7 ms·

Why is America so rich?

40 points by cwan 16y ago

pg 16y ago
One way to help answer this question is to imagine what would happen if, around the same time Larry & Sergey started Google, two identical grad students were working on the same thing at a university elsewhere in the world. The second story would have played out a lot differently. This thought experiment isn't a complete answer, but it's not irrelevant either.
- iuguy 16y ago
  That's interesting. There's quite a few places around the world where it would've been different, but how different depends on the targeting. At the time Google started up, Yahoo! was the biggest (IIRC, it was a long time ago). Both were American companies and both initially targeted the US (I distinctly remember using Google and finding it crap for UK-specific stuff, so went back to flitting between Lycos and Altavista. Had Google started up in Cambridge or Oxford, I imagine they would've targeted the UK and possibly Europe initially, focusing on different search patterns, different promotional strategies and so on. They may well have been intimidated by Yahoo in some respects but would've seen an opportunity to attack Yahoo's poor local search. Had they have started in China they could've been Baidu.cn. Of course, all this is academic but an interesting thought experiment nonetheless. I think if Google started in the US at the same time as a UK search engine, the UK engine would've been more reliant on the UK market and would've seen slower growth once there's initial traction, but Google's search domination isn't completely global.
- adammichaelc 16y ago
  That's really interesting thought. In the US and specifically Silicon Valley, they got a check for $100,000-ish to help them in the early years. In most any other country (or even most other parts of the US), that money wouldn't have been available to 2 unknown people, regardless of how smart they were. That's not the only piece of the puzzle, but it's significant.
  - hasenj 16y ago
    There are other factors. For example, Linus went to a university in Finland, it was free so he stayed there for 8 years or so. If he was in the US at the time, would he have had the time and freedom to work on a Free kernel full time? He would probably be in a deep debt like most students. The point being, there are many other things that other countries have that America doesn't have.
    - gahahaha 16y ago
      It could be argued that he is the exception that proves the rule. He did something great, but he did not start Linux, the company, and make billions. Also - Linux would be useless without the GNU project - which is arguably very American.
      - hasenj 16y ago
        GNU is very anti-capitalism. RMS talks about valuing "community and freedom" over "features". That's pretty much what the "communism" ideal is all about, right? Not saying GNU is communist, that's very taboo, but the ideals and motivation are definitely not "very American".
        pg 16y ago
        "GNU is very anti-capitalism." Fortunately, however, the source code is not aware of this.
        hasenj 16y ago
        I didn't mean it as "against commercial use". I meant the spirit of it favors community over commercial use. The whole point of the GPL is to prevent people from "sealing away" the source code and favor commercial gains over the hacker community. I view capitalism as "valuing money above all things". Don't confuse capitalism with the free market; the free market existed over a thousand years ago. Many people got rich through trade. Perhaps not in Europe (I don't know).
- deleted 16y ago
  [deleted]
- hasenj 16y ago
  Where did you get this notion that innovation can only happen in Silicon Valley? Does the Silicon Valley produce anything remotely close to Japanese Anime? Do Americans produce cars that are anywhere close to German or Japanese cars? Do Americans produce desserts that are anywhere near in quality to European desserts? There are many things that Americans are simply horrible at doing.
  - pshapiro 16y ago
    It will be more helpful to both parties if you can show a concrete problem through some existent things.
deleted 16y ago
[deleted]
chailatte 16y ago
Why WAS America so rich? Most of the competitions were wiped out by WWII. But now they've all rebuilt and caught up. Now the US is in trillions of debt, the largest debt holder in the world.
- johngalt 16y ago
  Why was the competition wiped out? Why did the USA win WWII? I think you'll find a circular reference here. People act as if American Imperialism is responsible for it's economy, when it's the opposite. We are by no means great war fighters. We just build more than anyone else.
  - anamax 16y ago
    > We just build more than anyone else. We also get the misfits from other places.
  - ZeroGravitas 16y ago
    I would imagine being on a different continent helped tremendously. South America was pretty much untouched too.
mcantelon 16y ago
They neglect to mention Bretton Woods establishing the US dollar as the world's reserve currency. http://en.wikipedia.org/wiki/United_Nations_Monetary_and_Financial_Conference http://en.wikipedia.org/wiki/United_Nations_Monetary_and_Fin... >the IMF insists that the foreign exchange reserves maintained by other nations are held in the form of dollars, so no matter how much debt the US accumulates, its economy will not collapse.
bugsy 16y ago
Nothing to do with OPEC using the dollar as its only accepted currency, meaning if you want to buy oil you need to get dollars by selling things cheap to america?
hasenj 16y ago
Because they control the medium of exchange: the American Dollar is the de-facto standard for all currencies of the world. I've heard (or maybe read?) a quote to the effect that the US dollar is one of the top things that America exports. It's also the reasons Banks are rich, even though they don't practically produce anything. If they were simply accounting firms managing people's money and doing nothing other than book-keeping, without the ability to "create" money out of thin air, they wouldn't have become so rich. Japan and China on the other hand, became rich solely due to their hard work. I'm particularity fascinated by how Japan raised from the ashes, literally, to become what they are. The quantity and quality of creativity over there is just amazing.
- chailatte 16y ago
  Too bad Japan decided to save the banks in the 90s crash, and drain their citizen's cash savings by keeping interest rate at 0%. Fast forward to present day where the savings rate is close to 0%, and they have 200% GDP public debt. US is trying to do the same thing, but alas, it won't have the same effect as Americans have a negative savings rate, and dollar will suffer massive inflation in the process, dooming 60% of the population that live on less than 40k a year.
