While the financial crisis or Great Recession that began in 2008 dominates our financial consciousness, it strikes me that the events that began in December 2010 and will no doubt continue through the U.S. presidential election in November 2012 may have more of a lasting impact on our collective economic futures.
In December 2010, a mere day apart, rioters in London protesting cutbacks in tuition aid attacked Prince Charles’s car carrying the prince and Camilla, while the next day in Tunisia economic frustration set off a protest that has engulfed the Middle East and has already resulted in three Arab leaders being deposed.
In the rest of the world, protesters have since taken to the streets in Greece, Iceland, France, Portugal, Ireland, Israel, China, and elsewhere to vent their rage at aid cutbacks, food inflation, lack of economic opportunity, financial destruction caused by major banks, changes in retirement age, or government austerity generally. At their core, these protests are about economic policies or at least changes to existing economic policies.
The year 2011 represents a turning point where governments around the globe are finally realizing that the promises that have been made to voters may no longer be able to be kept and that an endgame of sorts has been reached where spending in excess of current receipts may no longer be able to be financed.1
Certainly, the weaker and more heavily indebted economies around the globe are already experiencing a painful austerity and an abrupt change to the social contract. On a projected basis the total of all of the promises made by politicians of all parties to a generation of voters now exceeds that which many countries can afford to pay without the destruction of their underlying economies.
It wasn’t until the riots in the United Kingdom in the summer of 2011 that I began to warm to the title of Ziad Abdelnour’s latest book, Economic Warfare: Secrets of Wealth Creation in the Age of Welfare Politics.
I found myself trying to explain to my teenagers why the streets in London near where we lived for a few years had erupted in riots and anticipating their next question as to whether or not the same thing could happen in the United States. I explained that, while there was certainly an element of hooliganism underlying the riots, the United Kingdom was going through a difficult economic period and that this was particularly difficult given significantly less economic and social mobility throughout the population in the United Kingdom when compared to the United States. It sounded so mundane when I said it that it took a while for my teenagers to appreciate that we were having an important conversation about the true nature of America and how we differ from much of the rest of the world. America does not have a tradition of class warfare.
The vast majority of Americans have never believed the concept that one must fail in order for another to succeed. In fact, we have celebrated those who have achieved economic success in our society whether in industry, Internet, medicine, fashion, music, finance, or otherwise, and our system allows for significant economic and social mobility based on ability and hard work. Further, what happens in America ultimately influences what happens in the rest of the world.
America is still roughly a quarter of worldwide gross domestic product and is a beacon for the young and ambitious around the world. Was I wrong? Is our great tradition at risk? As the United States confronts its economic challenges, the debate is no longer about if we have a problem but rather how we address the prospect of future deficits and government spending given the ripening of the entitlement promises made by a generation of politicians from both sides of the aisle to the past 80 year of voters.
With partisan politics at high decibel levels in advance of the presidential election in 2012 and a fundamental debate taking place between the "reduce the size of the problem crowd" and the "raise more money from those who can afford it crowd," I worry that certain fundamental premises of our collective economic success are in jeopardy. Sometimes when the debate is all around us, it takes an outside observer to make us appreciate how unique our economic model really is and how privileged we are to live in a country where we have economic liberty.
Ziad Abdelnour comes from a successful and prominent merchant family in Lebanon and relocated to the United States in 1982 as that country was going through a civil war. Ziad is an accomplished businessman in his own right and has become a trusted adviser and confidant to many successful families throughout the United States and the world. Ziad’s passion in defense of the case for individual economic liberty in the United States is exceeded only by his contempt for those who have abused the system to the detriment of all.
Conservatives and liberals will each find much to agree and disagree with in Ziad’s book. Economic Warfare is a timely addition to the debate and a good history lesson in advance of the next election of how our modern financial institutions came to be and how far from the founding fathers’ intent many of them have strayed.
Ziad argues forcefully that much of what we have come to accept as "progressive" ideas needs to be looked at through a different prism—a prism of economic liberty. Traditionally, we are taught to judge the success of a society by how it deals with the least able, most vulnerable members of that society. Economic Warfare challenges us by asking whether it is not the reverse that should be true. Shouldn’t we judge a society by how they treat the most successful? Do we vilify, tax expropriate and condemn those who have succeeded, or do we celebrate economic success as the engine that propels our society toward greater collective well-being?
Economic Warfare’s timing could not be better. As protesters fill the streets in cities around the globe, and as the United States begins to frame the solutions to our deficit issues, Ziad takes a refreshing look at the U.S. system and offers some strong advice as to how not to destroy that which has made our country unique. Many of Ziad’s concerns are reminiscent of a recent quote from the Financial Times:
Given the concentration of savings among a minority of the population, soaking the rich will be easier than slashing entitlement spending. But paralysis in Washington and the Fed’s dual mandate could result in a third path equally devastating to the wealthy: allowing inflation to debase private savings while easing indebtedness. Either way, America’s outnumbered savers may succumb to the tyranny of the majority.
I have known Ziad for more than 25 years since our time together at the Wharton School and as a coworker at Drexel Burnham Lambert in the mid-1980s. I truly admire Ziad’s passion as well as his ability to see events and trends for what they are. Ziad’s outsider’s perspective on what is great about the United States and what we are in danger of losing is timely and informative and an important contribution to the debate going forward.Marc Rowan
Apollo Global Management, LLC
1. John Maudlin, Endgame (John Wiley & Sons, Inc., 2011)