Thank you! Very good points you make! On Wed, Sep 29, 2010 at 6:39 AM, MJ <[email protected]> wrote:
> *"Currently, the main demand placed upon politicians is to create jobs for > us. But, since it is companies -- not the government -- that create jobs, > such a task is impossible. Government can expand and draw more workers into > its ranks, or it can directly finance the creation of specific jobs in a > specific marketplace with taxpayers' money. In either case, a destruction of > wealth is involved, and the jobs -- unlike private-sector jobs -- do not pay > for themselves but in fact require ever more taxpayer funding each year, > which further reduces capital in the economy." > > **Can Politicians Help Us? > *Wednesday, September 29, 2010 > by Kel Kelly <http://mises.org/articles.aspx?AuthorId=1099> > > The word "politician" usually comes with a negative connotation. It often > brings to mind thieving, lying, corruption, and malfeasance. Nonetheless, > most people seem to look to politicians to manage their world for them, to > protect them, and to make their lives better. In every instance of local or > national elections, citizens are deeply focused on choosing the politician > they think will do the best for their community or nation. They seek > politicians with experience, knowledge, insights, and ideas. They seek a > leader. > > But can our elected officials, even if honorable and well-intentioned, > really improve our lives? Let's take a look at the various possible avenues > of assistance. > > Currently, the main demand placed upon politicians is to create jobs for > us. But, since it is companies -- not the government -- that create jobs, > such a task is impossible. Government can expand and draw more workers into > its ranks, or it can directly finance the creation of specific jobs in a > specific marketplace with taxpayers' money. In either case, a destruction of > wealth is involved, and the jobs -- unlike private-sector jobs -- do not pay > for themselves but in fact require ever more taxpayer funding each year, > which further reduces capital in the economy. > > If jobs are not profitable -- if they are not part of a production process > that results in creating at least the same amount of sales revenues as the > costs that went into generating those revenues -- then they use more > resources than they create; they destroy wealth. That ultimately means fewer > goods available for each person, and at higher prices. > > But even if the government subsidizes unprofitable jobs (e.g., green jobs) > and "funds" (i.e., subsidizes) that work to make up for its lack of profit, > there is still a net destruction of wealth. This is because subsidies come > directly from what would otherwise be our incomes. > > When money is taken from us through taxes to pay the extra costs required > to produce something that we would not *voluntarily* choose to purchase on > our own at that higher total price (i.e., the selling price plus the subsidy > we paid out of pocket to make the item "worth" producing), our money is > wasted. Other goods we would prefer will not become available because the > resources used to make those goods were instead used in making the product > we didn't want. > > Except for building space stations, military bases, or other > government-funded, wealth-destroying activities, government creates and > builds nothing. It thus has no power to create real jobs in the marketplace; > it can only "manage" and regulate. > > To repeat, only individuals and individual companies produce and create; > their ideas and capital are what *profitably* creates jobs. > > Year by year, most of the currently existing companies would hire more > workers if only they were allowed. For example, suppose a company has $100 > to pay out in wages. Suppose further that it has hired 9 people for an > average wage of $11.11 per hour each ($11.11 × 9 people =$100). If there had > been a tenth person available to perform work at the company and help > increase its production, why wouldn't the company have hired that person and > spread the $100 across 10 people, instead of 9, at a wage of $10 per hour > each ($10 × 10 people = $100)? > > It is because the government prevents people from being hired below a > certain price, primarily through minimum-wage laws. Since unskilled workers' > productivity is low and they are not (yet) capable of bringing in as much in > sales revenues as the company would have to pay them for their work, they > are unprofitable at the minimum wage level and thus not hired. > > Right now, specifically, unemployment is unusually high because the economy > is imbalanced. This imbalance was caused by the government's credit > expansion, which gave economic incentives for companies to transfer capital > and labor to locations where it was revealed unprofitable once the credit > expansion ceased (e.g., the home-construction industry). > > Currently, the imbalance still remains because the policies of stimulus > spending, subsidies, and the printing of yet more money -- money that has > artificially sustained bank balance sheets but has hardly made it into the > real economy -- have prevented prices from falling, losses on bad > investments from being realized, and thus capital and labor from returning > to where they're profitable. If the economy were actually allowed by our > politicians to right itself, banks would lend and the surviving companies > would become more stable, more profitable, and more eager to hire more > workers. > > Another way people think that our elected officials can help us is by > supporting us financially. Voters accept politicians' proposals for > government unemployment insurance, subsidies, and transfer payments of many > stripes. But in order to redistribute wealth, wealth must first be taken > from someone else. Voters don't usually mind this, since they know that the > money they'll receive comes mainly from the rich, who, in their eyes, > already have too much. > > But what they don't know is that most of the wealth of the rich is not in > the form of houses, cars, and boats, but in the form of factories, machines, > tools, technologies, and labor payments. Through their ownership of stocks, > bonds, private investments, their own companies, and other assets, the > wealth of the rich is mainly in the form of capital goods. In other words, > the wealthy own most of the tools we use in our jobs to produce the