Don Tow's Website

The U.S. is known as a country where if you are willing to work hard, and especially if you are willing to study hard and work hard, then you will have a good future:  A good education, a good job, and a good life.  The U.S. is a country full of opportunities, and they are there for your taking if you are willing to work toward it.  This reputation is what attracted so many millions of people from all over the world to come to this country during the last 200 years, especially during the last 60 years when the U.S. became the most powerful and richest country in the world.  People come in the form of legal immigration and sometimes in the form of illegal immigration.  The ability to have a good future if you are willing to work for it, definitely for your children if not also for yourselves, is known as the American Dream.

Year after year thousands and thousands of immigrants have gone after and then realized this American Dream.  The question is can this American Dream be continued unchanged in the future?  To try to answer this question, we first discuss a unique characteristic of the U.S. environment, and then examine several phenomena that have been occurring in the U.S

The U.S. is really unique in terms of geographic or natural opportunities during most of its existence.  It offered a vast country with a very small native population.  It offered good natural resources with a large percentage of the land ideal for agriculture and cattle ranging.  Thus, there was always room to expand and enough resources to share, instead of being a zero-sum situation where one could gain only at the expense of someone else.  The country actually welcomed more new comers to help develop the vast land.  As a matter of fact, it was partially due to immigration to the U.S. of so many of the best and brightest from other countries that propelled the U.S. economic engine to become the richest and most powerful country in the world.

The U.S. is bordered by the Atlantic Ocean on the East and the Pacific Ocean on the West, providing natural barriers from foreign aggressors.  It is bordered on the north and the south by two relatively new countries also with a vast land of their own and a small native population.  The U.S. was able to live relatively peacefully without worrying too much about the threat of foreign invasion until World War II.  Thus, it could focus its resources and energy internally to develop the country.

With all the above advantages, it was able to develop into a rich and powerful country.  Furthermore, compared with most other countries, it suffered relatively minor damages from WWII.  This enabled it to develop into the richest and most powerful country in the world after WWII.  Then for another 25-50 years before many other countries (e.g., first Germany and Japan, and then Korea, India and China) developed into credible economic competitors, the U.S. was able to reap great economic advantages all over the world.

This is not to deny that other factors (e.g., its democratic system of government, the American entrepreneur spirit) were also contributors to the success of the U.S. during the first two hundred years of its existence.  The point we want to make is that there was almost an ideal geographical or natural environment for the U.S. during most of its existence that greatly helped it to develop into the richest and most powerful country in the world and created the base for the American Dream.

We now turn our attention to some of the phenomena that have been occurring in the U.S.   The event that has captured the public and media’s attention in the last year and a half is the near-collapse of the financial market (occurring first in the U.S. around the second half of 2008 and then rapidly spreading to the whole world), followed by the astronomical [1] government financial bailout, and more recently by the huge bonuses distributed in the very companies that triggered the financial collapse.

I think that several questions need to be raised.  The financial collapse was due to many banks and mortgage companies investing in high risk mortgage loans followed by many insurance and investment companies creating and investing in various insurance investments derived from these risky mortgage loans (e.g., credit default swaps).  This became so fashionable for most of the last decade until 2008.  During the several previous years of booming housing market when house prices kept going up and people kept buying houses with loans they really couldn’t afford, these companies made billions and billions of profits.

The first question we need to ask is didn’t the people who were reaping these huge profits realize that these loans and derivative investments were intrinsically risky and the boom was built on a house of cards, that sooner or later the housing and investment bubble would burst, especially when the adjustable mortgage loan rates changed to the higher rates which the borrowers could no longer afford.  I think that there is no way that many of the people who created these investment vehicles didn’t know.  It is more likely that they didn’t care.  Their motive, as well as the motive of their companies, was to make as much money as possible for themselves and their companies.  The fact that what they were doing could lead to financial disasters for the country and the world is a problem to be worried about later and more importantly is someone else’s problem.   Although the adverse fallouts of such purely self-centric motive may not be as severe in a continuing expanding economy like the U.S.’s several decades earlier, it is disastrously serious in a zero-sum economy like the current U.S. economy.

When the financial bubble burst, the U.S. government decided that the only way to keep this financial meltdown from spreading to the whole economy is to bail out these companies with billions and billions of dollars, totaling approximately $11 trillions. [1]  Probably no one really knows whether such a huge bailout is necessary to keep the whole economy, not just a number of companies, from collapsing.  Nevertheless, a natural question to ask is whether it is really necessary to bail out all these companies.  Many companies repaid the government in less than a year.  For example, Goldman Sachs in April 2009 repaid the $10 billion TARP bailout money received from the government just six months earlier in October 2008; JP Morgan Chase repaid their $25 billion TARP bailout money in early June 2009.  If they can repay the money so quickly, did they really need the government bailout to survive?   It seems that the answer to this question is most likely no, especially taking into consideration that both Goldman Sachs and JP Morgan Chase had record earnings or revenues for 2009.  Perhaps that the real reason they accepted the bailout was again greed.  They are concerned only about themselves and not the whole country, thinking that if the government is willing to give them a bailout, why should they reject it even if they don’t need it?  One may then ask if it were greed, why would they repay the bailout money so quickly?  If they don’t repay the bailout, they would be under more scrutiny from the government, e.g., with respect to bonuses.  They definitely did not want to lose or significantly reduce their traditional huge bonuses.  Keep in mind that the bonuses for each of the executives of these companies who make these decisions are in the millions.  Therefore, the reason for repaying the bailout money so quickly was also greed.

