"The most significant threat to our national security is our debt," Admiral Michael Mullen, Chairman, Joint Chiefs of Staff, August 27, 2010


Monday, March 16, 2009

Wealth Creation v. Wealth Destruction

Wealth creation is pretty simple and it is the foundation, the Golden Goose, or the source of the largess that the US free enterprise system makes available to all. The source is wealth creation.

How is wealth created? Three primary sources. Wealth is created by growing something from the ground for food and lumber and thousands of other valuable natural items. Around the globe wealth creators grow corn and beans and olives and oranges and raise cattle and fish. The more you tax and the more you regulate these activities the more you limit this wealth creation process.

Wealth is also created by extracting something from the ground. Things like gold, iron ore, petroleum, gas, and other minerals and metals. Tax it and regulate it and others who buy these products will be glad to go where there are lower taxes and regulations.

The third key source of wealth creation is to make something that people want to buy with the harvested items and the extracted items. We, in the US of A, used to be quite good at making things. We not only made things we made the tools, the machines, the technology that made making things easy. We still make the things that make things. And we tax and regulate the dickens out of it so that non wealth creators can engage in their wealth destruction activities.

All wealth creation requires labor. Each and every one of us has a skill or a labor component that is needed to support extraction, growing/harvesting and manufacturing. Labor is needed for wealth creation.  Grow/harvest, extract, manufacture/produce/ labor. Wealth is created.

Now, what destroys wealth? In no particular order but real wealth destroyers are:

1. Anyone who does not engage in growing, harvesting, extracting, manufacturing and offering their labors to support these activities is a burden on the wealth creation process.

2. A growing service economy model is flawed; big time. Government does not create wealth. That’s why government must be limited. Also, lawyers, bankers, bureaucrats at the licensing bureau, teachers, doctors, stock brokers, lottery tickets; it goes on endlessly – none of them create wealth. They need wealth creation to survive. Try to eat a legal contract or fly in a plane built by an accountant! Try keeping your food chilled in a refrigerator running on electricity produced by the Energy department or live in a house built by federal or state bureaucrats.

What to do?

IF YOU WANT TO DEAL WITH THE PROBLEM, KNOW THE SOURCE OF THE PROBLEM.
IF YOU JUST WANT TO ACT LIKE YOU ARE DEALING WITH THE PROBLEM, FULL SPEED AHEAD.

THERE IS NO GOVERNMENT SOLUTION TO THIS PROBLEM, NO UNION SOLUTION TO THIS PROBLEM, NO POLITICAL LEADERSHIP/SAY THE RIGHT THING SOLUTION TO THIS PROBLEM.  TO FIX THE PROBLEM WE MUST GROW/HARVEST/EXTRACT/MANUFACTURE = WEALTH CREATION.

THE ALTERNATIVE PATH WE ARE ON IS:  SPENDING = DEFICITS = DEBT = WEALTH DESTRUCTION

The previous administration did not have a clue about the above. The new Obama policies are not encouraging wealth creation.  Spending, deficits and debt destroy wealth. Our economy is sick because we are infected with wealth destroying viral agents known to us all as underworked/overpaid unions in both the private and public sector and government supported inefficient entities in health care, education and public services.  The US of A can grow/harvest/manufacture all that it needs and buy any resources it is lacking.
GOVERNMENT SPENDING MUST BE CUT DRASTICALLY. TAX POLICY MUST SUPPORT WEALTH CREATION AND DISCOURAGE WEALTH DESTRUCTION.

The reason TheFundamentals goes to basic cause and effect issues is that the solutions lay therein and there is no evidence of any political will to address the basic issues.  Virtually all of our existing government policies and spending programs do the exact opposite of supporting wealth creation and discouraging wealth destruction.  Our competitors see this situation and are taking great advantage of it.

1 comment:

Anonymous said...

Unfortunately, the politicians aren't going to read your wonderful article that states exactly what the problem is and how to fix it. It is too common-sense, which, of course, they lack. The only thing that is going to work with these incompetents is to unite as a nation with such a loud voice that it gets their attention and through fear they will be forced to change their aberrant behavior.