We are still very much a nation of capitalists. But we are a nation that is increasingly reining in our capitalist instincts with regulations that make it difficult to open a business and make a profit, and with taxation that reduces the rewards for risk-taking. And it is not only bureaucrats and liberals who are confining the population’s wealth-creating instincts. Lawyers do as well, and so do environmentalists, who together have learned how to game the legal system so that new technologies and new businesses are tied up in court for years. Frivolous lawsuits are a constant expense to American businesses thanks to the “American rule,” whereby each side in a court case pays its own expenses regardless of outcome. That is an open invitation, frequently accepted, to legal extortion. We are the only country in the common-law world that uses the American rule.
Here is a near-perfect example of what Ronald Reagan meant when he said that government is not the solution, it’s the problem. Reforming the American legal system to promote growth, instead of lawyers’ incomes and special-interest-group agendas, would have a highly positive effect on GDP growth and job creation.