  - fonosip 16y ago
    that sounds bad. but the US is nowhere near 200% GDP public debt. and has the world's reserve currency which is a key thing Japan did not have.
    - SkyMarshal 16y ago
      As soon as you start counting on things like having the world's reserve currency, or house prices never declining, etc. etc., you lose it. Economic history is replete with that theme. Will we ever learn?
      - OmniBus 16y ago
        One well-known fact is that nearly every petroleum producer trades petroleum in US dollar. Rumour has it that if some major producers attempt to switch to another currency, she hurts US economy and will be retaliated by US. Printing more money does not benefit Americans in general. Much of money is taken by US financial firms to overseas for speculation instead of going to manufacturing sector when the devaluation of US dollar is foreseeable. Sudden flux of speculation hurts the economy of other nations.
jawee 16y ago
Does anyone have a mirror? The link isn't working and Coral Cache doesn't have it.
- ximeng 16y ago
  http://webcache.googleusercontent.com/search?q=cache:gfz3dS3UOyAJ:www.economist.com/blogs/freeexchange/2010/11/growth+http://www.economist.com/blogs/freeexchange/2010/11/growth&cd=1&hl=en&ct=clnk http://webcache.googleusercontent.com/search?q=cache:gfz3dS3... For those wondering what the Economist site runs on, the error message is: Pressflow Site off-line The site is currently not available due to technical problems. Please try again later. Thank you for your understanding. If you are the maintainer of this site, please check your database settings in the settings.php file and ensure that your hosting provider's database server is running. For more help, see the handbook, or contact your hosting provider.
fleitz 16y ago
I think the the tenacity and perseverance of the American character results in a nation that is better equipped to produce wealth than any other nation. It is founded on entirely different principles than the rest of the world. Americans are optimists and that leads them to have the courage of conviction to do things like a Marshall Aid plan. America realizes that it stands on top of the world and thus the only way to lift itself up is to lift everyone else up with it. For many years America was one of the freest places to do business. Because of that and their geography they were able to leverage massive industrial power to fuel the Allied war machine while charging a large portion of that back to their allies. After WW2 they correctly realized that they needed a plan to get the rest of the world on track, because they were the only ones left with functioning industry, they gave and sold the world the means of production. (Marshall Aid plan) From these acts they became the worlds reserve currency and leveraged that into massive monetary expansion and reaped the rewards of seigniorage. The problem is that American has adopted a very anti-business climate (Sarbox, Dodd-Frank, etc) and is still acting like it represents 60% of world GDP. It's pretty much Silicon Valley that is still keeping the US in the game. Also, not to forget is the Americans were smart enough to offer to pay the Sauds their bribe to be able to protect them. The British scoffed at this offer and the rest is pretty much history. Basically, the Sauds said 'someone pay us for the privilege of protecting us' I'm not American but hold a deep respect for the things the country has done for the world.
- pyre 16y ago
  > It's pretty much Silicon Valley that is still > keeping the US in the game. While there may be some truth to it, I think that statement is a bit bold.
  - fleitz 16y ago
    Bold ideas are what change the world. I don't think that it is the companies or the particular ideas that are keeping the US in the game, it's the spirit and the character. It's having the courage to dream, the passion to execute, and the friends and colleagues who will offer a hand up after you fail. No where else have I seen this spirit so embodied and embraced than in SV.
deleted 16y ago
[deleted]
joe_the_user 16y ago
Why was Britain so wealthy in 1922? Well, it wasn't really, it was only formally wealthy and really in decline. The simple answer today for why America looks wealthy on paper that our currency is chronically over-valued from our historical position as the last super power. From this, all the things we produce seem more valuable than they are. Of course, we aren't actually selling these things to that many people in other countries. Instead we coast on the credit China is willing to conveniently advance us to buy their goods. We're "so productive" we no longer need to produce ... that much. The world's overall currency and trade relations are amazing unbalanced with both US and Chinese policy makers apparently willing to feed the illusionary value of the dollar for as long as it suits their mutual policy interests. Silicon Valley is a huge source of innovation but it's one of last things of value to the world that the US has. There are other things on that list but the list hasn't gotten longer for a while now. Also, US government spending is on-par with Europe (~33%+ of GDP!) but the US somehow provide little to no "safety net" to its citizens. The US still a large manufacturer - it's just that a large portion of it's manufacturing goes directly to the defense sector.
- aaronblohowiak 16y ago
  Web apps don't register, but actual silicon does: http://www.suite101.com/content/top-us-imports--exports-2009-a204269 http://www.suite101.com/content/top-us-imports--exports-2009...
variety 16y ago
The real questions should be: "...and yet, so blighted, and so plain ugly to look at in most places? And why, despite all this wealth, are the standards of living and general education levels so shockingly low?"
netcan 16y ago
It's actually a hard question to answer. Being a good place for innovation (as pg suggests) is definitely part of the answer. But if you look at a list of rich countries (excluding mineral wealth & havens eg Qatar,Norway & Luxemberg,Andorra), it's hard to put a finger on a cause. If you asked the residents of those countries why they're rich, you'd probably get few commonalities. US: freedom, innovation Singapore: extreme k-12 education, trade center Switzerland: dunno Netherlands: Progressive culture, social justice Ireland: Intelligently designed & centralized tertiary education system, bribing key companies to set up shop France: Liberte, egalite... ( just kidding, sort of)

