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Where to Invest?
Silicon Valley isn’t just rich — it feels rich, too: Central San Francisco may have a late-capitalist fin de siècle pre–Walking Dead feel to it, but the genteel precincts of West Atherton and Menlo Park feel like a different, happy, refined little world. Because Silicon Valley has a kind of self-enforced sumptuary law, only certain kinds of conspicuous consumption are socially acceptable — you’ll see more Lamborghinis parked outside an Eddie V’s in Houston than you’ll see ferrying the suburban aristocracy of Very High Tech America to and from wherever it is they go. As the Guardian reported in 2019, Silicon Valley is on a GDP per capita basis wealthier than such global enclaves of the serious money as Luxembourg, Macau, and Qatar, at least as the World Bank ran the numbers in the pre-Covid economy.
With $128,647 in economic output per person in 2017, Silicon Valley represented the crème de la crème of big money, almost within economic spitting distance of . . . Midland, Texas, which reported a GDP/capita that was substantially higher at $174,749.
Midland doesn’t feel rich. A lot of it feels temporary — and weird, and brutal, and Blade Runner–ish where it is not positively Martian in its barrenness and austerity.
But the road from Midland to Menlo Park isn’t as long as you might think.
Things are a little weird in the economy right now. The U.S. economy is currently suffering from a combination of weak (and, recently, negative) economic growth at the same time it is dealing with high inflation — a “stagflation” Americans have not endured since the 1970s. (You know, the 1970s: the age of disco and butterfly collars and such that coincided with the first time Joe Biden got elected to federal office.) Real wages — meaning inflation-adjusted wages — have been in decline. Fuel prices have been skyrocketing, but many of the oil and gas producers in West Texas are sitting on the sidelines. Between January and May, the so-called FAANG stocks — the formerly bulletproof shares of Facebook, Apple, Amazon, Netflix, and Google — lost more than a third of their value. Because these shares are so widely owned, their performance over the years has made a big positive contribution to the net worth of a whole lot of U.S. households — in 2015, for example, the NASDAQ as a whole would have lost money if not for the performance of five or six blockbuster companies. When they falter, there is a lot of hurt to go around.
With tech shares in free fall, a fair number of venture capitalists (many of whom made their fortunes in tech and still have a lot of exposure to the industry) are dialing back their operations, restricting the flow of capital to start-ups that have been important drivers of U.S. economic growth and innovation. That has important long-term implications: VC-backed companies account for almost two-thirds of U.S. research-and-development spending.
A not-great sign: Business investment remains substantially off its 2019 peak. Even those West Texas drillers are hesitant to invest much in the current economic climate, in spite of high oil prices. From Bloomberg:
After Russia invaded Ukraine in late February, crude prices surged to a 13-year high. Gasoline is above $4 a gallon in every US state for the first time. Jet fuel in New York spiked to a record last month. Yet shale explorers show no sign of riding to the rescue. Their business model has fundamentally changed, reshaped by pressure to curb growth and divert cash to investors with dividends and buybacks. Inflation is also taking a toll. US oil output this year is expected to expand by less than half the amount it did in 2018, when crude traded around $65. That means more pain for consumers, with JPMorgan Chase & Co. predicting US gasoline at $6.20 a gallon by August.
Americans are really good at a lot of things — a surprising number of things, in fact. But we have an absolutely enormous footprint in four key areas: agriculture, energy, technology, and culture. Americans are awesomely productive farmers, and the United States is the world’s largest exporter of agricultural products, a fact that is going to matter a great deal as Vladimir Putin’s brutal assault on Ukraine disrupts global grain markets. The United States is the world’s leading producer of oil and gas. Most of the world’s most important technology companies are U.S.-based. (Can you think of an important Internet company from the European Union or Japan? Other than Spotify in Sweden, it’s hard to think of any big ones.) Eight of the world’s ten largest media companies are U.S.-based. Practically all of the world’s mobile phones run on Android or iOS. The United States, with its sophisticated capital markets and highly productive work force, is a center of global innovation and productivity.
