judges can and do take account of changing circumstances and theories, and allow for rational and fair exceptions. Not every regulation would be improved by such a process, but many probably would be.
In this approach, agencies promulgating regulations would be allowed to write short, simple rules that set out the general idea and purpose, implementing them through case by case applications. Business would benefit in several ways. First, the thicket of regulation would be sharply cut back. Second, the regulation could be tailored to the precise circumstances of the business in question. Third, as a body of rulings developed, caselaw would provide, based on practical experience, the details that are necessary to guide business decisions. Fourth, this approach would generate far more caselaw than the present approach, providing a much richer, more complete set of guidelines. Two other possible benefits: first, this approach would greatly simplify regulation in general; second, it might also greatly reduce the requirements for providing information, while requiring the relevant information to be provided in particular enforcement actions or for particular regulatory informational purposes.
The first play George Bernard Shaw wrote, in 1892, was Widower's Houses. It sets out, with great clarity, the trap that ensnares everyone who lives in a large society (more than a few hundred souls) that does not provide a public safety net of some sort for people who cannot make an adequate living. In the play, the rich landlord of a row of execrable slum houses seeks to marry his spoiled daughter to a member of the gentry. All proceeds according to plan until the young gentleman learns that the girl's money comes from screwing rents out of the tenants. He insists that they live on his relatively meager funds alone. It transpires, however, that his funds are the interest on loans being repaid by those same rents. And as the prospective father-in-law points out, if capitalists like him don't provide slum housing, the tenants would go homeless. But if they try to fix the housing up, the tenants destroy the improvements. Consequently, everyone--tenants, landlord, lender--is trapped in a system. And all the moralizing--the landlord is greedy, the tenants are stupid and lazy, the mortgage holder is callous, etc.--is about the people trapped in the system.
What Shaw leaves unsaid, but is being said by Bernie Sanders, is that the system needs to change. In a rich society like ours, or like England at the time Shaw wrote, there is enough wealth to provide a social safety net for the worst off, so that a systemic trap need not arise.
But to get that wealth used in such a way requires a major change in the allocation of society's wealth. In the century or so since Shaw wrote, there have been two such changes. The first, consisting of Progressive, New Deal, and Great Society programs in the US, amounted to substantial reallocations of society's wealth, and resulted in tremendous economic growth through the 1970s. The second, the Reagan Revolution and the period of Republican domination of the US political process that followed, reallocated society's wealth in the other direction, back to the rich and privileged, and with the George W. Bush years and the Great Recession that capped Bush's efforts, resulted in a large economic decline.
The Republicans seeking the Presidency propose to continue the redistribution of social wealth to the rich and the privileged, although not in so many words. The Democrats both seek to reverse the direction of redistribution, but in very different ways. Bernie argues for a revolutionary leap; a change in one swoop of legislation. Hillary argues for a pragmatic program of change, necessarily gradual in nature. In World War II terms, Bernie wants to end the war with an atomic bomb; Hillary by fighting island to island until victory finally comes.
The trouble, of course, is that neither has the firepower. Bernie has no atomic bomb, just proposals. Hillary cannot guarantee any wins either; most likely, she would face the same total obstruction Obama has faced since 2010, and since even a Presidential victory and the winning of a Senate majority would not give the Democrats control of the House, the funding for any of her programs, much less Bernie's, would be up to the intransigent Republicans.
Something will change this bleak scenario, but as I write today, I don't know what.
As President Obama recently said to Marilynne Robinson,
there is a spike in fear within the US right now. There seems to be widespread
disquiet even in our wealthy and sophisticated metropolises. Outside of them,
disquiet seems to have turned into outright fear, as the articles about the
early death of middle aged white men suggest. And fear seems to underlie the
mysterious appeal of the many loony and mean-minded Republican Presidential
candidates and governors. Such fearfulness, which paradoxically come at a time
of nearly unprecedented peace and well being, causes people to turn ugly and
behave exactly contrary to the moral codes of their religions. Fortunately, we
are a diverse and democratic nation. Although vicious and greedy demagogues aim
to profit by fanning fears and hatred, as in Houston, plenty of us do not let fear
shape our behavior, and we have plenty of kind, decent, and admirable leaders
in the Lincoln and FDR mode to inspire the better angels of our nature.