40 points by cwan 16y ago

pg 16y ago

One way to help answer this question is to imagine what would happen if, around the same time Larry & Sergey started Google, two identical grad students were working on the same thing at a university elsewhere in the world. The second story would have played out a lot differently. This thought experiment isn't a complete answer, but it's not irrelevant either.

iuguy 16y ago
That's interesting. There's quite a few places around the world where it would've been different, but how different depends on the targeting. At the time Google started up, Yahoo! was the biggest (IIRC, it was a long time ago). Both were American companies and both initially targeted the US (I distinctly remember using Google and finding it crap for UK-specific stuff, so went back to flitting between Lycos and Altavista. Had Google started up in Cambridge or Oxford, I imagine they would've targeted the UK and possibly Europe initially, focusing on different search patterns, different promotional strategies and so on. They may well have been intimidated by Yahoo in some respects but would've seen an opportunity to attack Yahoo's poor local search. Had they have started in China they could've been Baidu.cn. Of course, all this is academic but an interesting thought experiment nonetheless. I think if Google started in the US at the same time as a UK search engine, the UK engine would've been more reliant on the UK market and would've seen slower growth once there's initial traction, but Google's search domination isn't completely global.
adammichaelc 16y ago
That's really interesting thought. In the US and specifically Silicon Valley, they got a check for $100,000-ish to help them in the early years. In most any other country (or even most other parts of the US), that money wouldn't have been available to 2 unknown people, regardless of how smart they were. That's not the only piece of the puzzle, but it's significant.
- hasenj 16y ago
  There are other factors. For example, Linus went to a university in Finland, it was free so he stayed there for 8 years or so. If he was in the US at the time, would he have had the time and freedom to work on a Free kernel full time? He would probably be in a deep debt like most students. The point being, there are many other things that other countries have that America doesn't have.
  - gahahaha 16y ago
    It could be argued that he is the exception that proves the rule. He did something great, but he did not start Linux, the company, and make billions. Also - Linux would be useless without the GNU project - which is arguably very American.
    - hasenj 16y ago
      GNU is very anti-capitalism. RMS talks about valuing "community and freedom" over "features". That's pretty much what the "communism" ideal is all about, right? Not saying GNU is communist, that's very taboo, but the ideals and motivation are definitely not "very American".
      - pg 16y ago
        "GNU is very anti-capitalism." Fortunately, however, the source code is not aware of this.
        hasenj 16y ago
        I didn't mean it as "against commercial use". I meant the spirit of it favors community over commercial use. The whole point of the GPL is to prevent people from "sealing away" the source code and favor commercial gains over the hacker community. I view capitalism as "valuing money above all things". Don't confuse capitalism with the free market; the free market existed over a thousand years ago. Many people got rich through trade. Perhaps not in Europe (I don't know).
deleted 16y ago
[deleted]
hasenj 16y ago
Where did you get this notion that innovation can only happen in Silicon Valley? Does the Silicon Valley produce anything remotely close to Japanese Anime? Do Americans produce cars that are anywhere close to German or Japanese cars? Do Americans produce desserts that are anywhere near in quality to European desserts? There are many things that Americans are simply horrible at doing.
- pshapiro 16y ago
  It will be more helpful to both parties if you can show a concrete problem through some existent things.

