Column: Why do wealthy nations unravel? A lack of nationalism, says this economist

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A resident retrieves his wildfire burned American flag with the ashes of his house behind him at 13807 Kuehster Road near Conifer, Colorado March 28, 2012. Ten residents whose homes were destroyed in the fire were briefly allowed back to inspect the damage. The fire burning in the foothills and canyons near Denver has killed an elderly couple and destroyed 22 homes. REUTERS/Rick Wilking (UNITED STATES - Tags: DISASTER TPX IMAGES OF THE DAY) - RTR300VP

In his new book, “The Price of Prosperity,” Economist Buchholz argues that as nations become more wealthy and more prosperous, they begin to unravel. Photo by Rick Wilking/Reuters

Editor’s Note: Economist Todd Buchholz is out with a new book, with a counterintuitive thesis. In “Price of Prosperity: Why Rich Nations Fail and How to Renew Them,” Buchholz argues that as nations become more wealthy and more prosperous, they begin to unravel. He points to factor such as eroding nationalism and work ethic, a loss of community, a fear of immigration and declining birthrates to explain why.

As Buchholz told Making Sen$e’s Paul Solman, “Our society is based on [Greek and Roman] empires, but they’re gone. So why do we think our country is going to defy all of human history?”

The following is an excerpt from the introduction of Buchholz’s new book. For more on the topic, tune in to tonight’s Making Sen$e report with Paul Solman, which airs every Thursday on the PBS NewsHour.

— Kristen Doerer, Making Sen$e Editor


In Casablanca, Major Heinrich Strasser invites Rick to sit down and join him for a drink at the Café Americain.

“What is your nationality?” the Nazi commander asks.

“I’m a drunkard.”

“That makes Rick a citizen of the world,” the French captain Renault jokes.

But what about us today, who live in relative peacetime and prosperity? Do we feel a great emotional tug for our country?

The witty, sardonic lines fit the scene: a war-riven city in 1941 and a mass of desperate refugees figuring out how to fake their way to freedom. Rick was, of course, an American, but he was either too tipsy or too shrewd to cough up an honest answer to the Nazi. Who could blame him? But what about us today, who live in relative peacetime and prosperity? Do we feel a great emotional tug for our country? Many Americans seem to feel a greater emotional attachment to other things. If asked, “What are you?” their hearts might answer, “I’m an iPhone guy.” Or “I’m a fantasy football fanatic.” Or “I’m gluten free. And proud.” If an airplane skidded on the runway and passengers had to evacuate quickly, how many would first save their iPhone, their football picks, or their tasty gluten-free muffin instead of an American flag? After a burst of flag-waving following 9/11, polls show that patriotism has drifted steadily lower, especially among young people. While 64 percent of senior citizens say they are extremely proud to be an American, only 43 percent of young adults agree, and nearly half of Millennials say the “American dream” is dead. Other wealthy countries face the same trends.

Rick Blaine was a “citizen of the world,” because he was a drunkard. But in a globalized economy, even sober types are citizens of the world. Bono of U2, who claims great pride in his Irish heritage and still speaks with a brogue, skipped out of Dublin so that his band could reincorporate in the Netherlands and pay lower taxes on their music royalties. Roger Moore — 007 himself — has mostly lived in a Swiss chalet or in tony Monaco. And the guy who funded Facebook, Eduardo Saverin, hopscotched from Brazil to Harvard to Silicon Valley to Singapore after renouncing his U.S. citizenship in 2012. Not only drunkards and superstar musicians and actors, but just about anyone who works in international sales or computer software development might naturally feel more anchored to ephemeral cyberspace than to some cobblestoned Main Street with flags flying from the lamp poles and local merchants scrambling to compete against Amazon.com.

While 64 percent of senior citizens say they are extremely proud to be an American, only 43 percent of young adults agree, and nearly half of Millennials say the “American dream” is dead.

This book is not a long lament about patriotism and its enemies. Nor is it an attack on the modern economy. In fact, it turns on their head many traditional notions about patriotism and the stability of countries. It is a diagnosis, a history and a manifesto aimed at prosperous countries. Do not despair, for I will end on a note of optimism, with a road map that could help us avoid the shattering of nations. Theodore Roosevelt said, “We want to make our children feel . . . that the mere fact of being American citizens makes them better off. . . . This is not to blind us to our shortcomings; we ought steadily to try to correct them.” How many people agree only with Roosevelt’s statement about shortcomings? Contrast Roosevelt’s view with the University of North Carolina professor who teaches a course on “The Literature of 9/11” and calls the United States not just a superpower but a “necropower,” adding the Greek prefix that means “death or corpse.” The professor does not mean that the United States is dying; he means that it delivers death to others through torture and other military means.

Virtually every advanced country from Japan to Italy faces similar economic and cultural land mines. This book is not solely aimed at Americans. As I write this, millions of refugees from Iraq and Syria stream across European borders, sneaking onto and even on top of trains and buses. Will they become Germans? Or Brits? Or Frenchmen? Or eternal refugees, the shrouded “Invisible Men” of the 21st century? Or worse? In 2014, the British Ministry of Defence reported that twice as many British Muslims traveled to Syria and Iraq to wage jihad than had joined the British military over the past three years. Among British Muslim students, 40 percent support introducing sharia law. We might think of France as a fairly unified state, but early in its history, France struggled to stop Normans, Bretons, Alsatians, Gascons, Savoyards, etc. from setting up their own countries. More recently, Charles de Gaulle wondered, “How can anyone govern a nation with 246 different kinds of cheese?” Like the France that de Gaulle bellyached about, the United States no longer coheres. We have a thousand television channels, 1 billion websites and 330 million citizens with no reason to listen to each other. Talking heads on MSNBC and Fox News shout as if they are attending UFC wrestling matches. It is hard to get a country to “rally around the flag” when everyone stomps off in his or her own direction. Though President Obama won a clear reelection victory in 2012, he gathered votes from fewer than 28 percent of the adults in the country. Our official “national tree” is the oak, but perhaps our national symbol should instead be a splinter. The splintering is even more profound in the United Kingdom, France, Germany and other “advanced” nations.

