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Integrity
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One does not get this impression from the news media nor from the economic and political pundits who fill the internet and the postal service with their brand of essential information. It is necessary to step back and to consider broader features of our economic system to find reasons for this remarkable record of achievement. There must be some systemic reasons which have catapulted the U.S. economy to new heights of job and wealth creation. The attributes are hard to observe and even harder to define, because they rise up essentially from the yearnings of the human spirit, and are quantifiable only in their results and with the passage of time. One of the most distinctive qualities of the United States economy is its entrepreneurial spirit, the willingness of aspirers to risk everything to achieve some good. This is most visible in the number of small businesses that are started each year. It has been estimated by the Federal Reserve Board that there are probably between 13 million and 16 million small businesses in the U.S. including both firms with employees and self employed persons. These enterprises comprise 99% of all businesses in the country, employ more than half the private workforce, and are responsible for around 50% of all sales. Small business employees also provide entry level employment and training for an impressive portion of the labor force. An impressive number of these entrepreneurs belong to minority groups, attesting to the fact that the entrepreneurial culture is alive and well in our country even among those less advantaged. From its earliest days the American economic system has been characterized by openness and competition. These characteristics are ingrained in our laws, behavior and indeed, our culture itself. States compete with each other to attract businesses, and cannot erect laws which bar another state from conducting business within its borders. American corporations compete in virtually every sphere of activity, from brand recognition to technological innovation. Many other nations stifle competition and otherwise discourage individual initiative in many ways. In its best formulation the American business model seeks to deliver goods and services of high quality at the lowest cost, a result of an open, competitive, and dynamic marketplace. In varying degrees other industrialized nations often seek to shield inefficient and outdated industries and companies by protectionist policies and anticompetitive institutions, all under guises of national interest or social justice. Our own attempts in the past to keep alive failing enterprises by government action have ended badly for workers and stakeholders alike. There is no social justice in an economic system which denies the opportunity for people to use their ingenuity and talents to make a better life for themselves. The advance of globalization has intensified the competitive environment. Economic integration among nations is, on balance, a healthy development. It benefits emerging and economically underdeveloped nations by giving them entry into the world economic system. It offers to millions in the world the opportunity to earn a livelihood and a rising standard of living, possibilities which were beyond their grasp before. Globalization holds real benefits also for the United States because of our technological leadership, vibrant productivity, motivated workforce, and competitive spirit. Other countries, notably some in Asia, have seen the potential in a free, capitalist marketplace, and have adopted the United States business model with great success. How is it that the United States economy enjoys a level of general prosperity unprecedented among the world’s economies? The answer is not obvious. Certainly it is not an immunity from recessions. The answer goes deeper than short term economic trends. The primary reason for this good fortune lies in the spirit of entrepreneurship nurtured by the free market system, which affords individuals the opportunity to succeed. No human institution functions perfectly. Our system, however, rooted in our earliest culture, offers everyone the chance to use their ingenuity, energy and desire to better themselves and their families. Society overall benefits from a system, which is based on the potential for individual achievement. We recognize that we have just scratched the surface of a dynamic and complex issue. In these days, however, when so much has been written about why our economy has continued to expand despite turmoil in the energy market, decline in new home construction and other cyclical issues, it is important to recognize that our economic system is anchored firmly on entrepreneurship born of optimism and the potential for individual attainment. It is this natural desire to improve which, we feel, will carry the American economy to new heights. The limited view of our economic potential is shortsighted. Investment Policy Committee Alfred A. Lagan, CFA, Chairman Daniel A. Lagan, CFA, President February 26, 2007 This information is intended solely to report on investment strategies and opportunities identified by Congress Asset Management. Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. This material is not intended as an offer or solicitation to buy, hold or sell of any financial instrument. 2 Seaport Lane Boston, MA 02210 www.congressasset.com
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