Americans have stopped taking risks. James Bolt discovers what this bizarre trend means for the future.
Have Americans stopped taking risks? This is the question pondered by economist Tyler Cowen in his latest book The Complacent Class: The Self-Defeating Quest for the American Dream. This book fits well into Cowen’s work on patterns in modern society and the stagnation of the American economy, a theme he tackled in earlier books such as Average Is Over. But with chapter titles such as ‘Why Americans Stopped Rioting and Legalised Marijuana’, this new book isn’t focused on your standard economic metrics.
It is strange to ask if Americans have stopped taking risks because they have always seen themselves as risk takers. From the settlers at Plymouth Colony to the Wild West and the post-World War I immigrants, America was built by people taking a chance on building a better life. Can a society so rich in that heritage suddenly revert to embracing the status quo and actively avoid its disruption, even if their lives would improve? Cowen says yes.
In both their personal and professional lives, Americans have segregated themselves into bubbles of comfort. The status quo for Americans in 2017 is a far more comfortable than that of their ancestors. This makes the need to improve one’s living standards less pressing today. But the slow disappearance of risk-taking is causing long term consequences.
IN BOTH THEIR PERSONAL AND PROFESSIONAL LIVES, AMERICANS HAVE SEGREGATED THEMSELVES INTO BUBBLES OF COMFORT.
In their personal lives, Americans have turned to online dating. A computer now ‘matches’ you to another person based on your personalities, rather than going out and socialising. When two daters are matched, they don’t take any chances on the restaurant. They can have dining venues recommended to them by other apps that know their eating habits. Together they can listen to music on apps such as Spotify and Pandora that recommend music with their own algorithms that determine what they would like based on previous listening habits.
If that seems trivial, then look at American professional lives. The number of people making ‘the big move’ for a job in a new city is falling. Interstate migration is 51 per cent its 1948-1971 average, and those who move tend to be migrants rather than those born in America.
The number of Americans taking the big risk of opening their own business is also falling. In the late 1980s, 18.9 per cent of employment in the American economy was at firms less than five years old. Just before the Great Recession in the 2000s, this number fell to 13.5 per cent. There’s a similar trend in Australia too, with our business entry and exit rates in precipitous decline.
What will happen if Americans no longer take risks and disappear into their own comfort bubble?
Cowen paints a bleak picture that the American economy is going to suffer. As people further retreat into their own status quos, economic growth will falter. And if that happens, America will be overtaken by competitors such as China. Indeed, wages in America are already falling—today’s median male wage is lower than it was in 1969.
However, America’s resistance to change cannot last forever. President Donald Trump’s election is possibly the most disruptive change to the American political scene since the Civil War. Whatever you think of the man, the former host of The Celebrity Apprentice was elected to the nation’s highest office, despite not once holding public office in his life. Surely this demonstrates an appetite for change. It is also notable that the states that guaranteed Trump’s win—Ohio, Wisconsin, Michigan and other ‘flyover’ states—are the places feeling the biggest pinch of the slowing economy.
But it remains to be seen whether Trump’s election is the big change event, or a precursor to more disruptive events.
Much is made of the divisions in America. We all were horrified by the images of the 2014 Ferguson riots on our televisions, mostly because such scenes have become so rare. We are far removed from the social disturbances of the 1960s, such as the 1967 Detroit Riot where 4700 paratroopers had to be deployed to quell the violence. But there is an underlying appetite to resort to violence in times of complete political frustration. As Cowen warns, this time of social peace cannot go on forever. One of the most important sentences in The Complacent Class comes towards its end:
The biggest story of the last 15 years, both nationally and globally, is the growing likelihood that a cyclical model of history will be a better predictor than a model of ongoing progress.
America has not outgrown its past. With a history of political violence—albeit a small history compared to other nations—we cannot assume those days are behind us, especially in these divisive times. Cowen’s point about the cyclicality of history need not be read as totally negative one. If history is cyclical, then this period of stasis cannot last forever, and the future of America may return to one of growth.
IF HISTORY IS CYCLICAL, THEN THIS PERIOD OF STASIS CANNOT LAST FOREVER, AND THE FUTURE OF AMERICA MAY RETURN TO ONE OF GROWTH AND HUMAN FLOURISHING.
Cowen insists he is an optimist for the future, but his pessimistic predictions include more unemployment, falling wages, increased social unrest and further segregation. However, Americans have overcome worse examples of these social problems in the past. If history is the best predictor of the future, then the future will be a positive one.