Reading and hearing TV broadcasts about Republican "base" voters has been a distressing experience. It seems to me that the "base" consists of three types of voter: the ideologue, the fearful, and the selfish. We are not dealing here with simple ignorance. Ignorant people can learn. The "base" does not seem to have that ability, because each voter type starts with a fixed point of view.
The ideologue: typically, but not solely, an evangelical who responds to leaders claiming to have heard the word of God. If God spoke, then we of course must obey. There is no room for disagreement or alternative ideas; challengers to the word of God are evil, or to be charitable, just wrong. There seem to be many non-evangelicals who come to the political and public policy scene with equally firm, fixed, theoretical ideas. Once such an ideological world view exists, such people simply conform all information to the view. If, for example, one wishes to deny global warming, one simply insists that the scientists are corrupt or overlooking stuff, thereby producing false data. The denial comes first, shaping the apprehension of fact. Aspects of the ideological world view also characterize the fearful and the selfish.
The fearful: the historical evidence, as reported in Daniel Pinker's book, indicates that the world has steadily gotten safer from war and other forcible attacks, and other evidence shows that people have steadily gotten safer from natural disasters, disease, and starvation. Nevertheless, it seems that many Americans are more fearful than ever before, perhaps because of the global dragnet for news that now bombards every household. Fearful people act very cruelly and inconsiderately, because they believe their survival, or that of their loved ones, depends on killing or otherwise eliminating those who they see as threatening. They also seek strongmen, often dictators or demagogues, to lead the nation out of danger. As with the ideologues, their preset ideas about danger override all other considerations, including actual fact.
The selfish: perhaps few people are deeply selfish, but selfishness seems to characterize many of the billionaires and multi-millionaires who finance politics these days. These are people, like the Koch Brothers, who pursue their own immediate self interests without regard for the consequences to others. They may well adopt and believe in ideologies that justify or at least support the measures that seem in their self interest.
Perhaps the people I have described do not make up a majority of the eligible voters. But they certainly seem to constitute a very large segment of those among the eligible voters who actually vote. To be sure, there are many eligible voters who take more thoughtful positions. Unfortunately, there are also many eligible voters who take no position and rarely, if ever, actually vote, or if they do vote, base their votes on tribal identification.
The question this next Presidential election may decide is whether or not democracy, as wounded by the current Supreme Court, can survive these forces.
When people are oppressed and hopeless they may rise up in
anger, as in the turmoil of the Industrial Revolution. But it seems that if they are nonetheless fed and entertained, as are the modern victims of political discrimination in Europe and the US, they just give up. They don't expect voting to help, and so the Democrats flounder. Why? Because the Democrats look for support from those concerned about victimization, discrimination, and governmental policies that harm the public interest. Yet those they seek to protect don't vote! They especially don't vote in off-year elections when governors, state legislators, and US Representatives are elected. Because of their concerns and orientation, the Democrats should normally win the support of most Americans, and would if they all voted. But because something like 45 to 55% of registered voters don't bother to vote in off-year elections, and 40% don't even vote in Presidential election years, Democrats struggle to win half the votes of those who do go to the polls. And they are floundering in that struggle because they don't command the financial resources of the Republicans, they don't have the support of the most influential media, and they have proven themselves remarkably inept at communication.
I don’t know if I am writing to you, or a publicist for NYPL, or an underpaid staffer, but in any case I will tell you why, although I am most grateful to the library for its wonderful collection and the research I was able to do there, formerly donated substantially, and thanked the library in the preface to the resulting book (The Origins of Business, Money, and Market, 2011), I no longer give money. The reason is quite simple.
Serving as the titular head of the library is a great honor, extended only to those who have been financially successful—as they must be to raise the huge sums necessary for the library and as anyone can see by looking at who those people have been. So I fully expected that the wealthy people who received this honor, and who then sought contributions from the rest of us, would be taking a modest salary—not trivial, because that would be demeaning, but not extremely large: they don’t actually need it, and their plea for funds from the public is usually based on the library’s serious want of same. So when I discovered that the salary being paid to the head of the library was well over a million dollars a year, I realized that the thousand or so dollars I could contribute was actually being used to pay this person far more money than I thought made any sense. Accordingly, I have not contributed to the library for a number of years, and have no intention of doing so until I learn that, as for the great Mr. Gregorian in former days, the leader’s compensation has returned to saner levels.
