What is Wealth and How is it Created?
What is wealth and prosperity? We all want it because nobody wants to be poor, suffering and impoverished.
It sounds like a simple question. It is and the answer is astonishingly simple. However, it’s our deviation from the principles that accrue wealth and prosperity to the greatest majority of people that got us into deep dodo. Wealth is simply excess production. A corn farmer sows his seeds, lovingly tends to his crops and harvests the product of his labor. What he doesn’t need to feed and sustain his own life is wealth or savings. What does the corn farmer do with his wealth? He could trade his corn for meat or eggs or shoes or clothes and other things he might want. But - no matter what the corn farmer does, he absolutely must produce and must save enough seed to plant again or he will starve and suffer. That’s a law of economics that cannot be altered, modified or otherwise tampered with without negating the entire wealth building mechanism of human survival.
Human survival has always been based on the principle of working in some capacity to produce something of value to sustain life and create excess production for the purpose of exchanging it for other goods and/or to save for the future.
Along the way, money was developed as a medium of exchange as a matter of sheer convenience because of its portability. That’s all money was and ever should be – a medium of exchange. Money has been many things throughout history (furs, spices, salt) but whatever was deemed to be money at any given time was consistently valuable, scarce and highly prized. In time, the preferred money became gold and silver because of its consistent high value based on rarity and the fact that gold and silver are easy to melt into portable coins to carry and/or store.
But the burning question should be: Why did some human societies flourish and prosper while others languished in misery, slavery and totalitarian hell? It’s a valid question that nobody ever wants to address. Again, the answer is simple. The most prosperous societies throughout history have always been the freest societies that vigorously defended property rights through the rule of law and its code of civil contract law. There can be no liberty without strong property rights and there can be no property rights without the strong enforcement of contract law.
America created the world’s first fully vested citizens and rejected the time honored concept that humans were subservient “subjects” under the rule of a thieving and oppressive aristocracy.
Our founding documents, the Declaration of Independence and the Constitution, laid out the legal blueprint for the first truly free human society because humans were deemed to have God given inalienable rights that no government could usurp, diminish, withhold or withdraw. It was the promise of liberty that was the calling card for immigrating folks to suffer misery, deprivation, starvation and death for the promise of a better life in America. And they were willing to work their fingers to the bone to survive in a raw and harsh new nation just for the hope of liberty and prosperity for their posterity. And they didn’t have Medicaid cards, food stamps, public housing and a supply of welfare checks. Wild America was no place for freeloaders or the lazy. Surviving wild America was tough and brutal.
These are the folks who toiled to build America and transform America from a raw wilderness into an incredibly vibrant land of abundance and achievement. These are the folks who shocked and startled the world as the workers of Communist proletariat paradises around the planet took notice of the workers in capitalist societies who were amassing wealth, building homes and acquiring creature comforts that they could only dream of.
Everybody wanted to come to America or at least they used to because America was a place where hard work and thrift were rewarded and property rights were protected. The idea that anybody could rise and succeed and not be permanently relegated to a social and economic status conjured up by class obsessed elites was so utterly appealing that folks risked their lives and everything they had just for the opportunity to live free and breath free and know that what they toiled for was theirs and nobody could take it away from them. These days, America has lost her liberty and these days, America is no longer a place where hardworking freedom minded folks want to be.
What’s gone wrong with America and Europe for that matter?
Government is a vulture that is eating America and Europe alive, it’s eating our property, it’s eating our ability to produce, it’s eating our bank accounts, it’s eating our present and our futures, it’s eating our liberty and government is eating alive all that we once held sacred – economic liberty, political liberty and property rights. By taking the plunge in into collectivism, we are now forsaking everything that took Western Civilization a millennium of bloody struggles to achieve.
Government and its tooth fairy economics is the Grinch that stole jobs, paychecks, savings, pensions, and financial security. Government today is all about soaking the unwashed masses and fleecing the lobotomized sheeple.