In spite of the continued gloomy economy for the whole country and an unemployment rate of about 10%, these companies still decided to dole out huge bonuses to their employees.  For example, for 2009 Goldman Sachs doled out $16 billion in bonuses, so that on the average, each employee received approximately $500,000 in bonus and compensation for 2009.  For 2009 JP Morgan Chase paid $27 billion in bonuses, so that on the average, each employee received approximately $135,000 in bonus and compensation for 2009.  There is really no moral justification for awarding such huge bonuses when you take into consideration that it is mostly the doings of these companies that caused the financial meltdown resulting in the depressed economy for everyone else in the country.  The justification from these companies is that in order to keep their employees, such huge bonuses are necessary.  But if the whole financial industry were ethical and morally responsible, then there would be no company to jump to due to significantly higher bonuses in other companies.  Again, it seems that the only explanation is unabashed greed.

But are such unabashed greed and purely self-centric motive restricted to only those people working in the financial industry?  The answer is no, and this behavior is manifested in government, labor unions, corporations in other industries, professional sports, etc.

One of the well known characteristics in government is pork barrel politics.  This refers to the spending of government money on projects that benefit only the constituents of a particular politician in exchange for that politician’s political support, usually in voting for a particular bill.  The pork barrel money that is spent is taxpayers’ money, and the projects usually do not benefit anyone else and sometimes may even have adverse impacts on others.  There are numerous examples of such pork barrel spending; we illustrate with only two.  One is the $300+ million bill pushed by Republicans that was passed by Congress in 2005 to build a “Bridge to Nowhere” in Alaska [2] that would connect the town of Ketchikan (population 8,900) with its airport on the Island of Gravina (population 50).  This bridge is supposed to replace the current ferry service that runs every 15-30 minutes and charges $6 per car.  After this bill became well known and the public backlash was so severe, Congress later that year removed the spending specifically earmarked for this as well as another similar bridge in Alaska.  However, this new action did not save the taxpayers any money, because the $400+ million originally allocated for the two bridges remain in Alaska and left to Alaska to decide how to spend that money, including using the money to build those two bridges if they so desire!

Another example of pork barrel spending is the proposed Senate Healthcare bill that was formulated at the end of 2009.  In order to get Senator Ben Nelson’s vote, the 60th vote necessary to assure its passage in the Democratic-controlled Senate, the proposed bill was revised so that the federal government would pay forever Nebraska’s expanded Medicaid population while all other states would get full federal assistance only for the first three years of the bill.  This promise has been estimated to cost the taxpayers as much as $100 million during the next decade.  It really doesn’t matter that Senator Nelson has said that he didn’t request this change.  What matters is that it was even offered, and he accepted it.  Related to the Senate Healthcare bill, if the senators were voting according to what they believe and what they think is best for the country, then I don’t see how all the Democrats would vote one way and all the Republicans would vote the other way.  Obviously, they voted according to party lines.

Pork barrel spending is not just an isolated event that happens only once in a while, it is intimately immersed in the fabric of political spending in government, at both the federal and state levels.  It reflects the greed and the self-centric motive of the political process.  One may argue that that is the only way to make political progress.  Perhaps that could be an acceptable way in a continuing expanding economy, but it is definitely not the best way in a zero-sum economy.  One may also argue that it is human nature to be greedy and completely self-centered.  I believe that each human being has both a positive side and a negative side, and in our educational and political process, we should not only encourage exhibiting positive behaviors, but our whole social and political process should reward positive behaviors, and reprimand or discourage negative behaviors.

Another example of greed and self-centric motive in both government and corporations is the spending behavior at the end of the budget year.  Often money has been allocated for a specific budget year for a particular project or organization within a government agency or a corporation.   Near the end of the budget year, the project or organization may find that they really didn’t need all the money that was allocated.  Instead of returning the money to the larger organization which may find better uses for the money, the common practice is to spend it for fear that their funding request(s) for the following year(s) will be reduced.

