The New Global Aristocratic Class & the Decline of Free Enterprise

October 14th, 2010 // 4:00 am @ Oliver DeMille

While regulation increases and economic freedom decreases in America, other nations are going the opposite direction.

In order to remain prosperous and strong, America must revive the principles of free enterprise that made her great.

Three New Hotspots

In a two-day span, the New York Times ran two articles — “The Tel Aviv Cluster” and “Is China the Next Enron?” — on the strengths and weaknesses of China and Israel.

Written by Thomas Friedman and David Brooks, respectively, the articles arrived at surprisingly similar conclusions.

First, at the time of the articles, both nations were economic hotspots, primarily because of the high numbers of entrepreneurs within each.

Where America has become a capitol of employeeship, in Israel and China the American Dream of “making it” through business initiative and entrepreneurial enterprise is alive and well.

India could certainly be included in this.

Second, both are zones of technological growth. Of course, this stems from entrepreneurial innovation.

Where the U.S. trains most of the world’s attorneys, Chinese, Israeli and Indian students dominate many engineering and technology enrollments in many of the world’s leading schools.

Entrepreneurship, Technology & Progress

China has low interest rates, easy credit for private and business capital, and lots of investment money flowing.

Israel, as Brooks puts it,

“…has weathered the global recession reasonably well. The government did not have to bail out its banks or set off an explosion in short-term spending. Instead, it used the crisis to solidify the economy’s long-term future by investing in research and development and infrastructure, raising some consumption taxes, promising to cut other taxes in the medium to long term.”

Friedman wrote that China has:

“…a mountain of savings…China also now has 400 million Internet users [in context, the entire population of the U.S. is just over 300 million people], and 200 million of them have broadband…Now take all this infrastructure and mix it together with 27 million students in technical colleges and universities⎯the most in the world…Equally important, more and more Chinese students educated abroad are returning home to work and start new businesses.”

Brooks wrote that:

“Tel Aviv has become one of the world’s foremost entrepreneurial hot spots. Israel has more high-tech start-ups per capita than any other nation on earth, by far. It leads the world in civilian research-and-development spending per capita. It ranks second behind the U.S. in the number of companies listed in the Nasdaq. Israel, with seven million people, attracts as much venture capital as France and Germany combined.”

Challenges Coming

Third, both China and Israel appear to be on the verge of major shifts.

The Chinese challenge ahead is to bring its political institutions up to speed with the rapid spread of economic liberties.

The Soviet Union collapsed because it tried to reform by expanding political liberty while maintaining a command economy.

Traditional Chinese communism also rejected freedom at all levels, and the attempt now is to offer economic freedom while keeping a totalitarian government.

The huge amount of savings, including “$2 trillion in foreign currency revenues” available to the Chinese government gives it a lot of power into the future.

What kind of volatility is ahead for a nation with an authoritarian and oppressive government which also has the world’s largest entrepreneurial class?

As for Israel, the challenge is that increased economic and technological success further widens the gap between Israel and its already estranged neighbors. This is a huge destabilizing factor.

As Brooks says, “Israel is an ‘astonishing success story, but also a highly mobile one.’” He suggests that if the region destabilizes, the entrepreneurial class already has connections and homes in Palo Alto, for example.

American Decline

Perhaps the most telling message of these articles is the contrast with the U.S.

We’re cutting technology programs and increasing the regulatory, tax and red-tape obstacles for entrepreneurs.

Positive gains in U.S. social justice since 1964 have unfortunately and unnecessarily coincided with the dismantling of American incentives for entrepreneurial free enterprise.

Current levels of U.S. business regulations don’t allow many American entrepreneurs to compete with their international counterparts.

Trends in China, India and Israel provide more evidence for one of the most important developments in our world: The rise of a new global aristocratic class.

Interestingly, Friedman and Brooks have both written books about the new elite (see The Lexus & the Olive Tree, On Paradise Drive, Bobos in Paradise, and others).

For example, Friedman introduced the concept of the “Electronic Herd,” a new, highly mobile elite class that manages the world’s capital from their laptops and lives in places like Mediterranean beach towns on the Spanish or French Riviera, Ashland (Oregon), Austin (Texas), the Bahamas, Buenos Aires, London and so on.

This group parties in Manhattan and Switzerland, reads the great classics of humanity and today’s latest financials, and has little connection with or allegiance to any government.

Rediscovering The American Dream

America became known around the world for two great ideals: 1) freedom, and 2) a classless society where anybody could become whatever they were willing to earn and achieve.

Together, we often called these ideals “The American Dream.”

As the U.S. regulated away our free enterprise strategic advantage — especially since 1989 — its cities become more and more like the class-based European models that many American cultural elites idealize.

Today, America’s “aristocrats” are likely to be less loyal to the United States than to their corporate connections, and Americans who consider themselves patriots are likely to be dependent on job wages and living paycheck to paycheck.

Canada and various other nations are in the same situation.

The irony here is thick.

Those who care about freedom (many of whom are Independents) may have more to learn from examples like Israel, China and India than from contemporary Washington D.C. and its increasingly Europeanized institutions, dreams and objectives.

The Effectiveness of Liberty

Just like during the American founding era, freedom in our day will flourish again in any place emphasizing entrepreneurship, free enterprise initiative and major deregulation of small business and class-oriented structures.

While many nations can learn from America’s current example of religious and racial freedoms and freedom of the press, the U.S. needs a healthy renaissance of economic and political freedom.

Until our leaders, institutions and laws once again lead the world in allowing and incentivizing entrepreneurial initiative, our freedoms and prosperity will decrease.

It is time for America to import its most valuable resource: A widespread belief in free enterprise.

The world needs less of a growing elite class and more nations where freedom is adopted and applied.

Learn More:

To learn more about the current state of geo-politics and economics, and how to revive freedom, read The Coming Aristocracy: Education & the Future of Freedom and listen to The Four Lost American Ideals by Oliver DeMille.

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Oliver DeMille is the founder of the Center for Social Leadership, and a co-creator of TJEd.