Your Teacher Said What?! (18 page)

The basic principle that defines work in Europe (and, all too frequently, in more Progressive parts of America) is that workers need to be protected against their employers. By building an entire economy on these lines, European economies have accepted that the only thing that keeps the average laborer from becoming a victim is the power of the state.

This culture of worker victimology has been a whole lot more popular in Europe than in the United States, so far, anyway. That's a big chunk of what those Tea Party protests are about: a distaste on the part of millions of Americans for seeing themselves as in need of government handouts. In this, as in so many ways, America's core beliefs about work, independence, and free markets are different from Europe's.

I started to understand one reason why the United States has a set of core beliefs about the economy (and a whole lot else) that is different from most of Europe when I read an article by the libertarian writer Lee Harris in which he points out that our most basic beliefs aren't things that we choose—not with our brains, anyway. Ideas about the world don't form our attitudes; our attitudes form our ideas. He explains this in terms of a fifty-year-old psychological theory that people tend to be divided into two basic groups: one whose “locus of control” is inside them and one whose locus is outside. “Internals” believe that they are in control of their own lives, while “externals” see themselves as subject to outside forces that they can't control. It doesn't matter much whether those forces are other people or luck or the impersonal laws of history: Externals view themselves as acted upon, internals as acting.

You can see where this is going, I hope. Free-market libertarians are internals. Social-welfare collectivists are externals. And for historical reasons, European nations have cultivated an “external” attitude that produces the sort of generous state welfare benefits that get the citizens of Athens (or Dublin or London or Paris or Madrid or Rome) to take to the streets whenever they are threatened.

But don't take my word for it. In 2006, the Pew Research Center Global Attitudes Survey revealed that Americans are twice as likely as Europeans to credit their success to their own efforts; they are
three times
more likely than even the legendarily hardworking Germans to say that children should be told that hard work is essential to that success. Three years earlier, in the same survey, 68 percent of Germans surveyed said that personal success is determined by forces outside their own control (up from 59 percent in 1991). The number in the United States? Less than 35 percent.

I guess it's not that surprising that a nation of
im
migrants would have stronger beliefs in aspiration, willpower, and individualism than a country of
em
igrants. You can see the effect in any number of economic statistics, but the strongest is one of the most powerful drivers of economic growth: starting up new businesses.

For the last ten years, a group of researchers at the London School of Economics and Babson College in Massachusetts have been running a program called the Global Entrepreneurship Monitor. It studies the way entrepreneurs thrive (or not) in more than fifty countries around the world, and one of its most consistent findings is that the factor that is most important in building an entrepreneurial economy is the degree to which the nation welcomes immigrants.

A big reason is the way immigrants view risk. After all, everyone knows that small businesses, from dry cleaners to restaurants, are pretty risky propositions (this is one of those things that “everyone knows” that turns out to be true). Almost by definition, immigrants are less risk averse than almost any other part of the population, and year after year the Global Entrepreneurship Monitor has found that those countries with large immigrant populations
always
have an edge in the annual number of business start-ups.

That's not true just in the United States but also elsewhere. In fact, it's even
truer
in the most immigrant-friendly nation in the world: Israel.

I can date the beginning of my interest in—and admiration for—Israel's economy pretty accurately. In September 2000, Penelope and I were flying home from a trip to San Diego with Blake, who was then only nine months old, and found ourselves on the same flight as Israel's former (and now current) prime minister, Benjamin Netanyahu. He was between jobs—he'd been prime minister from 1996 to 1999, but was, at the time, retired from politics, temporarily, as it turned out—but was still one of the most identifiable Israelis in the world.

My first reaction when I noticed him was nervousness; this was still a year before 9/11 but that didn't mean that any flight with someone like Netanyahu wasn't likely to be a pretty attractive target for attack. My second reaction, minutes later, was the exact opposite: This was probably the
safest
flight I would ever take.

Anyway, we introduced ourselves: Just two MIT graduates with, as it turned out, similar ideas about free markets and such. Since one of us—not me—was, and is, a natural politician, Blake found herself being held and kissed by the once and future prime minister of Israel—and one of the real architects of the biggest economic miracles of the last fifty years.

In its brief history, Israel has actually experienced
two
economic miracles, both of them fueled by immigration. The first one occurred in the twenty years after the state's founding in 1948, when the population of Israel grew from 800,000 to nearly three million and its per capita productivity climbed from about a quarter that of the United States to about 60 percent. However, during these decades, Israel was still a nominally socialist economy, and most of its growth was a function of a very impoverished starting point.

The first miracle, predictably, ran out of fuel in the 1970s. It's hard to remember now, but Israel lost an entire decade to low growth and hyperinflation—the inflation rate was 111 percent in 1979, 133 percent in 1980, and 445 percent in 1984—almost entirely because of heavy-handed government intervention in the economy. In Israel during the late 1970s and 1980s, the national government literally set the terms for every loan and debt instrument issued in the country. The only private-sector loans being made were for projects approved by government, which effectively controlled both wages and prices.