Any country in the world would be glad to have one of those four gems in its economy. China is the world’s largest food producer, but it is also the world’s largest food importer and the world’s largest oil importer, something that must disturb the sleep on the autarky-minded gerontocrats in Beijing. The Germans are justly proud of their automotive industry, but the regulators in Berlin and Brussels are frustrated by the fact that practically all the Internet firms they wish to exercise control over are U.S.-based. And American culture — and cultural products — are simply everywhere: As Americans traveling abroad will notice, you couldn’t escape American popular culture even if you wanted to. There is no yurt far enough away.
It would be a great understatement to observe that the fundamentals of the U.S. economy — the real, long-term fundamentals — are strong. Arguably, they are stronger in the United States than they are in any other country anywhere in the world.
So, why is our economy so unsatisfactory at the moment?
Go ahead and make your ritual denunciations of Joe Biden. Get it out of your system. All right, then.
President Biden is not great on the economy — in fact, he is pretty bad. But I would like you to try to take a slightly larger view, one that is not simplified to meet your ideological and political needs.
There is some good reason to believe that a big part of what ails the U.S. economy right now is best understood through a Hayekian or “Austrian” lens, an analysis that emphasizes the problem of uncertainty. We have organic uncertainty in the economy, much of it having to do with worries about the persistent supply-chain hangover from Covid-19 and lack of clarity about how and when that will be resolved, and about what a post-resolution world really looks like. Covid also accelerated some organic changes in the economies of the developed world, hastening labor-market changes related to demographics and turbocharging the move to remote work that probably would have happened to some extent on its own but perhaps would not have gone as far or as fast as it has. How that is going to shake out remains unclear.
We also have industry-specific uncertainty caused by politics and policy. The folks in Midland and the nice people in Silicon Valley may not have much in common culturally, but they share some uncertainties when it comes to business. Put in the most stark and extreme way, they are worried that they may be effectively regulated out of business. The fossil-fuel industry has no friends in the Democratic Party and relatively few friends in Europe, and it faces a world in which Wall Street greenwashing threatens their access to capital and financial services; on top of that, many of that industry’s business partners around the world are, because of the nature of the petroleum business, authoritarian states and state-run firms linked to authoritarian governments. The American Left intends to put fossil-fuel companies out of business, and putting them out of business is, in effect, the long-term consensus position in the European Union. How many millions of dollars of your own money would you invest in long-term energy projects, given that uncertainty and hostility?
Technology companies are worried about punitive populist tax measures and aggressive regulation, especially of social-media platforms. Social-media firms such as Facebook and their high-tech cousins such as Google and Amazon have few friends on either side of the aisle in the United States — Republicans see them as West Coast progressive cultural enemies, and Democrats see them as plutocrats in need of plundering for the sake of the common good. The urgent political voice of the moment is something like that of J. D. Vance, purveyor of the most authentic anti-capitalist populism Peter Thiel’s money can buy. (I like you guys, I really do — call me when you sober up.) And, if anything, the bureaucrats in Brussels are at least as much of a danger to U.S. social-media companies as the culture warriors in Washington are.
Democrats are the greater economic offenders at the moment, kicking around very significant changes not only to business taxes but also (probably more significant) to laws and regulations affecting corporate governance. But Republicans are no longer reliable allies when it comes to trade, regulation, corporate governance, and much more. And, in many ways, an uncertain friend is a bigger problem than a certain enemy. Reliable hostility you can plan for — you can put it in your budget. Uncertainty is a heavy tax.
We don’t need to reinvent the American economy — if we were building it from scratch, what we built almost certainly would not be as good as what we have. We have the sort of organic prosperity and capacity that you can’t buy, legislate into existence, or cook up in a committee planning session. But prosperity is not self-sustaining or self-executing. It requires constant investment, innovation, and cultivation. We have remarkable areas of excellence and economic strength, but we also have a political consensus that at times seems hell-bent on killing that magical goose in the false belief that we can get all the golden eggs at once if we do so.
Of course, there is more to the U.S. economy than farming, energy, technology, and culture. But these provide a real foundation for the real-world realization of that “broadly shared prosperity” that the politicians are always talking about — something for everyone. But we need a stable, predictable policy environment — especially after the radical disruptions associated with the Covid epidemic.
