It’s the economy, stupid.
You probably are old enough to remember the comment then-governor of Arkansas Bill Clinton made on why President Bush should be removed from office and he placed in his stead. The economy was lagging, at least a little bit. Bill Clinton said to the American public, “It’s the economy, stupid.”
Not only did he insult every American citizen (calling them stupid for thinking anything but the economy was important) but he made a point that the only political issue worth discussing was the economy.
I too believe the economy is terribly important. How else can I feed and clothe my family except I am given the means to do so? And what other means is there than the economy?
Because of the importance of the economy, I wish to explain a few, basic principles.
First, what is wealth? Wealth is an accumulation of value. What is value? It is in the eyes of the beholder. I value things like healthy food, good clothing, a warm home, and quiet time in the evening. If I have a lot of those things, I feel wealthy.
Notice that nowhere in discussing wealth and value did I talk about money. Nobody wants money, except as a means to obtain the things they really want. That is, we do not work 40 hours a week so we can get a few pieces of paper. We do it so that we can get a few pieces of paper that can be used to buy real things and services that we want and need.
Now, how is wealth created? Can wealth be created at all? A Marxist believes wealth is not created. They believe that what you have is what you have and there is no more. In a way, that is true. But wealth is not possessions. It is an accumulation of value. That is, it is having things that are valued by their owner.
Let me put it another way. A grocery store full of food is useless for the people who are not hungry. It is also useless for the owners of that store. They couldn’t eat all that food in ten years. Most of it would spoil before they had a chance to eat it. They probably don’t want cans of beans anyway. Maybe they want something else, like a gourmet spaghetti meal. However, if we took all that food in the store and gave it to those who wanted it most, all of a sudden, it would be much more valuable, and everyone would be more wealthy.
This is where capitalism comes in. To a degree, Marxists realize the above fact, although they don’t understand the implications of it. Capitalism is a system whereby people are allowed to trade what they have with whomever they wish for whatever they want. It is a system where there are solid property rights–the rights to do with what you own as you see fit. It is a system where there are solid contract rights–the rights to enter into any kind of agreement with whomever they wish, provided the other person is also willing.
Capitalism is the only system that respects individuals as intelligent, proactive, and responsible. It is the only system that treats humans with respect. All other systems try to say that people are incapable of entering into fair contracts with each other, and incapable of using their property appropriately. Think about it. When someone comes and tells you what you have to do, that’s pretty rude. It’s rude because they think they know more than you and you are too dumb to figure things out for yourself.
Now, within a capitalist system, I want you to take two individuals who enter into any agreement with each other. Both sides enter into the agreement because they think they are getting a better deal by doing so than not. You go to a garage sale, for instance, and buy some nick-nacks for dirt cheap. You are pretty proud of yourself because you just made the deal of a century. Meanwhile, the person who sold the stuff to you thinks you just paid good money for some of their old junk. They are probably wondering why anyone would pay so much for such worthless junk. Both of you walk away with something more than you had when you started. Both of you created wealth from thin air!
Now, multiply the above action by 300 million by 300 million. And multiply that by the number of times you make a trade each year. And multiply that by how much more value you walked away with than you went in with. That’s a whole heckuva lotta value!
That’s our economy.
I don’t need to tell you the benefits of a good economy. Suffice it to say, that everybody, even the poor, win when we have a good economy. Sure, some win more than others, but we all win together. When the economy is poor, people aren’t making as many deals, and those deals aren’t as beneficial. This is bad news for everyone. Everyone, especially the rich, get hurt in a bad economy.
What can we do to make a good economy?
Why, for starters, you can go out there and create as much wealth as you possible can. If you are making good deals, a lot of good deals, everyday, that means the economy is doing pretty good. And don’t just think of the benefits for yourself–think of the benefits for everyone you traded with to get there. I like to think of Bill Gates, who is extremely rich. How much money did Bill Gates steal? How many copies of Windows did he sell with the threat of physical violence? Rather, think of how many people willing gave Bill Gates their money so that they could use his software. Bill Gates made a lot of money, but so did everyone who got pretty decent software for cheap. Bill Gates is rich, but he made a lot of others richer too. He created billions of dollars of wealth for himself, but he also made billions of dollars of wealth for others as well.