Greed and self-centric motive apply equally well to labor unions.  Labor unions definitely serve a useful purpose.  Without labor unions, profits earned from the labor of the employees will not be nearly as well distributed, resulting in a small and very rich owner/manager class and a large and very poor worker class.  However, with the increasing power and influence of labor unions, labor unions often continue to demand higher salaries and better benefits which sometimes can no longer be sustained from a business point of view, especially when their government or corporation is getting closer and closer to insolvency.  Examples are the airline and auto industries.  State governments and local school districts are facing tremendous budgetary shortfalls and higher taxes, yet teachers unions continue to oppose strongly any significant sharing of the health insurance premium even though most workers today contribute a non-negligible share of their health insurance premiums. Again, a purely self-centric motive of any group will no longer work to the benefits of the larger society, and in the long run as well as that particular group, as we transform from a continuing expanding economy to a zero-sum economy.

Another example of self-centric motive in the corporate or government world is manifested in the unwillingness to share information with colleagues.  This is a seldom discussed phenomenon, but it is fairly pervasive and is a factor from keeping a company from being more efficient, more creative, and more competitive.  We probably have all experienced this phenomenon.  In my 35 years of professional life, I have experienced this in an obvious way on several occasions, and probably many more times in more subtle and non-obvious ways.  On the one hand, a colleague would ask me for information on subjects that I either know more or have been working on, and I provided the information every time they asked.  On the other hand, when I asked them for information on subjects that they either know more or have been working on, they took no action and basically ignored my request(s).  My asking for that information was not purely for my own benefit, but it was because there could be synergy between what they were working on and what I was working on or what I had worked on.  Such lack of cooperation could result in lost opportunities.

The last example of greed and self-centric motive is in the field of professional sports.  The astronomical salaries of the top professional athletes or even the average salaries of professional athletes are mind boggling.  In the article “Misplaced Priorities and Its Social Impacts” (http://www.dontow.com/2009/02/misplaced-priority-and-its-social-impacts/), I mentioned that

• the signed contracts of the top 10 picks in 2008’s National Football League draft guaranteed an average of $18.7 million over the lifetime of their contracts (usually four-to-six years)
• the average salary per season in 2008 for Major League Baseball players was over $3M
• the average salary for the 2008-2009 season for the National Basketball Association players is $5.3M
• the average earning of the 120 major-college football coaches in 2007 was over $1M
• among the 65 colleges that made the NCAA Basketball Tournament in 2006, at least 20 of those colleges’ basketball coaches were making over $1M for 2006-2007.

Why should we care if they can make so much money?  The reason is because we, ordinary citizens even if we don’t go to any of their games, ultimately pay for their salaries.  Their salaries are paid through higher charges for ads and commercials (reflected in everyday products that we buy), television and cable broadcast fees (reflected in our monthly television and cable subscription fees), and sometimes also through public subsidies for their multi-billion dollar stadiums and arenas (reflected in our various taxes).

Summary: For over 200 hundred years, the U.S. offered the American Dream, i.e., if you are willing to study hard and work hard, then you will have a good future:  A good education, a good job, and a good life.  Millions of people from all over the world have immigrated to the U.S. to seek and then fulfilled the American Dream.

Can this American Dream be continued into the future?  In this article, we argue that a major reason for the U.S. being able to offer the American Dream is because of its unique geographical or natural environment that isolated and protected the country while offering the country with plenty of land, natural resources, and a very small native population.  This allowed the U.S. to continue to absorb more people and continue to expand.  In other words, for the first 200 years of its existence, the U.S. was in a continuing expanding economy.  However, in the last 20-30 years, the U.S. has essentially fully expanded, so its economy has transformed from a continuing expanding economy into a zero-sum economy.  In a zero-sum economy, the benefit of the larger entity must be taken into account.  Adopting a greed and self-centric approach may benefit one part in the short term, but not the whole and in the long term not even that part.  Furthermore, other economic powers have come into existence to provide credible competition to the U.S.  Thus, in order for the U.S. to compete successfully, it must operate very efficiently and creatively.  This provides another reason that all its parts must work together and synergistically, but not against each other.

Can the American Dream be continued?  Yes, it can, but it cannot be accomplished doing business as usual.  In particular, our motive and mode of operation cannot be driven by greed and a self-centric approach.  It must be driven by taking the whole entity into our heart.

As stated earlier, this is not to deny that other factors (e.g., the democratic system of government in the U.S., the American entrepreneur spirit) were also contributors to the success of the U.S. during the first two hundred years of its existence.  Furthermore, we do not mean to imply that more greed and more self-centered motive are found in the U.S. than in other countries.  As a matter of fact, we believe that there are more similarities than differences among people from various countries.  Every human being has a positive side and a negative side.  In a continuing expanding economy, the adverse consequences of exhibiting more of the negative side are no where as severe as in a zero-sum economy.  The U.S. and most of the world are now in a zero-sum economy.  Whoever can exhibit more of the positive side will come out first in the competition.  If the U.S. comes out first, then the American Dream can be continued.

[1] Including various forms of financial aid, the total financial bailout is approximately $11 trillions.  See, e.g., http://money.cnn.com/news/storysupplement/economy/bailouttracker/index.html.  The $700 billion Trouble Asset Relief Program (TARP) established by Congress in October 2008 was only part of the total federal bailout money.
[2] This became well known during the 2008 presidential election.