We are in a new era. Unfortunately, it is an era in which our economic needs are radically at odds with political incentives. We need consensus, cooperation, stability, modesty, moderation, and prudence, but our politics rewards confrontation, extremism, narrow-minded partisanship, and short-term maximalism. But there is so much in America that works — and works well — that it is difficult for me to believe that it is impossible to build a successful political agenda around our genuine national strengths rather than one that is based on parochial grievances.
I only wonder how much trouble and misery we are going to inflict on ourselves before we figure that out.
Words About Words
A sociolinguistics study that I encountered as an undergraduate had an interesting finding: As you would expect, the more educated an American is, the closer his writing and speech is to Standard American English, with one big exception: Americans with doctorates working in universities tended to adopt an unusual number of British usages in their writing and speech. I don’t remember the precise details of the study and can’t find it, but I suspect that the research was done in the 1980s, the pre-Internet era in which most Americans would not encounter British English in their daily lives. (I feel like I am about to start inviting you damned kids to get off my lawn, but you children of the digital age may not appreciate that it was once a rare and expensive luxury to be able to get a subscription to a foreign newspaper — and unless you lived in New York City or Washington, same-day delivery was basically impossible at any price.) People working in universities would have more access to news periodicals and academic journals written in British English, and would in that way have an opportunity to absorb those usages. More important, as the study authors noted, they would have an incentive: British English is considered high-status among Americans in general (ask Florida Man about that) but especially so among academics.
Prestige and language are tightly related. In one of the foundational studies of sociolinguistics, William Labov studied pronunciation in the very class-conscious linguistic ecosystem of New York City department stores in the early 1960s and found that the more high-end the store, the more standard the pronunciation of the clerks. At the time, the ascending socioeconomic rankings went: Klein’s, Macy’s, Sak’s. Similar studies have produced similar results over the years, and you’ll notice this in your own life if you pay attention: You may think that a waiter is a waiter is a waiter, but the waiters at Applebee’s will speak differently from the waiters at Eleven Madison Park. The person working the cash register at Barnes & Noble will generally speak a more standard English than the one at Walmart.
And once you’ve exhausted the fanciest kind of American English, you end up with British English — you will hear a statistically unusual number of British accents among my National Review colleagues.
The very refined Mid-Atlantic accent and mannerisms of our founder, William F. Buckley Jr., were the subject of speculation and comedy during his lifetime, but you can hear similar speech from contemporaries of his with similar biographies, such as George Plimpton. That is an almost entirely lost species of American speech.
Pretentious Britishisms and Europeanisms should be avoided in most cases, but there is at least one foreign convention that I think we should adopt in American usage: the day/month/year format for writing dates in which the day and the year are numerals and the month is spelled out: 4 July 1776, 22 August 1485, 11 November 1620, 26 December 1991. The advantage here seems to me obvious: The spelled-out month separates the two numbers, making them easier to separate in the mind. And, unless you are writing about some very ancient history, you won’t have years that are less than 31, and in most cases they will be four digits, which makes the whole package easier to digest. I would make exceptions for dates that have become in effect proper nouns, such as September 11.
A reader might stumble over 4/5/1906 or 2/1/1903, but not 5 April 1906 or 1 February 1903.
Also . . .
About “exponential” growth and other kinds of growth, a physicist observes:
There’s another one that people (more) often confuse with exponential growth: geometric. In geometric growth, the variable is set to some fixed exponent (frequently 2 or 3 for area or volume; linear is the special case where the exponent is 1). In such a case, a square with sides twice as long as another will have four times the area, while another that is three times as long will have nine times the area.
There are (of course) other relatively-common kinds of growth that people confuse with exponential growth, such as logarithmic (fast then continually slower but never stopping) and sigmoidal (slow, then fast, then slow, often reaching a maximum). The latter is particularly interesting of late, because it is often a good model for population growth, such as the population of people with a certain communicable disease.
Sigmoid functions are called that because their graphs look like an S that is stretched laterally (or horizontally, if you prefer). One of the things that makes them hard to explain is that there are many different such functions. One of the reasons they’re not explained is that they often look like exponential functions initially, and exponential growth is exciting, or frightening. Indeed, a common sigmoid function is an exponential function divided by the same function plus a constant (such as 1); for small values of the exponent, the constant dominated on the bottom (the denominator), so the function looks like the exponential function, but for large values of the exponent the constant is less and less important, and the function goes toward one.