It is hard to get a country to “rally around the flag” when everyone stomps off in his or her own direction.

Many commentators blame an obvious villain for polarizing civil society: new technologies, especially the internet, which offers infinite choices and distractions. The internet raises two separate threats: it can radicalize loners, and it can also fracture communities. An NYPD white paper proclaims that the “Internet is a driver and enabler for the process of radicalization” by luring weak-minded and strong-minded people into fringe groups. Former Obama official and Harvard Law professor Cass Sunstein warns that when “like-minded people get together, they tend to end up thinking a more extreme version of what they thought before they started to talk.” At the same time, new technologies enable a splintering of society. Picture an old black-and-white photo from the 1930s, with grandparents, parents and children gathered around one RCA family radio in the living room listening to the revered voice of President Franklin Roosevelt. Even RCA’s mascot, a terrier named Nipper, perked up his ears to listen. Now look around a home today, with each individual tuned to a personal smartphone or iPad. We have all seen families gather together at restaurants, ostensibly to share a meal and conversation, but each holds in hand an electronic device that literally packs more computing power than Apollo 11. At the same time, community institutions have broken down, including thousands of city and village newspapers that have folded at a rate of about 150 per year.

Throughout history prosperous nations have suffered from a powerful tendency to fissure, splinter and lose their unifying missions — even without the help of electrons zipping through wireless devices.

Clearly, technology can play a role in unraveling communities. But to blame technology is too simple, convenient and recent of an explanation. I will show that throughout history prosperous nations have suffered from a powerful tendency to fissure, splinter and lose their unifying missions — even without the help of electrons zipping through wireless devices. This entropy explains why nations have collapsed, even when their economies looked relatively strong. In fact, this book will show that nations are just as likely to unravel after periods of prosperity as during periods of depression. I will uncover five key forces that tend to undermine nations after they have achieved economic success. Together these forces impose the price of prosperity. While Paul Kennedy’s classic “The Rise and Fall of the Great Powers” hit bestseller lists with tales of countries overextending their military, I make the case that the rot begins internally, not from armies storming across borders trying to conquer others. Recent bestsellers like Thomas Piketty’s “Capital in the Twenty-First Century” target inequality, while “Why Nations Fail” by James A. Robinson and Daron Acemoglu focuses on poor countries struggling to achieve prosperity. But we must also worry about “successful” countries that can no longer move forward or even stay in place.

I will also argue that a splintering among the population matters: it induces people to cheat, swindle and focus more on the short term than on their long-term responsibilities, which ultimately undermines the economy and a cohesive civil society. The evidence jumps out from the headlines. A front-page story in the New York Times in 2008 reported that virtually every career employee of the Long Island Railroad applied for and received disability payments upon retirement. As a national spirit recedes, opportunism creeps in and shows up in everything from the housing market to school admissions to how congressmen handle national budgets. In the bubble years before the Great Recession of 2008, home buyers and brokers conspired to get subprime mortgages without putting any money down and without even showing tax returns to the bank. Bankers signed off anyway, since they were delighted to collect their hefty fees and pass the risk on to some faceless investor or taxpayer. Nobody had any skin in the game.

As a national spirit recedes, opportunism creeps in and shows up in everything from the housing market to school admissions to how congressmen handle national budgets.

It is a common and dangerous mistake to think that societies are less vulnerable when they are relatively prosperous. Most readers and even some social scientists assume, for example, that economic downturns spark crime. But faltering spirits and a lack of faith in the future kindle kidnapping, burglary and murder more than do falling incomes. During the 1930s, as families gathered around to listen to President Roosevelt’s reassuring voice, they felt a greater sense of cohesion and mutual support. In contrast, crime rates exploded in the 1960s, even as paychecks got fatter and jobs got easier to come by. To explain how even relatively prosperous societies have a tendency to come apart, we will scroll back the pages of history and look at the story of the splintering of such powers as the Ming dynasty in the 1600s, Venice in the 1700s, the Habsburg monarchs and Tokugawa shoguns in the 1800s and the Ottomans on the eve of World War I. In these examples, we will see how disintegrating national goals led to opportunistic behavior, an increase in cheating and theft and a decrease in saving and investment. We will see how the five forces of entropy threaten nations, putting a price tag on prosperity. These empires were powerful and reached extraordinary heights of economic wealth, yet they all collapsed from within. In this book, I have chosen examples that span cultural norms, from Confucian to Islamic to Catholic, geographic characteristics, from seafaring lowlands to mountainous highlands, and, of course, hundreds of years of history. The stories in this book will allow us to make inferences that are not anchored to one specific time, place, region or religion.


Copyright © 2016 by Todd G. Buchholz. Re-printed here with permission of Harper Business, an imprint of HarperCollins Publishers.

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