The news yesterday carried two unrelated articles that tell the current political story very clearly. One is about how corporate lobbyists have so thoroughly killed Republican Congressman Dave Camp's tax reform bill that the Congressman will not run again for his House seat, even though he holds the important position of chairing the tax writing committee. The second is about the Supreme Court's decision in a case,McCutcheon v. Federal Election Commission, No. 12-536, that holds unconstitutional any limit on the total amount of money that a person can contribute to political candidates or entities. In other words, we now live in an oligarchy of the wealthy, in which politics (and judges) are completely controlled by those who can and do provide unlimited funding. They will control, for their own benefit, decisions on all important public issues, from climate change to war. Citizens, even those who by normal standards would be regarded as wealthy, no longer have a realistic voice in their own political destiny. The implications are not entirely terrible. After all, some of the most successful societies in history have been ruled in this way. Think ancient Athens, Republican Rome, and Great Britain between the Act of Settlement in 1701 and the 1st World War. More ominously, though, we now live in a world where the fortunes of these oligarchs are no longer tied to the conditions and destinies of the countries in which they live. If the US declines as its middle class shrinks, while certain other countries flourish, the American oligarchs will not be much affected. And if worse comes to worst and social revolution breaks out, they will--like the bin Laden family on September 12, 2001--simply flee to places abroad. Basically, they don't have much stake in the national destiny. This leaves the US in a position identical with traditional colonial possessions. The mother country could exploit the possession quite ruthlessly, because its authorities had little stake in the colony's well-being, and returned as little benefit as was absolutely necessary to the exploited territory.
We liberals do no service by denying that many of those who need public assistance fail to help themselves and appear to be moochers. The self-righteous right, the smug who have enjoyed good luck all their lives, and many poor or lower middle class people who observe the homeless and the out of work up close, are responding to a highly visible reality. What is lacking, though, is an explanation. Why would homeless people spend their days onerously picking up tin cans, sitting in the cold or the heat to beg, living in proximity to psychopaths and other dangerous people, and subjecting themselves, their pets, and their children to filth, bureaucracy, public contempt, and deprivation? Calling them moochers (and worse) assumes that they are rational people who lack the moral fibre to act in their own interest, much less the community's. Yet as I understand it, many of the people on public assistance are either there temporarily due to misfortunes beyond their control, or because their minds lack the internal structures and capabilities necessary to function in our modern urban society. We act as if they stupidly and irrationally choose their misery. In reality, such people are the exception, not the rule.
I was reading a review in the recent NYRB of a book by the man who invented the "trolley problem," Joshua Greene, which shows that many people refuse to kill one man, even though it would save 5 people. A runaway trolley car containing 5 passengers can be diverted if you push a man off a bridge into its path. If you don't do that, the car will crash and kill the passengers. What do you do? The "trolley car" problem has become a widely used thought experiment in philosophy classes. For example, Michael Sandel starts his MOOC course on justice with it. Greene talks about the psychological difference between active agency and passivity. But I think the setup is falsely rigged. The problem presents the deaths as a certainty, a "fact." But anyone in the position of the man who has to kill to save the 5 would not see it as a certainty, but just as a possibility. Consequently, the trolley problem poses a false dilemma.
I am responsible for managing a substantial investment portfolio, and consequently have been watching the government shutdown/debt ceiling discussions with considerable care. As early as late June I was turning some of that portfolio into cash (prematurely, as it happened), out of fear that the Republican radicals would shut down the government and cause a default on the debt, with virtually incalculably bad consequences for the country and the world, as well as the markets.
Noting that the stock market did not seem to share my concern I kept wondering why, and exploring all the possible reasons. The most plausible was that Bernanke's warning of the end of stimulus had caused bonds to drop in value, sending a lot of cash into the stock market seeking returns, while during the summer there were no significant new threats looming, China's slowdown seemed to have halted, and the European economy was gradually improving.
Last week John Boehner stated unequivocally that he would not allow a debt default to happen. I regarded this as a major turning point, because I thought Boehner could not say this without having some reason to believe that the crisis was in the process of resolution. I therefore put some of my cash back into the market. But over the weekend he seemed to reverse course, putting forward a new series of demands, and Eric Cantor voiced confidence that the Republican demands would be met. This made me think that Boehner is not as disciplined in his comments as one might expect of someone in his position.