Americans delude themselves into believing that they are still free. They even toss out terms like communism, oligarchy, plutocracy, fascism, socialism, monarchy etc. and say “hey, America isn’t one of those nasty countries”. While anybody can debate the finer points of definition of any of these terms of economic/political order but in essence they all mean the same thing – a handful of powerful ruling elites control everybody and everything and all for the sole benefit of enriching themselves. The rich get richer, the poor get poorer and the middle class is systematically wiped out. In the modern context I call it an emerging industrial feudalism.
As America barrels toward economic collapse at breakneck speed in a race to becoming a third world collectivized totalitarian cesspool, the pundits and politicos are screaming “CAPITALISM HAS FAILED”. Capitalism is supposed to represent free and open markets which in its ideological purest sense is nothing more than the voluntary activities of free peoples making and trading their widgets and whatever else they produce that they want to trade. While it is true that America has never really had a pure capitalistic economy, America did substantially adhered to the basic principles of capitalism until it started to radically change in 1913. The creation of the Federal Reserve forever changed our hopes for peace, liberty and prosperity because it resulted in the vast growth of liberty slashing federal powers, powers that immediately started growing exponentially and waging wars of empire.
But Capitalism isn’t the problem or even the cause of our immense and agonizing economic woes these days. In fact, when property rights were secure before the age of government confiscation, crony capitalism, cartel capitalism, protectionism and fascism, capitalism was the most prosperity inducing of all human activities simply because the motivation to work and produce was extraordinarily high. Capitalism motivated sane values like self-sufficiency, thrift, savings, a strong work ethic and building communities that respected the property of others.
Going back to our corn farmer who freely trades the product of his labor among other producers with sound money backed by something of value, the person who works hard and saves tends to accumulate real and enduring wealth over time. Wealth is savings and being the excess of production above consumption needed for survival, wealth is typically stored in a bank or is invested in something that will yield a return. It’s precisely the savings from production that spawned the capitalist system. Capitalism is an economic system based on capital or savings. To have savings, one must produce. These savings are the engines that drive economic activity and prosperity. It’s also how America became the wealthiest nation on the planet – it had an abundance of hardworking folks who energetically produced and saved their money that was used as capital to fuel future economic activity and prosperity.
The modern corporation is nothing more than a legal mechanism to pool savings to invest in land, plant, equipment machinery etc. with the goal of producing something that people want and will buy at a price that will produce a profit or a return on investment.
America once proudly boasted a huge mix of entrepreneurs consisting small, medium and large businesses because the instinct of a human being to be “the captain of their ship and master of their fate” is just overwhelmingly powerful and the alternative of the last resort is working for wages.
Capitalism isn’t evil, capitalism is nothing more than the legal ability to produce, to trade and to benefit from your labor as well as having the ability to keep your savings or profits for future needs. However, when “profits” earned from productive labor are vilified as targets for tax collectors and redistributionist schemes, then the system of economic liberty is thrown into violent turmoil. Capitalism only becomes evil when it becomes crony capitalism wherein the rich and powerful buy legislators to give them protections against competition and free trade. But that’s not capitalism, that’s the fascist marriage of big business and big government that destroys productive wealth building capitalism with graft and public corruption.
Small business owners need profits as a savings cushion for future personal and business needs. Large corporate businesses also need their profits to fund future growth and to maintain financial solvency. So whether one is a small business or a large publicly held corporation, the same principles apply but just on a different scale.
Despite some nasty events, like the Great Depression, America purred along as relatively free nation wherein wealth was shared and acquired across a broad spectrum of the population and the middle class flourished and prospered. What was America doing back then to achieve wealth and prosperity for the multitudes? America and Americans were producing and saving, just like the corn farmer who knew he had to produce and save a portion of his production for the future or he would starve. Agriculture is the sanest method to explain economics because it involves two principles that cannot be violated without dire consequences: Producing and saving seed for your next planting/harvest and using excess production to acquire other things and save.
