If you want to know the future of an economy or a technology, one helpful measure is Wriston’s Law (named after Walter Wriston, a significant name in banking and finance). His book, The Twilight of Sovereignty, explained that capital (both financial capital and intellectual capital) “will go where it is wanted, stay where it is well-treated.”
The success of America in the recent past illustrates the reality of Wriston’s Law. America was a safe place for smart people and investment capital. America attracted talent and money while other countries repelled it.
Immigrants came to America in droves in the 20th century because this was the land of opportunity. They came to this country with some skills and dreams of success. They succeeded because there were many opportunities and few barriers.
America developed the atomic bomb in the 1940s in part because America welcomed talented immigrants from central Europe because Nazi Germany repelled them. Later, some of them helped build the American space program.
The economic conditions of America were also welcoming. While Europe raised taxes, presidents like John Kennedy and Ronald Reagan lowered them. Capital moved to America and created jobs and provided a foundation for new technologies. Investment capital also attracted great minds and encouraged foreign students to come and study in our universities.
Let’s now apply Wriston’s Law to America today. Are we as attractive to investment capital as we were just a few decades ago? I don’t think so. Our tax rates are equal to or even exceed the tax rates in other developed countries.
And are we attracting talent and entrepreneurs like we were in the past? Once again, I don’t think so. America also seems to be making it harder for educated and skilled foreigners to enter this country and become U.S. citizens.
I don’t think it is too late to turn this around, but we need to change our policies.