Rampant Prescriptivism
An ambiguous headline from the Wall Street Journal: “Stock Market Opens Higher After Weekly Loss.”
That isn’t quite right. That which is weekly is recurrent, happening once a week over an indefinite period of time: “Newsweek was a highly regarded weekly magazine before it became a steaming heap of hot garbage”; “They were weekly church-goers”; “I made my weekly telephone call to my mother.”
The usual market idiom for a decline over the course of a week is “loss on the week.” From the Wall Street Journal: “With a loss on the week of 255 points, or 6%, the index halted a string of weekly gains that had done a lot to restore confidence in the technology sector.”
We had better hope that this isn’t a regularly recurring weekly loss!
And Furthermore . . .
A publication brought out at regular periods is a periodical, as you all know, and the interval of its publication is its periodicity — fortnightly, for National Review, daily for the New York Times, etc.
Send your language questions to TheTuesday@NationalReview.Com
Home and Away
When Second Amendment advocates complain that the government does not enforce the gun laws that already are on the books, that often is received as empty rhetoric. But the actual facts of the case will astound and appall you.
Consider the perennially misgoverned city of Philadelphia. Today, a criminal facing a gun charge there is twice as likely to have his case dismissed as he was just six years ago. According to the Philadelphia District Attorney’s office, only 30 percent of gun cases were dismissed or withdrawn in 2016 — and by 2021, that figure had doubled, to 60 percent. I should emphasize here that these are gun crimes specifically, not petty marijuana-possession cases or shoplifting. In 2016, 61 percent of the gun-crime cases ended either in a guilty plea or in a conviction in court, but by 2021 that figure had declined to 36 percent — which is to say, if you are among the unlucky few criminals who actually gets charged with a gun crime in Philadelphia, you still have a two-out-of-three chance of walking on the charge today, while six short years ago the most likely outcome was a conviction.
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From the Archive . . .
Unfortunately, there are some subjects — and some species of stupidity — that do not change from year to year. Here is what I was thinking about on the first Tuesday in June 2021.
Forgive my plucking a comment from the obscurity of Twitter to make an example of, but it is a useful one. In an exchange about health-care policy, a professor of political science at a major American university asked a familiar question: Why is it that some Americans apparently believe that the United States is incapable of managing a single-payer health-care system like France’s?
You’ll see the problem there.
The fact is that nobody actually knows whether France or the United States is capable of managing a single-payer health-care system, because neither country has single-payer health care. Not many countries do.
France’s health-care system is different from the U.S. system in important ways, but it is in other ways quite similar: It is based on insurance. As in the Swiss system and the original version of the Affordable Care Act regime, that insurance is compulsory. Patients pay for their health care and then are reimbursed — but not for the full amount — by their insurers. The French generally have to consult with a general practitioner before being referred to a specialist, pay lab fees, etc. About a quarter of the hospitals are for-profit and the rest are either private nonprofits or public. What the French do not have — and what almost none of the countries of Western Europe and few countries around the world have — is single-payer, a public-monopoly model of health care found in the United Kingdom, Canada, Norway, the United Arab Emirates, and a few other countries.
Correspondence
About the virility panic, a reader observes:
I wanted to note something you might already know about [Robert] Baden-Powell and the origins of Scouting. B-P used to say that he conceived Scouting in observing the African rituals of manhood that involved the initiate setting out into the wild alone with a spear to learn courage, resilience, and self-sufficiency. He dreamed of constructing a cult (!) that would save the phthisic and degenerate youth of the modern cities (both upper class and working class) by guiding them into the great wild to learn character and manhood. Very much rhymes with Teddy Roosevelt’s philosophy — and he was a great supporter of Scouting in America.
In Closing
I will be on a partial break for a few weeks starting in mid-June, so you may see a little less of my work in National Review. Please know that this is short-term and in response to happy developments, and that the Tuesday will soldier on as scheduled. I suppose this is as good a time as any to confess something I suspect many of you have already guessed: I chose the name “The Tuesday” in order to keep myself on schedule.
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