Another thing you can do is to stay out of other’s business, except where you can create wealth by doing so. If you’re not invited, don’t attend, in other words. When you interfere where you are not wanted, you are destroying wealth. Let’s say a particularly rude mother-in-law demanded that a man buy a new minivan for his wife. Well, he thinks, I don’t want a minivan and neither does she. If she were to use every force of her will to cause him to buy that minivan, and he did, that would be a very bad thing. Afterwards, he is going to regret it. “I don’t want this minivan, and I wasted good money I could’ve used for something else buying it.” That is bad news, not just for him, but for the car dealer as well. Perhaps they could have done better to sell it to a more willing couple.
When you force people to do things they do not want to do, you are destroying wealth that could have been created had you stayed away. Capitalism depends on people having liberty to choose for themselves. It can work no other way. If you want to “force” capitalism on people, you do so by removing all constraints that cause them to do things they really don’t want to do. In other words, capitalism is the same as liberty and freedom.
Every other system is imposed on a people by limiting what they are allowed to do or forcing them to do things they don’t want to do. Every other system is against liberty. In other words, no other economic system but capitalism has liberty as its foundation.
I hope you understand the implications of what I just said. The implication is this:
All governments act by force when they act.
Acting by force destroys wealth.
Therefore, all governments destroy wealth when they act.
Let me repeat it:
Governments destroy wealth when they act.
This is the logical conclusion of the above. You cannot deny the conclusion without disproving one or both of the premises, or show that the two premises do not lead to the conclusion.
So, it is in our best interests to keep government from acting.
Now, I can argue quite effectively that we need governments to do some kind of acting, otherwise capitalism is impossible. For instance, we need to protect ourselves from those who would impose themselves on others and who would limit people’s freedoms. We must protect ourselves from these threats, whether external or internal, or we can’t have liberty at all.
I can write a list of things the governments must do in order to ensure that there is even liberty to begin with. In short, they must
- provide for the common defense against aggressors, foreign and domestic,
- provide a set of laws that when followed ensure that no one is acted upon, but is free to choose for themselves, and
- enforce those laws.
Governments may also provide a system of arbitration between two parties, but it can be shown that this is not strictly necessary.
Notice that it doesn’t take much government action to do the above. (1) requires a military and perhaps the occasional war. During these times, it is an all-or-nothing game. We either win the war or we give up on liberty altogether. Defeat means we have no liberty. (2) requires that we write a set of fair laws, and ensure that any inconsistencies or unfairness is repaired when discovered. This is a fairly simple thing to do. (3) requires police men, courts, judges, lawyers, and jails. It is probably the most difficult piece to get right of all three.
Our Founding Fathers tried desperately to setup a perpetuating system that did the above three and only the above three. They tried desperately to do it without imposing mandatory taxes. Unfortunately, they failed in both counts.
As far as taxation, it turns out that they need to be collected and they need to be collected by force. The problem with that is that taxes are extremely harmful to the economy. Taxes are so devastating that adjusting them by a few percentage points can destroy it or resurrect it in a matter of years.
As far as a perpetuating system that doesn’t do anything more than the above three roles, they failed as well. It became quickly apparent that no matter how much care and thought went into creating a government, inevitably it becomes corrupted, in a matter of years if not months. Therefore, they tried to create a system of eternal rebellion, where the people continually throw off the old, corrupt government and replace it with something new. We call these elections. It is important that we embrace the tradition of throwing off corruption and bringing in new blood, and that we do it as often as possible.
This is the only way we can keep government out of our business. With government out of our business, we are ensured that we have an economy that is strong and creates wealth.