Here is a brief excerpt from an article by Niraj Chokshi for the Washington Post. To read the complete article, check out others, and obtain subscription information , please click here.
Photo Credit: Nati Harnik/AP
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Sourpusses take note: One of the world’s wealthiest and most respected investors thinks you’re dead wrong about the future of the country.
In his annual letter to shareholders, published on Saturday [February 20, 2016], Berkshire Hathaway Chairman Warren Buffett made a forceful argument that Americans should look to the future with optimism, despite the dour messages broadcast from the presidential campaign trail.
“For 240 years it’s been a terrible mistake to bet against America, and now is no time to start,” he said in the letter. “America’s golden goose of commerce and innovation will continue to lay more and larger eggs.”
Why Warren Buffett thinks the presidential candidates are “dead wrong.”
For 50 years, Buffett has written the annual letters, which are widely read for his pithy and incisive analysis of the past, present and future of the holding company and the economy. This year, he laid out the case for a bright American future, even as he notes some cause for concern.
Even though he said the American economy is growing, Buffett nodded toward growing inequality.
Though the pie to be shared by the next generation will be far larger than today’s, how it will be divided will remain fiercely contentious. Just as is now the case, there will be struggles for the increased output of goods and services.
Congress will be the battlefield; money and votes will be the weapons. Lobbying will remain a growth industry.
But, Buffett argued, there is a silver lining:
“Even members of the ‘losing’ sides will almost certainly enjoy – as they should – far more goods and services in the future than they have in the past,” he said.
The market excels at producing things people don’t know they want, he said. For example, Buffett noted that he never thought as a child that he would someday need a personal computer.
“I now spend ten hours a week playing bridge online,” he said. “And, as I write this letter, ‘search’ is invaluable to me. (I’m not ready for Tinder, however.)”
“America’s economic magic remains alive and well.”
Republican presidential candidate Donald Trump at a December rally in Grand Rapids, Mich. He often decries the state of the U.S. economy, recently saying, “We’re dying. This country is dying.”
A history of growth drives Buffett’s argument for optimism, which he framed as a response to the modern politics of fear.
It’s an election year, and candidates can’t stop speaking about our country’s problems (which, of course, only they can solve). As a result of this negative drumbeat, many Americans now believe that their children will not live as well as they themselves do.
That view is dead wrong: The babies being born in America today are the luckiest crop in history.
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America’s “secret sauce”
Productivity, Buffett said early in the letter is “the all-important factor in America’s economic growth over the past 240 years” — a fact lost on too many Americans, Buffett lamented.
“That kind of improvement has been the secret sauce of America’s remarkable gains in living standards since the nation’s founding in 1776,” he said. “Unfortunately, the label of ‘secret’ is appropriate: Too few Americans fully grasp the linkage between productivity and prosperity.”
To prove his point, Buffett turned to three industries in which Berkshire has a stake: freight, insurance and utilities. Productivity gains in those and other industries “have delivered awesome benefits to society,” he said.
There are consequences, though: Productivity gains in America and abroad can disrupt lives, Buffett said.
When low-cost competition drove shoe production to Asia, our once-prosperous Dexter operation folded, putting 1,600 employees in a small Maine town out of work. Many were past the point in life at which they could learn another trade. We lost our entire investment, which we could afford, but many workers lost a livelihood they could not replace.
The United States should deal with such disruptions not by regulating the drivers of increased productivity but by ensuring a “variety of safety nets” exist for Americans whose skills don’t match those valued by markets. In particular, he points to the Earned Income Tax Credit, viewed by many as one of the most effective policy tools to help the poor.
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Here’s a direct link to the complete article.
Niraj Chokshi is a reporter on the Post staff. Here’s a link to several of his other excellent articles.