Why do great nations fail?

You most likely have seen the TV commercial by now. It starts out with the title of our essay – why do great nations fail? It appears to be some form of Chinese lecture hall, a smug professorial type lecturing to an auditorium of observant young people. It catalogs a series of historic failures and then focuses on the United States and its promiscuous spending and debt and closes with the conclusion that Americans now work for the Chinese because they (the audience) hold the debt. Also, at the end, they mock us with smug giggling. Pretty good stuff. It most certainly supports the fundamental that a picture is worth thousands of words. But is it on target? Is the ad accurate? Does it tell the real story?

Well, if you are a follower of TheFundamentals you would probably answer that question in the affirmative. After all, our catchy phrase, deficits = debt = destruction, is the basic theme of that ad. By the way, the ad is the product of an outfit called Citizens Against Government Waste. You can check them out at http://www.cagw.org/  and also view the 60 second ad there. By all means do so if you haven’t seen it.

But back to our questions? Does the ad tell the whole story about why nations fail? And the answer does need a bit further investigation. Are the spending and the deficits and the debt the whole story? Is it just an entitlement mentality coupled with corrupt politicians pandering to their special interests and a whole bunch of “protected classes” of voters who they depend upon for their continued survivability?

Why do great nations fail? Why is the United States so close to failure?

The answer is that we have forgotten or chosen to deliberately ignore why we were successful. And that issue does go deeper than the spending and the deficits and the debt. It even goes deeper than the Chinese holding so much debt and buying up so much of our productive capability and our intellectual know how and our priceless, intangible competitiveness.

We have chosen to burden the source of our success. And that source is wealth creation. Wealth creation is making things and growing things and extracting things. The source of all wealth in contained within those few brief words/concepts. That’s all there is to it. If you want jobs; real jobs. If you want growth so that there are good jobs for a growing population you had better grasp that you need to create wealth. And to create wealth you need to seize what is in the ground and either sell it to others or do something with it yourself and then sell that end product to others. You need to grow and cultivate the flora and fauna and feed nations with the end product. And make other usable products from the left over’s. You see, by doing these simple things, you create wealth. You create jobs. Lots of jobs.

Now if you decide that you want to make a better world and burden those simple processes with things like laws and rules and taxes and regulation and fees and interference from powerful forces like government bureaucrats and union organizers and do gooders and groups of people with their focused interests on higher pay and higher benefits and more say so in when you can do what; then you are making a choice to burden the very source of your success. At TheFundamentals we liken this activity to the old fable about the golden goose. The goose you see laid one gold egg every day. And that egg was the source of wealth for the farmer and his wife. But they became curious about why only one egg? Could we get two or three? So they dismantled (our politically correct choice of descriptive words so that no persons self esteem is damaged) the goose to investigate. And guess what happened? Yep. They killed the goose.

So the next time you see the ad remember, please, these three things:

1. Without economic strength there is no strength
2. Economic strength comes from wealth creation
3. Too much burden (dismantling) kills wealth creation

Bernanke wants you to think it is really complex.  It’s not that all that complicated folks.