deleted 16y ago

[deleted]

chailatte 16y ago

Why WAS America so rich? Most of the competitions were wiped out by WWII. But now they've all rebuilt and caught up. Now the US is in trillions of debt, the largest debt holder in the world.

johngalt 16y ago
Why was the competition wiped out? Why did the USA win WWII? I think you'll find a circular reference here. People act as if American Imperialism is responsible for it's economy, when it's the opposite. We are by no means great war fighters. We just build more than anyone else.
- anamax 16y ago
  > We just build more than anyone else. We also get the misfits from other places.
- ZeroGravitas 16y ago
  I would imagine being on a different continent helped tremendously. South America was pretty much untouched too.

mcantelon 16y ago

They neglect to mention Bretton Woods establishing the US dollar as the world's reserve currency. http://en.wikipedia.org/wiki/United_Nations_Monetary_and_Financial_Conference http://en.wikipedia.org/wiki/United_Nations_Monetary_and_Fin... >the IMF insists that the foreign exchange reserves maintained by other nations are held in the form of dollars, so no matter how much debt the US accumulates, its economy will not collapse.

bugsy 16y ago

Nothing to do with OPEC using the dollar as its only accepted currency, meaning if you want to buy oil you need to get dollars by selling things cheap to america?

hasenj 16y ago

Because they control the medium of exchange: the American Dollar is the de-facto standard for all currencies of the world. I've heard (or maybe read?) a quote to the effect that the US dollar is one of the top things that America exports. It's also the reasons Banks are rich, even though they don't practically produce anything. If they were simply accounting firms managing people's money and doing nothing other than book-keeping, without the ability to "create" money out of thin air, they wouldn't have become so rich. Japan and China on the other hand, became rich solely due to their hard work. I'm particularity fascinated by how Japan raised from the ashes, literally, to become what they are. The quantity and quality of creativity over there is just amazing.

chailatte 16y ago
Too bad Japan decided to save the banks in the 90s crash, and drain their citizen's cash savings by keeping interest rate at 0%. Fast forward to present day where the savings rate is close to 0%, and they have 200% GDP public debt. US is trying to do the same thing, but alas, it won't have the same effect as Americans have a negative savings rate, and dollar will suffer massive inflation in the process, dooming 60% of the population that live on less than 40k a year.
- fonosip 16y ago
  that sounds bad. but the US is nowhere near 200% GDP public debt. and has the world's reserve currency which is a key thing Japan did not have.
  - SkyMarshal 16y ago
    As soon as you start counting on things like having the world's reserve currency, or house prices never declining, etc. etc., you lose it. Economic history is replete with that theme. Will we ever learn?
    - OmniBus 16y ago
      One well-known fact is that nearly every petroleum producer trades petroleum in US dollar. Rumour has it that if some major producers attempt to switch to another currency, she hurts US economy and will be retaliated by US. Printing more money does not benefit Americans in general. Much of money is taken by US financial firms to overseas for speculation instead of going to manufacturing sector when the devaluation of US dollar is foreseeable. Sudden flux of speculation hurts the economy of other nations.

jawee 16y ago

Does anyone have a mirror? The link isn't working and Coral Cache doesn't have it.

