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America’s wealth is not an inventory of goods; it is an organic entity, a fragile pulsing fabric of ideas, expectations, loyalties, moral commitments, visions. To vivisect it for redistribution is to kill it.
Capitalism is the supreme expression of human creativity and freedom, an economy of mind overcoming the constraints of material power.
All progress comes from the creative minority. Under capitalism, wealth is less a stock of goods than a flow of ideas, the defining characteristic of which is surprise. If it were not surprising, we could plan it, and socialism would work.
Most of America's leading entrepreneurs are bound to the masts of their fortunes. They are allowed to keep their wealth only as long as they invest it in others.
In capitalism, the winners do not eat the losers but teach them how to win through the spread of information. Far from being a zero-sum game, where the success of some comes at the expense of others, free economies climb spirals of mutual gain and learning. Far from being a system of greed, capitalism depends on a golden rule of enterprise: The good fortune of others is also your own.
The secret of supply-side economics is not merely to incentivize people to work harder or accept more risk in order to gain a greater reward. The reason lower marginal tax rates produce more revenues than higher ones is that the lower rates release the creativity of employers, allowing them to garner more information ... command more capital ... attract more highly skilled labor ... reduce time and effort devoted to avoiding taxes ... conduct more experiments ... try more business plans ... generate more productive knowledge.
Read the whole thing, it's quite illuminating. HT: Ashby Foote
11 comments:
In a free economy the individual has an open road to prosperity and he/she does everything possible to get there. In all types of governmental or rules bound organizations like unions the priority of the individual is to keep his/her job and pension and thus they have no incentive to make things better.
In the first case productivity and thus prosperity grows; in the second, by definition, there is stagnation at best.
For proof just look at highly unionized sectors: schools, autos in America, etc. All of these are in the mud.
I am always astonished how otherwise extremely intelligent people fall for such ideological nonsense. This so obviously flies into the face of reality of recent years - did the author live in alternate univers?
With the percentage of income and wealth of the uber-rich at decades-long record highs we should then be in a decades high of prosperity. Instead, we have just seen the worst recession since 1929 and are in the weakest recovery post WW2, with average wages still falling badly years into this so-called "recovery". The Bush tax-cuts for the uber-rich guarateed this malaise as much as the same tax cuts in the 1920s guarateed the fall into the Great Depression then. We desperately need more redistribution now. Again, how long do we want to repeat this experience in America, as per Marriner Eccles?
"As mass production has to be accompanied by mass consumption, mass consumption, in turn, implies a distribution of wealth ... to provide men with buying power. ... Instead of achieving that kind of distribution, a giant suction pump had by 1929-30 drawn into a few hands an increasing portion of currently produced wealth. ... The other fellows could stay in the game only by borrowing. When their credit ran out, the game stopped."
"It is utterly impossible, as this country has demonstrated again and again, for the rich to save as much as they have been trying to save, and save anything that is worth saving. They can save idle factories and useless railroad coaches; they can save empty office buildings and closed banks; they can save paper evidences of foreign loans; but as a class they can not save anything that is worth saving, above and beyond the amount that is made profitable by the increase of consumer buying. It is for the interests of the well to do – to protect them from the results of their own folly – that we should take from them a sufficient amount of their surplus to enable consumers to consume and business to operate at a profit. This is not “soaking the rich”; it is saving the rich. Incidentally, it is the only way to assure them the serenity and security which they do not have at the present moment."
Good article to summarize the benefits of capitalism, which is, in a nutshell, solving for the most effective use of accumulated (fruits of past labor) capital, on the 100th birthday of Milton Friedman.
Sent from my MacBook Pro
Wow. "Tax cuts for the uber-rich" are to blame for the great depression and the great recession?! I would love to hear the logic behind that, as it clearly ignores all other variables impacting economic health. This belief clearly serves a left leaning bias and ignores such things as heavy farm subsidies in the 20s and heavy home ownership subsidies and government intervention beginning in the 90s and culminating in the housing bubble. I find it hard to believe that there is any single identifiable cause for the housing bubble. Anyone suggesting a singular cause more than likely has a strong bias regarding government involvement in the marketplace, or lack thereof.
And it could be so obvious, if we only look at the historical data instead of ideology. Look at the history of how much income and wealth goes to the top 1% (or alternatively corporate profits as % of GDP). Look at how it ran up in the 1920s and 2000s. While the average Joe consumer had less and less, they stayed in the game via credit. In the course of this they had their last hooray in a housing bubble that popped 1926 and again 2005. Three years later the great depression resp. recession set in. Once again, why do we have to repeat the exact experience over and over? Why can't we ever learn from history?
Joe, I would submit that you either failed to read or failed to understand what Gilder wrote.
Joe--The 2008-09 recession was definitely not caused by "Bush tax-cuts for the uber-rich." Tax revenue was steadily rising from 2003-07. The recession was caused by the bursting of the housing bubble which, in turn was caused by reckless sub-prime lending and reckless derivative creation and trading. The reason that the recovery is so anemic is the enormous debt overhang and 25% of homes being underwater.
djakel,
No, in the context of the article, the Great Recession happened because the government tried to plan the housing market.
"While Washington debates whether big government is holding back the economy, it’s worth keeping a couple of facts in mind: Government has been shrinking steadily for two years, and compared to the size of the overall economy, government is actually slightly smaller today than it has been on average in the postwar era."
http://economix.blogs.nytimes.com/2012/07/27/big-government-isnt-so-big-by-historical-standards-its-also-shrinking/
It helps when we are honest about the situation...
If you cherry-pick the data, you can prove almost anything. To begin with, the NYT article only looks at "government consumption expenditures and gross investment," which conveniently ignores the huge increase in transfer payments, which today are at or near their highest level ever relative to GDP. Total federal expenditures today are about 23.5% of GDP, and while that has indeed declined from a high of just over 25% of GDP three years ago, today's number is still higher than at any time since WW II.
As for government employment, it is a very good thing that it has been declining, since it previously rose much more than private sector employment. Government employees today number almost 20 million, which is down from a high of 22.6 million about three years ago, but that is still 10% higher than it was in 2000. In contrast, private sector employment today is still roughly unchanged from where it was in 2000.
Government is shrinking, thank goodness, but it is still very bloated.
Real GDP since 2000 per your charts increased much more than 10%.
I just don't understand these articles. How can you talk about redistribution of wealth without talking about the Federal Reserve or the BOC.
Why is my savings account earning .85%? So the Federal Reserve can subsidize the banking and industrial sectors. On a MASSIVE scale.
Why is consumption in China declining from a low rate as a % of GDP? Because the BOC is redistributing wealth to the industrial and export sectors. On a MASSIVE scale.
Will somebody please get honest with the situation!
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