The Limits of a Nation’s Tolerance for Ruin

In December 1777, Scottish economist Adam Smith famously responded to concerns about Great Britain’s setbacks by saying, “There is a great deal of ruin in a nation.”

This quote, while often comforting, can also be misleading. It suggests that nations can withstand considerable adversity without collapsing. In fact, Smith’s own country more than survived its defeats during the American Revolution. However, cities and smaller regions have less resilience; their capacity to withstand continual crises is limited.

Recent Political Stunts and State Crises

Some politicians believe that city crises can be ignored—such as efforts by California’s Governor Gavin Newsom to garner online attention amid the state’s ongoing problems. While Newsom plays a polished online persona, California faces devastating wildfires, costing billions in damages, and ongoing riots fueled by Democratic policies and rhetoric supporting illegal immigration and law enforcement resistance.

These issues reveal how high taxes, homelessness, and lawlessness are driving residents away. Over recent years, California has lost a significant number of wealthy millennials—around 10,000 households earning over $200,000 annually in a single year—more than twice the exodus from New York of the same demographic.

Impacts of Policy and Taxation

This migration is facilitated by the flexible U.S. system. Unlike in many countries, where moving between regions is difficult, Americans can choose states with lower taxes and safer environments. Conversely, high-tax violent city environments push away the very people who drive economic vitality.

California’s struggles are compounded by lingering effects from failed COVID-19 policies, which disproportionately affected residents but seemingly spared leaders like Newsom. While online bravado may entertain, it won’t resolve deep-rooted issues.

Lessons from Abroad

The UK’s experience illustrates a similar story: last year, heavy taxation aimed at the wealthy expelled thousands of millionaires, threatening economic stability. Ironically, the UK government now seeks to lure them back—an acknowledgment that destroying economic confidence is much easier than rebuilding it.

Ultimately, Adam Smith’s insight remains relevant: there’s a limit to how much ruin a nation or city can endure. As we approach new elections, residents should remember that the endurance of a city or state is not limitless, and in policy, as in economics, the long-term trust of the invested is crucial for recovery and growth.