ximeng 16y ago
http://webcache.googleusercontent.com/search?q=cache:gfz3dS3UOyAJ:www.economist.com/blogs/freeexchange/2010/11/growth+http://www.economist.com/blogs/freeexchange/2010/11/growth&cd=1&hl=en&ct=clnk http://webcache.googleusercontent.com/search?q=cache:gfz3dS3... For those wondering what the Economist site runs on, the error message is: Pressflow Site off-line The site is currently not available due to technical problems. Please try again later. Thank you for your understanding. If you are the maintainer of this site, please check your database settings in the settings.php file and ensure that your hosting provider's database server is running. For more help, see the handbook, or contact your hosting provider.

fleitz 16y ago

I think the the tenacity and perseverance of the American character results in a nation that is better equipped to produce wealth than any other nation. It is founded on entirely different principles than the rest of the world. Americans are optimists and that leads them to have the courage of conviction to do things like a Marshall Aid plan. America realizes that it stands on top of the world and thus the only way to lift itself up is to lift everyone else up with it. For many years America was one of the freest places to do business. Because of that and their geography they were able to leverage massive industrial power to fuel the Allied war machine while charging a large portion of that back to their allies. After WW2 they correctly realized that they needed a plan to get the rest of the world on track, because they were the only ones left with functioning industry, they gave and sold the world the means of production. (Marshall Aid plan) From these acts they became the worlds reserve currency and leveraged that into massive monetary expansion and reaped the rewards of seigniorage. The problem is that American has adopted a very anti-business climate (Sarbox, Dodd-Frank, etc) and is still acting like it represents 60% of world GDP. It's pretty much Silicon Valley that is still keeping the US in the game. Also, not to forget is the Americans were smart enough to offer to pay the Sauds their bribe to be able to protect them. The British scoffed at this offer and the rest is pretty much history. Basically, the Sauds said 'someone pay us for the privilege of protecting us' I'm not American but hold a deep respect for the things the country has done for the world.

pyre 16y ago
> It's pretty much Silicon Valley that is still > keeping the US in the game. While there may be some truth to it, I think that statement is a bit bold.
- fleitz 16y ago
  Bold ideas are what change the world. I don't think that it is the companies or the particular ideas that are keeping the US in the game, it's the spirit and the character. It's having the courage to dream, the passion to execute, and the friends and colleagues who will offer a hand up after you fail. No where else have I seen this spirit so embodied and embraced than in SV.

deleted 16y ago

[deleted]

joe_the_user 16y ago

Why was Britain so wealthy in 1922? Well, it wasn't really, it was only formally wealthy and really in decline. The simple answer today for why America looks wealthy on paper that our currency is chronically over-valued from our historical position as the last super power. From this, all the things we produce seem more valuable than they are. Of course, we aren't actually selling these things to that many people in other countries. Instead we coast on the credit China is willing to conveniently advance us to buy their goods. We're "so productive" we no longer need to produce ... that much. The world's overall currency and trade relations are amazing unbalanced with both US and Chinese policy makers apparently willing to feed the illusionary value of the dollar for as long as it suits their mutual policy interests. Silicon Valley is a huge source of innovation but it's one of last things of value to the world that the US has. There are other things on that list but the list hasn't gotten longer for a while now. Also, US government spending is on-par with Europe (~33%+ of GDP!) but the US somehow provide little to no "safety net" to its citizens. The US still a large manufacturer - it's just that a large portion of it's manufacturing goes directly to the defense sector.

aaronblohowiak 16y ago
Web apps don't register, but actual silicon does: http://www.suite101.com/content/top-us-imports--exports-2009-a204269 http://www.suite101.com/content/top-us-imports--exports-2009...

variety 16y ago

The real questions should be: "...and yet, so blighted, and so plain ugly to look at in most places? And why, despite all this wealth, are the standards of living and general education levels so shockingly low?"

netcan 16y ago

It's actually a hard question to answer. Being a good place for innovation (as pg suggests) is definitely part of the answer. But if you look at a list of rich countries (excluding mineral wealth & havens eg Qatar,Norway & Luxemberg,Andorra), it's hard to put a finger on a cause. If you asked the residents of those countries why they're rich, you'd probably get few commonalities. US: freedom, innovation Singapore: extreme k-12 education, trade center Switzerland: dunno Netherlands: Progressive culture, social justice Ireland: Intelligently designed & centralized tertiary education system, bribing key companies to set up shop France: Liberte, egalite... ( just kidding, sort of)