very > goods and services we create for ourselves to consume. On top of this, these > owners of capital pay us money to produce these things we'll consume! > > The more money we allow to be taken from the rich -- by way of both higher > taxes and the government's inflation -- the less capital we ordinary people > have to work with, and the less we are able to produce. This means fewer > goods and higher prices; it means lower real wages. > > The effects of our current "stimulus" packages are similar in nature. Just > when companies need as much capital as they can get their hands on, we are > taking it from them to give to others to consume. If investors and their > companies instead kept this capital, they would be able to provide us with > more jobs, more goods, and a higher standard of living. Capital kept by the > wealthy will produce more capital and more consumer goods. > > Capital taken from the wealthy and given to others to consume is not only > destroyed but also represents new, additional wealth that will never be > created. > > Politicians are also elected for the purpose of protecting citizens from > supposedly evil businesses -- the entities that have given us virtually > every physical thing we have. The first way they do this is in the form of > regulation. But what *actually* protects us are laws defending our > property and person from aggression -- regulations mostly just allow one > group to benefit at the expense of another. Regulations do not benefit > individuals. > > Regulations such as antitrust laws prevent less-competitive companies from > facing new competition. > > Healthcare regulations that are claimed to help provide us with only the > most competent doctors in fact reduce the supply of doctors and raise > healthcare costs. To address this problem, the government pays -- and prods > big businesses to pay -- for our healthcare. The overall result is an > artificially reduced supply and increased demand for healthcare services, > which raises costs at twice the rate of inflation, making healthcare > unaffordable to many. > > Energy and environmental regulation prevents us from using safe, clean > nuclear power; it prevents oil companies from owning and drilling on land, > and incentivizes them to drill in less safe territory far offshore, > resulting in oil spills. It has also led to intermittent gasoline shortages > and higher oil prices in general. > > FAA and airline regulation results in delayed flights, hours-long airplane > traffic jams on the tarmac, and government-run monopoly airports with > security lines sometimes out the door. It also gives fliers much higher > airfares due to the prevention of competition: domestic airlines are > prevented from foreign competition; and airlines based in some large cities > are protected from other domestic competitors by local city councils -- such > as in my home town of Atlanta, where the city shields Delta from competition > from the likes of Southwest and JetBlue. > > Similarly, government regulation of the water industry results in water > shortages in many states. In many countries, government regulation of power, > light, and telephone services bestows on residents constant outages and wait > times of weeks or months to get service. > > The examples of harmful regulation go on and on for thousands of pages (in > the national register). Were it not for these regulations -- since they all > result in fewer things being produced -- we would have many times the goods > and services we currently have, and a much higher quality of life.[1] > > Another way politicians help "protect" us from businesses is in "managing" > the economy. One example: instead of allowing markets to control interest > rates, the government chooses a better rate for us so that it can > (supposedly) stimulate economic growth and "even out business fluctuations." > > In order to do this, it creates new money out of thin air and inserts it > into the economy. The new money pushes up consumer and asset prices (most > recently housing prices), and gives companies artificial incentives to take > on loads of debt and invest in areas they wouldn't otherwise, if guided by > *market* prices. The result is economic booms and busts, financial crises, > capital destruction, recessions, and general despair. Citizens, in the end, > are "helped" by having been given unemployment, higher prices, fewer > savings, and an uncertain future. > > Time after time, we choose local and national politicians who we think can > make our lives better -- but they can't. The very problems we want them to > solve are the ones they previously created in trying to manage our lives for > us. > > The truth is that the politicians themselves have no earthly idea how to > help us; they have no clue as to what they are doing. But it's of no > importance to them, because they are in it for the votes and for the glory > of "leading the nation." In fact, the way they get elected is by selling > other people's wealth -- the means of producing prosperity -- for votes. > > Therefore, both to win votes, and to *appear* to be helping us, they > engage in the same tired actions over and over -- printing money, taxing the > rich, offering new social programs, "investing" in new industries, engaging > in stimulus spending, raising the minimum wage, etc. On and on it goes, > decade after decade, depleting our capital structure and reducing our > ability to create wealth and raise real wages. > > The irony is that even though voters, over time, don't see these policies > alleviating poverty, eliminating unemployment, lowering prices, increasing > their real wealth, or giving them increased economic stability, they vote > over and over for the very same people who promise more of the very same > thing. And at every new election cycle, they earnestly assess the new crop > of politicians offering the same old "plans" and try to determine which one > can better help them. > > We should be able to see now that an "experienced" politician is one who > has thorough knowledge of how to buy votes, destroy wealth, and manipulate > the economy for the worst. We should see that when we vote for a "leader" > with "ideas," we will merely get a good actor who proposes ways to employ > the traditional socialist-oriented policies, but with a new twist, such as a > *new* penalty (tax) on producing wealth, or a *new* program > (wealth-redistribution mechanism) to help the "disenfranchised." > > We should also now understand that a politician seen as having "knowledge" > or a "track record" is simply one who has been around the block and knows > how to do these things in a smooth, efficient fashion -- and one who has > been thieving, lying, and harming citizens for a longer time. > > Unbeknownst to the average voter, the thing that can best and most safely > improve their lives is what they vote for politicians to protect them from > -- the free market. > > A free market would bring about in an increased amount of capital per > person and therefore increased per capita productivity, which in turn would > grow the volume of goods and services, thereby lowering prices relative to > wages. But to achieve this, *it would be necessary for owners of capital > to be able to keep their property. > > *Then, workers would not need government assistance because there would be > plenty of jobs available for everyone -- along with low-cost health > insurance that individuals would purchase for *themselves* -- since there > is always more work to be done than there are workers available (and since > there would be no wage controls preventing workers from accepting jobs). > Transfer payments and government "services" would be replaced with new and > increased wage payments. > > Most importantly, *every* *worker's* real wages would increase year over > year, as productivity and output increased (and those who contributed more > to producing things consumers wanted would earn proportionately more money). > > Similarly, in a free market, we would not need government "protection" > because we would be protected by tough competition in the marketplace. If > one company tried to underpay or overcharge us, there would be many more > companies we could turn to that were offering higher wages and lower prices > (i.e., market wages and prices) in order to attract us. Companies would > therefore find ways to produce with lower costs, a goal they could more > easily accomplish with more capital available to them. The more capital they > employed and the greater workers' corresponding productivity, the higher the > market wages. > > And without the government's manipulation of interest rates and the > printing of money, there would be no wide-scale malinvestment, and therefore > no recessions and financial crises. In this case, prices would *fall*instead > of rise most years, and our lives would generally improve through > time. > > No politician can improve our lives. > > No central planner can determine what is best for each of us individually > or in the aggregate. The economy works only though individual decisions and > choices. > > No politician can help companies produce more efficiently or in a way that > better pleases consumers. By using market prices and rates of profit, > businesses generally best determine what we individuals want for our lives. > If they judge correctly and produce what we need and desire, they succeed; > if they don't, they die. > > Government, on the other hand, dictates what it wants us to have, and has > no system of profit and loss to determine whether it is succeeding in > pleasing its "customers," or whether it is producing or destroying wealth in > the process. Since it can't determine its success or failure in money terms, > it is necessarily always destroying wealth on a net basis. And since > government is a monopoly, it does not allow competitors for us to turn to. > > Voters always want politicians who will "do a good job." But what is a *good > job?* We seem to think politicians are doing well if the economy seems to > be doing well. But this is often an easy illusion to create by means of > printing money and artificially and temporarily! -- pumping up asset > markets, GDP, and employment levels. > > The only real test of whether a "good job" is done is whether or not it has > become easier for people -- all people -- to achieve an increased living > standard from one year to the next, given the same amount of labor hours > performed. > > Indeed, almost any politician can appear to do a decent job just by showing > up, since it is companies and individuals instead of politicians who run an > economy except to the extent that politicians stick a wrench in the > turning economic wheels. > > The only way politicians can really improve the economy -- and our lives -- > is by (1) getting out of the way, and (2) undoing the policies they've > previously implemented that hamper it. > > In fact, we don't need politicians at all only laws protecting us and our > property. And until one of them comes to us asking to be elected in return > for instituting free markets and freedom in general, there is no reason we > should assign a politician any value or recognition, and should certainly > not take part in voting for them and their harmful proposals. > > > > Kel Kelly has spent over 13 years as a Wall Street trader, a corporate > finance analyst, and a research director for a Fortune 500 management > consulting firm. Results of his financial analyses have been presented on > CNBC Europe, and the online editions of CNN, *Forbes*, *BusinessWeek*, and > the *Wall Street Journal*. Kel holds a degree in economics from the > University of Tennessee, an MBA from the University of Hartford, and an MS > in economics from Florida State University. He lives in Atlanta. > > > > *Notes > > *[1] In Cuba, regulation intended to protect and help citizens includes > making air conditioners, toasters, and microwaves illegal. In Belize, > citizens are protected by a regulation that gives one company a monopoly on > cell- phone service, making its owner very wealthy, but telephone calls very > expensive. > > http://mises.org/daily/4726 > > -- > Thanks for being part of "PoliticalForum" at Google Groups. > For options & help see http://groups.google.com/group/PoliticalForum > > * Visit our other community at > http://www.PoliticalForum.com/<http://www.politicalforum.com/> > * It's active and moderated. Register and vote in our polls. > * Read the latest breaking news, and more. -- Please go to : http://all-seeing-eye-of-providence.blogspot.com -- Thanks for being part of "PoliticalForum" at Google Groups. For options & help see http://groups.google.com/group/PoliticalForum * Visit our other community at http://www.PoliticalForum.com/ * It's active and moderated. Register and vote in our polls. * Read the latest breaking news, and more.
