What is Exceptional about "American Exceptionalism"

Every year leading up to July 4th, the American Independence Day, I get pensive and meditative.

As a naturalized American citizen, who has sworn the oath to protect the US constitution three times so far -- once during my naturalization ceremony, once to work at the Commerce Department, once to work at the White House – I take the concept of “America” seriously.

While meditating on this year’s Independence Day, America's 246th, I keep on coming back to this line uttered by the famed investor Stan Druckenmiller at the 2022 Sohn Conference:

"There's a story about American Exceptionalism. I'm not sure we are so exceptional anymore, and if we are, I'm not sure I'm excited about what we are exceptional in."

Exceptionalism Cuts Both Ways

The word “exceptional” often has a positive connotation. It is generally good to be considered “exceptional” at something. If we peel this word back a layer, “exceptional” is the adjective form of the word “exception”, which means “a person or thing that is excluded from a general statement or does not follow a rule” – a word that has a rather neutral connotation.

In essence, the root of being “exceptional” just means you are the exception to rule or norm, which can be good or bad – a pendulum wing that can cut both ways.

The “exceptionalism” that Druckenmiller was not excited about is the US currency, still the world’s reserve currency and arguably the most “exceptional” and powerful weapon the US has at its disposal. Having this exceptional power has been a source of financial stability and was generally good for the world, in the aftermath of the chaos and destruction of WWII. But this power has been used and abused by the Federal Reserve, followed by other central banks, so much so that investors like Druckenmiller are openly contemplating shorting the US dollar.

It seems clear that the pendulum on one of the most exceptional parts of American Exceptionalism is swinging the other way. Unfortunately, it is not the only one.

When I wrote a similar post before last year’s July 4th, titled “So What Is The American Dream?”, I called out the “rule of law” as one of the two fundamental elements that makes America truly exceptional (in a good way).

However, with the overturn of Roe vs. Wade, the pendulum on the “rule of law exceptionalism” is swinging the other way as well. Overturning Roe is the culmination of a multi decade long political activism by certain sects of the conservative movement. The success of this activism has reduced the Supreme Court to simply a political tool, not the incorrigible institution of judicial review and independence that are still taught in US history textbooks.

If the highest court of the land is nothing more than a means to achieve a political end, then there is nothing “exceptional” about the US legal system anymore. Plenty of less exceptional countries have show trials and puppet judges (or puppies).

Both the printing of trillions of dollars out of thin air and the legal contortion to invalidate abortion rights out of thin air are rather “exceptional” behaviors. Exceptionalism cuts both ways.

Exceptionalism Attracts Exceptionalism

So is American Exceptionalism, the good version, dead?

No, but it is in danger of losing its appeal, because it is, after all, as Druckenmiller correctly labeled, a “story”. The “exceptionalism” story is often a self-fulfilling one, because the belief in exceptionalism attracts other forms of exceptionalism – exceptional talent, unrivaled resources, and respect and benefit of doubt from other countries. When the promise of exceptionalism is believable enough to successfully attract other forms of exceptionalism, those promises become that much closer to becoming true.

So what can save the American Exceptionalism story, as other competing versions from China, India, and elsewhere gain steam and traction?

Immigration.

America’s open immigration policy, despite its many (many) implementation flaws, is the one element that no competing country is even trying to emulate; it is truly exceptional! If America can just get its immigration policies right – not just why certain people should be let in, but how they should be treated when they are in – then America will remain exceptional, in a good way.

As Apple’s late co-founder Steve Jobs (himself an offspring of a Syrian immigrant named Abdulfattah Jandali) was fond of saying, “A players attract A players. B players attract C players”.

So as America celebrates its 246th birthday, whether it is or is not “exceptional” is perhaps not the right question to ask. Every country thinks of itself as “exceptional” to some extent – a prerequisite to nationalism.

What America must wrestle with is whether its story of exceptionalism is open enough, tolerant enough, and believable enough to keep attracting other forms of exceptionalism to swear its oath of allegiance.