Over the weekend there was another development, at least for me. A NY Times report detailed the long planning for this "crisis" on the part of the Koch brothers and similarly loony Republican billionaires. I had long thought that discussions of the Tea Party positions were deficient in leaving the money out of the equation and focusing only on the ideology of the radicals, since it was the money that gave them their teeth, convincing saner Republicans that they would lose their jobs if they did not hew the radical line. This article not only confirmed that view, but explained some of the more mystifying sideshows, such as the recently surfaced demand that to lift the debt ceiling Obama had to approve the Keystone pipeline, which the article said was 20% owned by Koch Industries.
My bottom line conclusion for the moment, therefore, is that the billionaires are running the show for the radicals, and dictating Boehner's positions. If so, then I return to a more optimistic view because despite their vicious and repellent views, these people are not actually crazy. They are excellent bluffers, and I believe they are running out a strong bluff here. Then they'll fold, because defaulting on the debt will be ruinous for them and they know it.
The Republican case against immigration reform rests, I think, on an unstated but very tenable premise: that as in the days of Jim Crow, voter suppression works, and will keep whites a majority of the voting population indefinitely. Voter ID laws are just the start of it. The nullification of rights is an old right wing game, as the abortion battles show they are terrific at it, and it works. --7/11 2:39 pm in response to op ed by Ross Douthat, "Rubio-Schumer and the Republican Future" In describing Justice Ginsberg as clear-eyed and realistic, Greenhouse puts her finger on the Court majority's current modus operandi: to elevate form over reality. The very clever Chief Justice (no relation) has neatly turned our Constitutional rights to equal protection and due process into safe harbors for the nullification of those rights in actual practice. The practice of Republican-controlled states is to demolish minority voting rights with laws framed as equal, but aimed at particular targets, like Anatole France's observation that a law equally prohibited both rich and poor from sleeping under the bridges of Paris. Roberts has ratified those practices. The law once prohibited corporate campaign contributions. But Roberts found this an unjustifiable impingement on the "equal" free speech rights of corporations and other organizations. Now we have corrupted elections at every turn. And so forth. Never in human history has a court wreaked so much damage on a successful political system as has the Supreme Court left to us by the Bush family. --7/11 4:29 pm in response to op ed by Linda Greenhouse, "The Cost of Compromise"
Egypt, like Pakistan, most of Africa, and many Middle Eastern and Asian countries is mired in an eternal succession of thieving elites. As long as the elites see less to gain from creating an economically and socially viable state than from using power to line their family pockets and destroy opponents, the turnover will continue. Moreover, they have perfected the art of fleecing the Americans, who now provide most of the assets that they steal. The only thing we can do to end this misery is to support those who are actually honest, have some concept of the public good, and seem competent. Absent such people, we should do as little as possible.
--7/8 4:36 pm in response to op ed by Ed Husain, "How Not to Become the Next Pakistan."
As a lawyer I am less interested in who wins or loses a Supreme Court case than in the reasoning and law that leads to the decision. People commonly ascribe results to the personal views of the justices, but the results should be the outcome of an honest process of legal reasoning, not preordained by judges' personal preferences. When the latter happens, lawyers regard the process as intellectually corrupt. In the decisions of the last two days, we have seen examples of both genuine legal reasoning, and intellectual corruption. A pattern has now become clear. Normally, the court's decisions are based on legal reasoning, but when it comes to cases that involve the fundamental structure of our democracy the conservative majority seems to privilege personal preference. We have seen that in Bush v. Gore, in Citizens United, and now in the Voting Rights case. In all these cases, the court has departed from usual practice and precedent in pursuit of decisions pleasing to the conservative majority. In doing so, it has sanctioned the free use of chicanery and money to restructure the Constitution's representative democracy into something that may soon approach an oligarchy. It is that corrupt process, and those devastating results that we must mourn. --6/26 12:46 pm in response to "Supreme Court Bolsters Gay Marriage with Two Major Rulings" The collection of big data by the NSA is not yet a Star Chamber. We need this information for security in the modern world, and until it leads to the punishment of people without according them the full range of constitutional protections, I cannot see the actual harm of it. I think that both Snowden and the security apparatus have behaved reprehensibly. Snowden broke the law, violated his promises, and cozied up to our fiercest rivals, but at least he has launched a valuable debate and exposed the overly compliant FISA court, which has apparently never turning down a security request. The security people, on the other hand, have gone over the top in claiming that the disclosures injure US safety (not clear how), and their fear of daylight reminds one of George Orwell. --6/28 2:46 pm in response to Roger Cohen, "The Service of Snowden"
My friend and long ago law partner,
Keith Roberts, has published a thesis congratulating American capitalism on the
advancements its technological innovations have brought to mankind.Not withstanding the ease and lucidity of
the piece, it is just plain wrong.