Which makes the current state of affairs in Israel's economy even more miraculous. Beginning in 1990, Israel started to welcome another enormous group of immigrants, this time 800,000 citizens of the former Soviet Union, which would be equivalent to the United States opening its doors to forty million immigrants.

Now, Israel has
always
welcomed immigration. It's the basic reason for the state. And it has always benefited from the presence of immigrants. But in the 1990s, these new immigrants were arriving in a country that was, largely at the urging of Netanyahu, embracing free-market principles. Finance, industry, defense, and transportation were all being privatized as fast as the new prime minister—Netanyahu was elected in 1996—could sign the papers.

The result is there for anyone with eyes to see and a brain to reason (this, all by itself, may explain the hostility to Israel among so many Progressives). As my friend Dan Senor points out in his book,
Start-up Nation
, Israel now has the highest concentration of engineers and R & D spending in the world—and the highest density of start-ups: one new business for every 1,800 Israelis every year. Israel, with a population of 7 million, attracts as much venture capital annually as Germany and France—with 145 million people—
combined
. Through the last decade of the twentieth century and the first decade of the twenty-first, through war (with Lebanon in 1996) and worldwide economic crises, Israel's economy has continued to be the world's most immigrant friendly, its most entrepreneurial, and one of its fastest growing. Our onetime companion on the San Diego–to–New York flight is promising to make Israel one of the world's ten richest economies in the next ten years, and I wouldn't bet against him.

Israel's Russian immigrants aren't completely typical; they are, as a group, far more educated and technologically literate than most. But they are only a part of the Israeli story, which includes large numbers of new citizens from places like Ethiopia and Yemen, as well. Israel in the 1990s didn't have to seek only the best-educated immigrants to see the phenomenon in action, any more than the United States did in the 1900s. This is because immigrants are also, as a group, younger than native-born residents in just about every country, which make them not just more entrepreneurial (though it does) but also more future oriented. America's larger percentage of immigrants is the biggest reason that the median age in the United States is three years lower than it is in France—and
seven
years lower than in Germany.

Other things can be relied upon in members of a more aspirational, “internal” culture. For one thing, people are a
lot
more competitive. Italian textile mills and tailors may make the world's most beautiful $4,000 suits, but they do so by behaving like medieval guilds. In fact, they
are
medieval guilds, still known as
associazioni di categoria
(in Italy even babysitters have them). Carlo Altomonte, a Milanese economist, even admits, “There is no sense of what a market economy is in this country. What you see here is an incredible fear of competition.” No surprise in a country that's been sending a high proportion of its most competitive citizens—its “internals”—to the United States for centuries.

Internals also push back at being told what to do; even when they act collectively, they prefer doing so voluntarily rather than in response to compulsion. Three centuries ago, the Frenchman Alexis de Tocqueville knew this, writing in
Democracy in America
, “Wherever at the head of some new undertaking you see the government in France, or a man of rank in England, in the United States you will be sure to find an association.”

And internals are suspicious of elites, even their own. Americans—those Americans who understand their birthright of freedom, anyway—know enough to distrust people who know a lot but don't know what they don't know.

About five years ago, while flying to San Francisco, I noticed that one of my fellow travelers was Nobel Prize–winning economist and
New York Times
columnist Paul Krugman, the man who has never met a governmental intervention in the economy he didn't like. There he was, flying first class inside a machine that is one of the most remarkable technological marvels of all time, moving at six hundred miles per hour toward what was probably a chance to pick up a fivefigure check for speaking to some group for less than an hour (in 1999 Krugman's fee for speeches was at least $20,000). And all I could think was “Why is this guy so down on capitalism and the free market?”

In his 1942 classic,
Capitalism, Socialism, and Democracy
, the émigré economist Joseph Schumpeter gave me a clue. In his preface, he admits, “I felt it my duty . . . to inflict upon the reader . . . my paradoxical conclusion: Capitalism is being killed by its achievements.”

The achievement he had in mind was the creation of a permanent intellectual class: “One of the most important features of the later stages of capitalist civilization is the vigorous expansion of the educational apparatus and particularly of the facilities for higher education.” And since “the man who has gone through a college or university easily becomes psychically unemployable in manual occupations without necessarily acquiring employability in, say, professional work . . . all those who are unemployed or unsatisfactorily employed or unemployable drift into the vocations in which standards are least definite. . . . They swell the host of intellectuals . . . whose numbers hence increase disproportionately. They enter it in a thoroughly discontented frame of mind. Discontent breeds resentment [and] righteous indignation about the wrongs of capitalism.”

Schumpeter had a bird's-eye view of the phenomenon; his employer at the time he wrote these words was Harvard University's economics department, which is just about as elite as you get.
²⁵

And as much as
Harvard dislikes American free-market capitalism, it loves the European welfare state even more. In fact, it is pretty telling that European elites are likely to be anti-American, while their American counterparts are almost guaranteed to be pro-Europe. Hostility to American ideas about the free market or capitalism is actually one thing that elites on both sides of the Atlantic share. And one thing that the Kernen family, no matter how much we enjoy visiting Europe, can't abide.

 

“Blake, how do you train a dog?”

“To do what?”

“Anything.”

“Well, you reward him when he does something right, and you say no! when he does something wrong.”