In a recent issue of the American Interest related to The Ends of Growth, we argue that, “Our focus on economic growth is misplaced and our leaders’ conception of the U.S. economy is misplaced. No wonder were in such a mess.” Defining Prosperity suggests that both republicans and democrats have an outdated understanding of our political system. The republicans have an absence of principle and the democrats have an obsolescence of purpose.
The next America needs to have an understanding of what America is. Economic growth, or its absence, is merely an indicator on the dashboard of our ongoing national journey. The engine that propels American capitalism forward is entrepreneurship; the fuel is opportunity; the work of foundations recycles the energy of society, making progress and widespread prosperity sustainable.
This century – the global century – will rest on sustainable development in global cities driven by entrepreneurs and fueled by venture capital. However, what will make this happen is the reconstitution of wealth on a global scale the likes of which has never been seen.
Wealthy individuals from around the world will have to learn from the American model that entrepreneurship leads to wealth, wealth needs to be given back to create opportunity for the next generation. The entrepreneurship-philanthropy-opportunity cycle is the inner dynamic of American capitalism and the source of its prosperity. The strengthening of it in the global economy is our most important job today.
April 20th, 2009 at 6:04 pm
Zoltan, you define a risk-based model of prosperity, but it seems that the voters (and so the politicians) are defining prosperity in terms of personal-security: job security, unemployment security, pension security, medical security, etc.
Our leaders are following the voters. How can we persuade the voters that emphasizing personal-security leads to stagnation and ultimately societal poverty?
April 21st, 2009 at 2:49 am
I suspect this overstates foundations economic impact. The top 100 foundations have total assets of around $300 billion and an annual payout of around $15 billion. That’s minute compared to government or business or the $14 trillion US economy.
You might make a case for the whole nonprofit sector, at $665 billion annually, but it’s mostly funded by individuals and volunteers, as well as government contracts for social services. Foundations are less than 10% of the total income of nonprofits. I agree that nonprofits and philanthropy fill critical roles in the US, including some innovations, but I wouldn’t put them in a central role of the economy.
America is maybe not the only model for “recycling the energy of society.” In much of Europe, the government provides many of the services that nonprofits do here. Even here, government provides over half of nonprofit income.
Since I work in the nonprofit arena, I’d love to hear more details on the sector’s role in the new economy.
April 21st, 2009 at 8:34 am
Well, it is certainly entrepreneurship that creates the wealth that initially funds philanthropy, isn’t it?
I don’t understand what is meant by, “The republicans have an absence of principle”. How so? The ranks of Republicans are filled with both entrepreneurs and those who give a much higher proportaion of their income to charity than Joe Biden and pre-book-signing Barack Obama.
April 23rd, 2009 at 3:27 pm
Republicans do not give more in charity. That is a myth which includes donations to churches. Fail.
Republicans do not have an absence of principle, they have an absence of ideas.
April 25th, 2009 at 9:50 am
With $4.1 trillion evaporated from the current global financial crisis, wealth creation has become such a demand that the energy must direct towards innovation and growth.
April 27th, 2009 at 11:23 am
I agree that entrepreneurship is a critically important dynamic, as are the philanthropic contributions of those who have profited from their innovations, but to suggest that the ‘entrepreneurship-philanthropy-opportunity cycle’ is the “inner dynamic of American capitalism and the source of its prosperity” seems to overstate the case a tad.
The country’s philanthropic culture has largely been a product of its government’s historical unwillingness to mitigate the social and economic inequality produced by its vibrant form of capitalism. This well developed culture of giving has surely produced some benefits – often, as you mention, in form of cultural institutions. But while you bluntly state that, among countries, “when philanthropic giving is absent, development is slow,” you provide no evidence. Is this giving actually contributing to entrepreneurial opportunity, or to the re-naming of new art gallery wings? Moreover, are you suggesting that this model – whereby individuals give independently based upon their values, interests, connections or even their hubris – is the most efficient or equitable means of serving the collective public interest?
What of the immense role government plays in creating opportunity, through the education system, through myriad social supports, through the maintenance of strong institutions and the provision of a regulatory and tax environment conducive to entrepreneurship? Presently, the United States is among the most unequal developed societies in the world, with relatively abysmal primary and secondary educational outcomes (PISA test scores), a great imbalance in the provision of health services, etc. This has grave implications for future innovative capacity. The US is also an outlier among developed nations in the muted redistributive role government plays in the provision of many of the foundational social supports that provide economic opportunity and innovative capacity. There is no doubt that the US maintains among the most dynamic and innovative economies in the world, but is this philanthropic reliance really the optimal means to bridge this opportunity gap that already exists for many Americans?