America, it's time to start taking risks again





FORTUNE -- After bidding farewell to 2010, many Americans are suffering from a hangover -- but it isn't from excessive partying. Quite the opposite: The unemployment rate in December fell to 9.4%, but job gains for the month disappointed. Meanwhile public confidence about the nation's future has fallen to historic lows.

Prospective Republican presidential candidates, emboldened by the dramatic midterm elections, are trying to reverse our collective funk by trumpeting "American exceptionalism" -- the idea that a democratic United States is uniquely positioned as a force for peace and prosperity in the world, a bulwark against tyrannical bullies and a model of the citizen wealth that free markets can bring.

That's fine as far as it goes. But for that to be more than just feel-good rhetoric, candidates (and the public they want to lead) need to come to grips with a more nettlesome characteristic of American exceptionalism: our penchant for taking risks. Risky business got us into the mess we're in, but embracing that trait that once made us great is precisely what we need to get us out. "Americans in their DNA are risk-takers at heart," David Smick, founder of International Economy magazine, said in a recent speech. "Yet America has moved from an era of reckless financial risk taking to a situation even more dangerous -- no financial risk taking."

Even President Obama, fond of scolding businesses for taking unnecessary chances, proclaimed in his inaugural speech that "we are a nation of risk-takers." Alexis de Tocqueville, classic chronicler of that American oddity called democracy, gave a different word to the trait: "restlessness." And he didn't consider it a particularly good thing -- this "strange unrest of so many happy men" who won't be content with a fertile farm or prosperous business, but must keep chasing the next horizon, inevitably falling prey to "melancholy."

Horizon chasing -- by homeowners, by mortgage lenders, by Wall Street investment banks taking reckless chances -- left us with a lot worse than melancholy. How do you tell citizens we need more risky behavior when -- if we are to believe financial historian Niall Ferguson -- all but 1% of GDP growth in the past decade was produced by consumers betting their homes to engage in hyper-consumption?

In the wake of the Great Recession, there's some constructive reaction to all that free-spirited behavior -- personal savings rates are up, and regulators are (hopefully) more willing to police practices that might sink the economic ship of state. But there are also destructive reactions: trillions in shy investment capital sitting on the sidelines, and banks profiting from cheap Federal Reserve money rather than making commercial loans.

We shouldn't forget that daredevils start companies, and startups produce jobs. A July 2010 study by the Ewing Marion Kauffman Foundation asserts that "startups aren't everything when it comes to job growth. They're the only thing." Existing firms, Kauffman asserts, are "net job destroyers."

But, as Smick notes, this is a lousy time to launch the next Google (GOOG, Fortune 500), when investors assume, because of a lack of sustainable financing, "that you'll never pull off a successful public stock offering." Policies on taxes and regulation, bank lending, and research funding should be weighed on their ability to inject risk taking back into the economy.

(Risk must be paired with consequences, something that Americans fundamentally understand: You take a risk, you fail, you don't get bailed out. The root of Tea Party anger was not about risk taking per se, but about the fact that taxpayers were called on to underwrite the failures of reckless bankers and overleveraged homebuyers.)

Unless we embrace risk taking again, we face a darker prospect: a "new normal" of sluggish growth, high unemployment, and cautious behavior instead of the DNA that has enabled the U.S. to compete vigorously in the world. And there's nothing exceptional about that.