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A fitful, and perhaps inconstant hegemon – in the eyes of many – nevertheless offers apparent avenues for innovation and change. What this means for asset-holders may be the creation of steady wealth and the appreciation of value over the long-term, secular horizon. This, of course, assumes that such a “fitful”, perhaps “inconstant” (and did we add “reluctant”?) power continues to offer a template.

Philippe Aghion and his co-authors Celine Antonin and Simon Bunel present an interesting forward assessment of the capitalist system and its prospects for fruitful evolution. It is, as such, a system that resonates with the Churchillian observation on representative democratic government – the worst system imaginable, except for all the other ones tried.

In the final chapter of their book, “The Power of Creative Destruction: Economic Upheaval and the Wealth of Nations” (The Belknap Press of Harvard University Press, 2021), the authors present an interesting, and revealing, table, which highlights the number of patents per country on average over the period from 2010 thru 2017. More on that in just a bit.

What’s interesting is where the United States stands, or sits, as the case may be. Despite epidemic obesity, we’re told, and very poor performance of American school children when compared to international peers, the US economy, business world and society seem to register a preponderance when it comes to the new and the innovative. Why that is so and what that means can have geopolitical implications.

Toward the end of their book, Aghion and colleagues highlight the differences, along with respective advantages of the “cutthroat capitalism” which the United States is said to embody, and the more “cuddly capitalism” practiced, say, in France and Germany, and the Scandinavian countries. The more market-, price- and competitive- determined capitalism seems to coincide, or is associated more with innovation, so the authors claim. The “cuddly” variety resonates with more communitarian societies, and facilitates social cohesion and stability.

The authors take pains to argue that there is admixture between these two varieties, especially in the wake of reforms administered during the most recent decades. In the early 1990s, Sweden, for example, undertook major reforms of its tax system, which facilitated a huge increase in productivity, according to the authors.

At the other end of the spectrum, the United States introduced protective, communitarian legislation such as the 2013 Patient Protection and Affordable Care Act, i.e. “Obamacare”, which provided a medical insurance backstop for large swathes of the American population.

That said, admixture or not, there may be something in the secret sauce that the authors touch upon as well. Whether “cutthroat” or “cuddly”, there is something in that soup, or in the air of the American experience, which seems to be stimulating, poor educational results of American youth notwithstanding. It is in an interesting question to ponder: what exactly is it?

Much wealth creation and compounding hinges on an understanding of what “it” is.  We have hunch that it’s a combination of an open culture and resilient institutions. As such, it may have something to do with the efficacy of contracts in the United States, and the confounding but healthful execution of deliberative representative democracy – even to this day…

Some interesting facts speak, as it were, for themselves. These Mr. Aghion and his colleagues cite in that final chapter of their book. In the United States, the number of patent applications per million inhabitants during the period 2010-2017 amounted on average to 1,186.4. The next leading country, Germany, posted an average of just 617.1. Of note as well, the top 5% of patents cited in academic papers numbered 32,678.0 for the US; again, the next leading country, Germany, recorded just 170.5 such patents placed in the top 5% cited in academic papers.

For those mystified by American pro football, or altogether sick and tired of seeing “Friends” episodes in syndication and streaming, this might be rather discouraging – and head scratching.

But, that said, think about it for a minute. Having a society like the one in the US, often at the technical and scientific vanguard, that’s relatively open, expressive and pluralist in nature is not such a bad thing. There are in fact geopolitical benefits for all, since such a society is much more of a “positive sum” kind of place and “mentality” than otherwise. Perhaps less red in tooth and claw as well. Something to think about.

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