British Foreign Secretary Sir Edward Grey famously remarked, upon the German invasion of Belgium which started World War I: “The lamps are going out all over Europe. We shall not see them lit again in our time.”
Nearly a century later, it seems pretty clear that the neverending European financial crisis similarly signals that the flames of economic energy that made Europe part of the advanced economic world is flickering, not to spark again in our time. The question is whether America’s fading light will revive or die out.
About three decades before Europe’s lights began to fade in 1914, the New York City poet Emma Lazarus wrote of a different kind of lamp beckoning “huddled masses yearning to breathe free.” Said Lady Liberty: “I lift my lamp beside the golden door.”
Europe and the U.S. historically represented two distinct economic models. The Europeans took a dirigiste approach, where government elites decided the distribution of economic resources. The U.S. system, in contrast, allowed for regulation, but was otherwise content to let the economic chips fall where they may. This laissez-faire approach is what enabled huddled masses to breathe free—and change their social and economic status.
Whereas those at the top of society and those at the bottom of society tended to remain constant across the generations, the American approach enabled poor immigrants to rise according to their efforts, enriching the whole of society through their contributions.
All this should be fairly obvious and well-known to Americans, who need only look at their own family trees to understand this principle. Indeed, the American system generated wealth in such abundance that in the postwar period the American government had enormous tax revenues to dispose of.