Wealth Creation and the Doctors of Doublespeak

Let’s consider the irrational notion that government can create wealth. I guess I could quit right there, but that would ruin all the fun! Every now and again, you will hear some true crackpot suggest such an idea that government actually creates wealth, so let’s deal with that here and now so that we can once and for all dispense with such nonsense.

What those who suggest the above are talking about is not wealth in the sense that most on this blog would construe it. Rather, the wealth referred to is job creation, redistribution, and government provided services. And the only way a government can accomplish those goals is through either printing its own money, or taking property away from individual producers or private property owners.

The fact that real wealth is the accumulation and complete safety of private property is of little consequence to the gang of looters who are merely interested in government’s role in confiscating private property in the pursuit of creating jobs, and growing the size and scope of government. It should not be surprising that a by-product of such intervention is the taking of your real wealth to accomplish it, and I would suggest that this is not simply a by-product but rather a desired social outcome for many on the liberal left (as well as the RINO muddled ground).

To those recipients of redistribution or government induced incentives, it may appear that their personal wealth is increasing – after all, they have more money today than they did yesterday. But paper money and public debt is not the same as individual wealth and all that government intervention does is inject the government into the market, and by doing so creates automatic dislocations and misallocations of resources, pitting groups against each other for pieces of the government redistribution pie. Worse, it creates distinct disincentives to achieve – disincentives to pursue efficiency and new technological innovations, i.e. risk taking.

If the answer to all the worlds’ problems was the recognition that government can create wealth, then let’s run the table.. We could all be independently wealthy with the single stroke of the pen of congress, in which each and every citizen would be issued $10,000,000 US Dollars – why beat around the bush? We’ll all be independently wealthy and could simply sit back and enjoy life… But wait, who would make our food? Who would pick up the trash? Who would mow the grass at the golf course? Hmmmmm. We have a little problem here, don’t we. When taken to its logical conclusion, wealth redistribution is simply a ponzi scheme. It is merely a dangerous game of generational socialism, and “works” only as long as there are more coercible contributors than there are willing recipients.

Another example of the folly of confusing job creation with wealth can be illustrated by a story related to me by a friend who buys fabric in Hong Kong. While touring China some years ago, he came upon a team of nearly 100 workers building an earthen dam with shovels. The fabric buyer commented to a local official that with an earth-moving machine, a single worker could create the dam in an afternoon. The official’s curious response was, “Yes, but think of all the unemployment that would create.” “Oh,” said the buyer, “I thought you were building a dam. If it’s jobs you want to create, then take away their shovels and give them spoons!”

The realities of economics cannot be wished away or ignored. In order to create wealth, individuals must be able to accumulate and hold private property – the absence of private property rights removes any ability to conduct cost accounting. Without the ability to account for the real cost of goods and services in a market, and thus any chance to profit from one’s labor and mind work, there will be no rational incentive for individuals to risk their time and efforts for the rewards of producing something others are willing to trade for, so that they can then accumulate and hold property for their own use and enjoyment. Legitimate, profit making trade is the key and it cannot take place without risk, and it certainly cannot take place without private property.

So, this idea that it is not taxes that are the problem but rather who is paying them is incredibly naive and plainly irrational. What matters most is the fact that taxation has evolved to consume as much of our production as it has, it must be reduced along with the size and scope of government interventions. This will allow for more independent capital formation, and thus far more stable employment in our economic system (with higher real wages, I might add).

There is a principle role for a moral government in the mix, but it is strictly limited and it is not redistribution. The demarcation line is drawn at the protection of private property rights. Once government gets into the business of taking private property away and giving to others we have left the realm of a just and moral government – this is not only what the Paulahanians of the world advocate, but they want much more of it. And it should be emphasized that it does not matter who the tax payers are, or who the recipients are, in the end the problem is the mere fact of the redistribution. The greater it is, the less real wealth can be created – the exact opposite effect than that advocated by those who argue that government can create wealth. Such socialists truly believe that the producers will never go on strike, regardless the burden. If one group yells too loud, hell just shift the burden. Heaven forbid we critically evaluate the core problem – government itself.

So it is true and quite obvious that government induced job creation is almost always jobs protection sold and veiled as “wealth creation.” Such an application of ideology tends to strangle the creation of new, real, wealth-enhancing technological advancements. Just look at the European Union, particularly France and Germany. Europe’s stagnant labor markets are a direct result of labor laws and regulations designed to protect existing jobs, even at the social cost of discouraging new capital formation and therefore wealth creation. There is a distinct lack of vision in such policy or, as Henry Hazlitt would comment:

“It is a doctrine that may always be privately true, unfortunately, for any particular group of producers considered in isolation-if they can make scarce the one thing they have to sell while keeping abundant all the things they have to buy. But it is a doctrine that is always publicly false. it can never be applied all around the circle. For its application would mean ecnomic suicide…For many things that seem to be true when we concentrate on a single economic group are seen to be illusions when the interests of everyone, as consumer no less than as producer, are considered.”

On its surface, to swallow such an idea that government can create wealth one must believe that “government” or “societies” are unique entities. The fact that they are not, that they are actually nothing more than many individuals acting in various manipulated and planned ways should be self-evident. But yet the purveyors of such notions would also have us ignore that reality and assume that free markets are less efficient than government ownership and central planning – despite all the evidence to the contrary! Why did the Soviet Union fail? And why does and did China see fit to build earthen dams using shovels instead of bull dozers?

To the contrary, what is needed is far smaller and less intrusive government, far lower levels of taxation (implicitly far less redistribution), and the recognition of the inalienable right to private property. Pursuit of such fundamental philosophical and political policies would once again release the dynamo that gave us such momentum as in our first 100 years…and remove the need to debate which group should bear the current or future higher levels of taxation thrust upon them.

This too is also the conclusion in a study of more than 100 countries over a 20-year period that governments with strong commitments to economic freedoms—free personal choice, the freedom of exchange, and the protection of private property—tended to be faster-growing and wealthier. The 17 countries with the most improved freedom ratings all had positive and generally strong growth rates, while the 15 countries where economic freedoms declined recorded real per capita wealth declines. The message is clear, government, in and of itself, simply cannot, by definition, create real wealth – only individuals able to exercise free personal choice, with freedom to trade their labor and mind work, and the knowledge that their private property is safe, can create wealth.

Bottom line: Don’t be fooled by the doctors of doublespeak…

Posted in Capitalism Advocacy, Liberty. Comments Off on Wealth Creation and the Doctors of Doublespeak
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