But what happens to the farmer when the government invades a “man’s castle” and violates his ability to produce and save by seizing his production, his property and/or limiting his capacity to produce and save?
He starves and goes begging to his new master for his sustenance.
This has been the trajectory of America for nearly 50 years. As government power grew, it stole the production of producers, it stole their wealth, it stole their seeds for future growth and it stole their savings that are plowed back into a productive economy. Government used to be considerably more honest about how it acquired their plunder and throughout most of history they would simply send in armies, kill folks, steal food, cart the conquered off to slave markets and/or and leave folks destitute and starving. But government and its armies were never anything more than massive plundering machines.
These days, government does the same thing with taxation and conning us into believing the greatest lie ever told – “Trust me, the government will take care of you and your family”. We aren’t talking about small but reasonable taxes to fund legitimate functions of government We are talking about the government at all levels consuming so much of the nation’s wealth that the nation can no longer produce wealth and prosperity. We are talking about expropriation of the nation’s ability to survive and prosper and the seizure of our savings and productive capital. Government doesn’t produce wealth; it only consumes the wealth produced by citizens. Every dime the government seizes goes down the black hole of corruption, special interests, crony capitalism and the military industrial complex. Government is growing so fast and consuming so much that there isn’t much left for our economy to even sustain itself let alone grow for the benefit of future generations. And it’s not just the Federal government that is eating us alive, it’s all government at all levels that grows and grows at the expense of our liberty and prosperity.
Federal spending has grown from 3% of the economy (pre New Deal) to 13% in 1940 to a whopping 27% in 2008 and that number will only continue to grow because the economy is shrinking and public spending is on steroids.
Every dollar the government sucks out of the economy is a dollar that is no longer available to plough back into our once extraordinary private economy that produced real wealth, real jobs, real prosperity and real savings – savings that were once recycled as capital that funded factories and business expansion, as well as a thriving middle class and many small businesses. Government and taxation has absolutely drained the capacity of the private economy to flourish and deliver middle class prosperity, wealth and savings. Tragically, the private economy is massively shrinking.
Long ago America approached the point where there isn’t much left for the government to loot and plunder. The federal government only has 3 ways of funding its schemes 1. Tax the folks into poverty (we are already there) 2. Borrow from idiot nations who are sufficiently stupid to loan us money (that’s slowing down as nations are quietly unloading our debt) and 3. Print gargantuan amounts of fiat currency that will reduce us to a banana boat republic (it’s being reported that the Fed is printing money and buying Treasuries because foreigners are no longer lapping them up at auctions).
So long as the public sector continues to grow, the private economy will shrink. There is no possible way for the government to create the necessary conditions for a flourishing private economy because the government specifically legislates to increase its own power at the expense of the power of “We the People” to produce and prosper.
More to the point, the economy will never recover for the middle class until government shrinks at all levels – Federal, State and Local. Only then will circumstances exist for the entrepreneurship of citizens to once again produce and prosper. So long as government at all levels is consuming our liberty and prosperity like ravenous gluttons, expect the situation to get worse – a whole lot worse.
If we think we are suffering now, we have only just begun to reap the poison harvest of a statist economy because the real misery has yet to hit us. When it does, the pinchers of the totalitarian state will really start snuffing out life ruthlessly and brutally. The totalitarian nations wallowing in Marxism/socialism/oligarchy/fascism/statism will always resort to the same tactics as Stalin and Mao who snuffed out 100,000,000 folks during the 20th century alone.
I keep saying over and over that the only difference between the economies of Mao/Stalin that wiped out 100 million folks and the so-called soft socialism of the West is that the former never had the luxury of a wealthy and productive economy to loot and plunder. Soon enough though, we will be fully plundered.
Meanwhile, the American people are drinking copious amounts of “Koolaid” as we cling to the delusion that government is the cornucopia of plenty. The lion’s share of the plunder generated by the governments looting machine only accrues to a few elites and insider power players. The rest of us are lucky if they toss us a few crumbs and those crumbs are dwindling.