I will approach this on a seriatim basis.
If Americans have creativity and
invention written into their DNA, then that is because the natives of the
countries that settled here shared that DNA.Open land, a tolerance for larceny and a paucity of law enforcement are
more likely explanations for the economic growth of the nation in its early
years and well into the Nineteenth Century.A peculiar strand that could be identified as American – democracy- often
stood in the way of the reckless and the savage.
This country’s “troubles of recent
years” were and remain a consequence of the same larcenous tendencies
manifested in the ruthless tactics of monopoly building, getting ahead by
crushing others and extracting value from cheap labor. The only innovation
involved in that “trouble” was camouflaging lies and making money from it.
It
cannot be seriously claimed that the American education system is or has been
robust for many of the last forty years.Can a system that produces a
higher rate of illiteracy than any other industrialized nation be called
“robust”?Should we take pride in an
educational system that produces members of Congress that believe the universe
was created in a matter of days and only a few thousand years ago; that deny
evolution; that insist that dumping hundreds of tons of carbon derivatives into
the atmosphere everyday carries no adverse consequence for the planet?
As
for marketing and financing, there is little doubt that the American experience
has produced new forms, but there is doubt as to whether those forms have
contributed to a healthy, if robust, economy and society.Marketing the “cornucopia” of goods to
Americans is fraught with fraud, i.e. misrepresentations and undisclosed
dangers.Attempts to ameliorate the
dangers inherent in such marketing have been opposed mightily, ruthlessly and
legally. The claim is that freedom to lie about one’s product is protected by
the First Amendment to the United States Constitution.One need only understand that truly native
genius involved in marketing cigarettes to conclude that American innovation in
marketing is probably not a good thing.
As
for financing:banks and their endlessly
varied progeny have combined regularly for nearly three centuries to destroy
the economic lives of millions.This
last disaster (that is to say, most recent) demonstrated to anyone paying
attention that the American financial system is as dangerous to all of us as a
trainload of nuclear waste.If “robust”
is the same thing as a system that permits its participants to wreak havoc and
then take home outrageously large paychecks, then “robust” is not something to
be real happy about.Across-the-board
rewarding of abject incompetence is hard to justify.
The
design innovations that inspire Mr. Roberts’ enthusiasm, to the extent they are
really American, are, upon close inspection, revealed to be unworthy.Carbon fuels have been with us for more than
a century.Somewhere shortly after the
end of World War II, there was a general awareness that petroleum was power,
let alone untold wealth.Our
manufacturing leaders made vehicles that required the use of petroleum products
and, until 1970, took no steps to improve the fuel efficiency of its products –
even in the face of competition of small cars from Japan.American auto manufacturers failed to make
any serious effort to replace the gasoline or diesel fueled internal combustion
engine until California and the Federal Governments began to require those
efforts.
Innovations
that we, as a society, require for our own “robustness” are not the subject of
capitalist enterprise.Rather,
innovations that return wealth to the wealthy proliferate. Overarching those
efforts is the ongoing search of American capital for means to avoid paying
labor the value it produces.The most
destructive of the creative and innovative devices in recent years has been the
evisceration of the American producing class by shipping jobs to overseas
locations.
While
it is with a great deal of affection that I celebrate my former partner’s
celebration of American capital over a libation or two, I can’t, in conscious
permit it to go unscathed by truth.
Keith Roberts is the author of The Origins of Business, Money, and Marketsand the incoming chairman of the Lawyers Conference of the American Bar Association's Judicial Division.
