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Wealth

by David Keck
October 29, 2012

There is a lot of talk in this campaign of 2012 about job creation and wealth, the latter usually described by those on the left as something less than virtuous.  Actually, the two are closely tied.

In 1968, I worked in the summer for the inventor and producer of in-car speakers and heaters for drive-in movies.  He owned the whole company personally, including the machinery and raw materials.  This man did not finish high school, was the son of Greek immigrants, and was a fighter pilot in World War II.  He made the first speakers in his basement.  He said many things, but one has stuck in my head, and is so simple to understand, I think we often make it much harder than it is.

That piece of wisdom was (paraphrased):  “There is one way to create wealth, and only one.  That is, to take raw material,      something from the earth that is there for us to use, and create something of    usefulness for the general population.”  This is so simple, yet so true.  Think about it. . .

But, you might say, what about casinos?  Don’t they “create jobs” where they are built?

No, not really, and they certainly do not create wealth.  Again, think about it beyond that you have a cousin who got a job running a craps table, or another who gets police special duty (and why do they need police special duty?) almost immediately after or at the opening a new casino.  You are creating a building and a new entertainment.  Where does the money come from that people are spending there?  Do they all of a sudden have extra money to spend there?  No.  They take it from spending on something else.  Perhaps from other entertainment.  So, in time, those other entertainments need fewer people to run them because they are being used less.  So they will stagnate or worse, go out of business.

No new wealth there – just shoving the money around.  And, in the end, the argument about your money not going to another state goes sour as well.  Ohio is already speculating about over-saturating the casino market in Ohio.  That means it will not be long before some of them close.  No wealth-creation there, nor real new jobs.

Nor does are government jobs creating wealth.  Where does the money come for them?  From your taxes.  Do you have more money because of these jobs?  No.  In fact, you have less.  The money and jobs created within government do not create any wealth.  Almost all of them are service jobs of some sort, broadly defined.  Now, we do need services jobs, and we do need teachers to teach skills to people to create and produce, to be sure.  And we do need services people to protect us from crime and fires.  Certainly.  But none of these create wealth.  Ultimately, the money for all of these comes originally from someone who created a product from what the earth had right there in raw form for us to use.  Add to that creativity.  If you don’t believe it, look at the great growth in wealth and products in the late 1800’s in the United States.

The raw materials were already always there.  There was oil aplenty.  We just did not know how we could use it yet.  At first, it was only used as kerosene.  Most of it was wasted.  The same with electricity.  It was always there.  It took the genius of Franklin, Edison, Tesla, Bell, Tesla, and others to come up with ideas on how to use to our benefit what was always there.

And we need one more thing for this kind of production and wealth:  affordable labor.  In the late 1800’s, we had immigrant labor that was more than willing to take the menial jobs to make a living.  They came here to escape persecution, war, famine, oppression, and were willing to do what work they had to to survive.  Some were gifted beyond that, and had the liberty here to take a chance of failure to eventually gain wealth, and at the same time employ others, supply new products for the public, and grow the nation’s economy.  Examples?  Andrew Carnegie, Scottish immigrant, bobbin-boy in a textile factory, who made a fortune in steel, and gave almost all of it away.  Though not an immigrant, Abraham Lincoln was born as poor as anyone, and, at age nine, lost his birth mother.  His relationship with his father was poor.  All handicaps.  Yet Lincoln had, in addition to natural ability through his great height and strength to be a farmer or any other form of physical labor, great intellectual curiosity.  It was this passion and the drive to succeed, to “make a difference” in life that led to his almost obsessive reading of all kinds of books well into his adulthood.  He was a surveyor, post master, small businessman, and lawyer.  Ambition.  Talent.  Drive.

Anyone who has worked for the state or federal government, especially union jobs, will tell you if you listen long enough of all the silly rules, inefficiencies, impersonal bureaucracy and the rest that goes on daily where they work.  The impression that the public gets about government workers often comes from the mouths of those workers themselves.  Their jobs are relatively secure.  No chance of failure there – so one settles into mediocrity and boredom.  And that is the kind of performance that you get.  No wealth creation there.  No jobs that actually produce something in the end.  As mentioned earlier, some of this we need for basic protection of the public and minimal functioning of government.  But to depend on it?  We do have a model of this, by the way.  It was called the Soviet Union.  Before you scoff, talk to someone who has lived or visited there.  Better yet one of the millions of refugees who fled not only the dictatorial governments, but also the bland, stifling economic conditions.

Why did West Germany flourish while East Germany was mired in economic stagnation?  Why does South Korea thrive economically and North Koreans are starving while producing nuclear weapons.  Is it because government jobs create wealth.  Actually, if you apply the arguments of today’s American liberals word for word and take them to logical conclusions, those autocratic governments are what they are asking for.  After all, people in those countries have “free” everything – medical care, jobs provided (and required), transportation, education, all of it.  Theoretically, those should have been utopias.  By the way, recite if you can even one national union in any of those countries.  They should all be very secure knowing they have a job and all that care to not have to worry about.  The problem is there is no liberty.  No chance for failure in one sense, but also no chance for excellence.  Dumb down to the middle, or worse.  No wealth creation.  No incentive.

In October of 2010, I was in Rome, sitting at a sidewalk café about two blocks from Via Da Cavour.  There were rhythmic sounds and shouting coming from the famous street.  What I observed were thousands of marching government worker union members protesting cuts in their benefits and/or pay.  The government ran out of money and ran out of rich people to tax.  The economy and production were stagnant because the rich had less and less disposable income to invest in companies.  There were more and more government workers who voted for those who added to government jobs and kept those that were there secure, whether the economy demanded it or not.  The problem was, now the government had no more money to squeeze from the rich and what was given had to be paid for.  But these unions were used to having their way and, as my father once said “My mind is made up; don’t confuse me with the facts.”  It is interesting that several of the banners carried at the head of various unions had pictures of Che Guevarra, stylized not unlike the Obama posters of 2008, and of the hammer and sickle.  Really?  This is what you want?  John Kennedy once said, to paraphrase, that democracy is imperfect, but we do not have to put a wall up to keep our people in.  And, one might say, there aren’t too many people fleeing the United States to go to the freedom and opportunity anywhere else in the world.

Getting back to the point:  Wealth is not created by gambling, government jobs, or, generally, service jobs.  It is created by creative genius, the freedom to fail, and a willing and plentiful labor force utilizing God-given natural resources to make useful products for our country and the world.  It is how it works.  Someone called in the radio station today and said “Hey, at least we are not as bad off as Europe.”  True enough, but only because we have not reached their level of government excess yet.  It is only a matter of degree.  Have you heard anyone say that we should allow undocumented immigrants because they will do the labor?  Of course you have.  Why is that?  It implies, no, assumes, that there are Americans who are just not motivated to work, at least not for some wages?  Why is that?  Because they know they will not starve if they refuse work. John Smith at Jamestown only turned things around when he had to give the order to “work or starve” because too many of the settlers thought they would fall in to a mother lode of gold and strike it rich.

Incentive.  Creativity.  Natural resources.  Ambition.  Liberty.  This is how wealth, and with it, jobs are created.  Anything else is something else.

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