4 Reasons America Is Falling Apart

AdvisorOneExcerpts from a post from Gil Weinreich from AdvisorOne.com about Niall Ferguson subtitled “British historian recounts reasons why U.S. institutions are failing but offers hope of recovery if U.S. embraces long view”:

Niall Ferguson, a Harvard professor equally at home in the sweep of civilization as the history of finance, explained to an audience of 400 investment professionals how it is that much of the world is growing while the U.S. is slowing.

The reason is that institutions matter—they are what made the U.S. stronger than the rest of the world—and their current decline explains America’s problems and current trajectory, the British-born historian well-known for his conservative political views, said at the Altegris investment conference in Carlsbad, Calif.

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Ferguson noted four key problems that “worry” him about America, and “terrify” him when it comes to Europe.

First is a breakdown in intergenerational equity. Citing the 18th century British statesman Edmund Burke’s famous dictum “History is a pact between the dead, the living and the yet unborn,” Ferguson said that older generations of Americans made sacrifices for younger ones.

“The World War II generation thought their kids were more important, but baby boomers—the me generation—think their descendants should make sacrifices for them,” Ferguson said.

He cited Boston University economist Laurence Kotlikoff’s work showing that in order to achieve generational equity—that is, to ensure our children receive roughly the same level of benefits and pay the same in taxes as adults currently do, Americans would have to either make permanent cuts in government expenditures of more than 30% or make permanent tax increases of more than 60%. Those figures will only go up, as they have now for some time. Yet the politics on display in Washington in recent years reveal that changes of that magnitude have been impossible to achieve, Ferguson said.

Indeed, in an environment where political rhetoric uses percentiles—like the 1% versus the 99%—we currently lack “the language” to discuss these issues. “We should be talking about generations,” Ferguson said, noting that today’s “elderly consume massively more than other age groups.”

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A final area of concern is what Ferguson sees as a breakdown in civil society. The historian noted Alexis de Toqueville’s 19th century visit to America, where the Frenchman lauded the proliferation of voluntary associations. Ferguson bracingly noticed that Americans today are “indistinguishable” from Europeans in this area.

While Americans have come to rely on the government to get things done, “the rest of the world is improving its institutions in nearly every country in the world.” The heaviness of government’s role in modern America is reminiscent of Latin America’s reputation, though Ferguson notes that government in Mexico is getting better even as it is getting worse here.

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[H]e noted a few positives that might yet buoy America’s position in the world…[O]ne key positive—“luck,” he called it—is that “the United States just struck gas and oil,” citing the “energy revolution” that is becoming apparent from America’s vast shale discoveries and exploitation.

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