NEW YORK – Born at the dawn of the Industrial Revolution, the United States has creativity and invention written into its DNA. By emphasizing economic freedom and individual achievement, the US has fostered a strong entrepreneurial culture. And, by marketing cutting-edge technologies, financing their development, and purchasing them, Americans consistently transform innovation into economic growth.
Illustration by Paul Lachine
Indeed, despite the US economy’s troubles in recent years, its educational, marketing, and financing capabilities remain robust. As developing and advanced countries alike clamor to increase their share of innovation-driven economic growth, the US has already established the necessary institutions – and a solid lead.
Before the Industrial Revolution, global economic growth was gradual and intermittent, depending on population growth, the discovery of treasure, and unexpected technological advances. But, as traditional cost structures and production techniques yielded to mechanization and vast economies of scale, consumers gained access to a cornucopia of new (or newly affordable) goods.
When manufacturing and trade replaced agriculture and household labor as the dominant economic activities, technological innovation became commercially and militarily vital. The US, Europe, and Japan established national innovation infrastructures, comprising government research entities, scientific institutes, research and development laboratories, and technologically oriented universities, night schools, and vocational schools.
During World War II, the US pulled ahead, becoming the global leader in innovation. While its predominance has waned since then, owing to heavy investment in technological infrastructure elsewhere, it remains on top.
America’s global reputation for technological prowess draws talent from all over the world. In 2008, foreign nationals accounted for a majority of US Patent and Trademark Office filings. In 2011, US nationals were responsible for 48.4% of filings.
America’s higher-education system has given individuals the ability and drive to innovate. According to one well-known survey, the top 15 universities in engineering, technology, and computer sciences (measured by awards and research output) are in the US. In fact, America boasts 20 of the top 25 technical universities, 52 of the top 100, and 154 of the top 500 universities – almost as many as Japan, Germany, the United Kingdom, France, China, and India combined.
Moreover, the US accounts for 26% of college-educated adults worldwide – as many as China, India, and Russia combined. According to the Center for Measuring University Performance, more than 700 US universities conduct research.
Support for education and research extends beyond universities. The US accounts for nearly one-third of global R&D spending – 2.6 times China’s share – including 37% of global R&D spending in the energy sector, 49.7% in life sciences, 58% in information and communication technologies, and 27.5% in chemicals and materials. In 2012, spending in the US on aerospace and defense R&D was almost 3.5 times higher than in all other countries combined. While the US does not dominate every field, it remains the world’s principal source of technological innovation overall.
Given the opportunities that America’s embrace of innovation implies, more than two-thirds of the foreign science and engineering students who study in the US remain for at least ten years after graduation. And the US has not only translated education into innovation; it has converted innovation into economic growth.
The first step in that process is marketing, which maximizes the commercial viability of innovative technologies by stimulating desire for them. Marketing communicates value and appeal to potential buyers, while reducing barriers to sale.
US business schools – which emphasize marketing in their curricula – dominate international rankings. For example, they filled eight of the top ten positions in theFinancial Times' 2011 rankings. Long the world’s largest marketplace, the US boasts more retailers, advertising agencies, and promotional communications than any other country – evidence that its capacity to stimulate desire for innovation remains strong.
The second step of the process is financing – giving individuals the purchasing power to innovate, and to consume innovative technologies. This occurs largely through credit (purchasing power in exchange for the promise of repayment). Formerly limited to wealthy individuals and established firms, credit has become pervasive – especially in the US, where nearly all consumers have credit cards, venture capital funds vie to sponsor innovation, and robust securities markets allocate savings to new projects.
Given its well-developed financial system, which includes by far the largest number of commercial banks worldwide, America is well positioned to continue to provide the needed purchasing power to support innovation. For example, US-based private equity/venture-capital firms raised $548 billion for investment purposes in 2003-2008 (excluding government funds) – more than double the rest of the world’s combined total of $251 billion.
In addition, the value of stocks and bonds on US securities markets totaled $67 trillion at the end of 2010, compared to $63 trillion in Europe and only $16 trillion in China. Indeed, despite recent excesses, the US financial sector remains among the world’s most accessible sources of purchasing power for both innovative technological ventures and consumer purchases.
By far the world leader in higher education, research and development, marketing, and finance, America maintains a strong capacity to translate technological innovation into economic growth. In an uncertain economic environment, US policymakers must protect and build upon one of their country’s most valuable assets – and its institutional underpinnings.
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