The Fourth of July and Human Capital

Two hundred and fifty years ago, something unique happened, the people of a nation were able to step away from what had been and envision what a nation could be. The people and the governing structure had never been so intertwined. A deep understanding of the people was necessary to create this new framework of governance, and the tradition of Western law was examined thoroughly to find the best framework for the people. The Founders fought viciously over where the boundaries should be drawn between individual autonomy and state control, Federal oversight, and regional independence. When they finished, they had created a system of governance that allowed more individual freedom than any that came before it. It also pulled together some of the best elements of earlier forms of governance to create the best chance of aligning the government’s incentives with those of the people. While this freedom shaped all the people who grew up in it, it had no guarantee of creating the American supremacy that is seen today. Only through a strong culture of virtue and creativity could the nation effectively utilize this effective form of governance and create something great. This system of government and its people formed each other and are only successful because of one another.

A free government without a strong culture of virtue and trust cannot sustain itself. Numerous free enterprise zones have failed when the nation surrounding them is not filled with virtuous people. Freedom only leads to growth and innovation when citizens are driven to build virtue that allows coordination. Paradoxically, these traits are enabled and supported by a government that allows for freedom, but freedom itself is often not enough to guarantee the creation and maintenance of these virtues, but a people can easily squander that freedom rather than cultivate virtue through it. All commerce has lower transaction costs when it is done in a society with high trust. People can spend less time worrying about the validity of their transactions and more time creating new and interesting things in a country with a culture more similar to America’s than Belarus’s. While freedom benefits the environment in which real virtue is practiced, the culture must be able to sustain a people with the internal traits that are the building blocks for all flourishing societies.

However, even if people are skilled and governed by the most altruistic motives, a government with too little freedom or inefficient incentives could lead them into poverty and stagnation. The Soviet Union had arguably far more high-level human capital than the United States did in the 1980s, yet they were only years from destruction. Russia was full of cutting edge scientists and experts in any field imaginable. Russia was also unable to produce businesses that added more to the world than they took as a whole. Additionally, Russia was notoriously bad at zero to one style inventions. The Russian people were often far more patriotic than Americans, yet they were unable to work their country into prosperity. Only a nation that allows people to bear the consequences of their own actions can experience the sort of dramatic growth that occurred in America over the last 250 years. Character and intelligence are helpful yet not enough to grow a country into prosperity without a state as free as ours.

Only through the marriage of good people and good institutions is the success of America even possible. The success was enabled through countless moments of divine providence and victory against all odds, but the two ingredients of success remain constant through it all. As the integrity and devotion to liberty of our government, as well as the character of our people are being shaken, we must never forget that this might be just another test rather than the beginning of the end. While every day there seems to be more news to suggest that the union’s days are numbered, it only dies when the quality of the people and the governmental structure that made us great are gone. Neither of these things has happened, and thus it is far too early to stop fighting. The journey of our nation ends when those who know the way become convinced they can only walk it by themselves. The truth, while once claimed self-evident, is not self-evident to all, and it demands that all who know it become its apologists.

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