Key to Economic Progress

Key to Economic Progress

We have witnessed the folly of printing money and giving it away to fat cat corporations. It’s obviously not working. Unemployment, the best economic health indicator, keeps going up. The answer to our economic crisis has been demonstrated many times in past history and forgotten.

The answer is increased productivity.

·         Bill Gates was more responsible for the great leap forward in prosperity and a balanced budget than the government. His genius made us all more productive.

·         Before that the space program’s research helped;

·         Before that the telegraph, and telephone;

·         The Industrial Revolution and the steam engine; and before that

·         In around AD 1000 a newly invented horse collar enabled horses to plow much better than oxen and doubled farm productivity.

All these increased productivity and benefitted everyone. The Government cannot increase productivity, but can encourage it.

Death and resurrection are better than rusting away. World War II destroyed the industrial might of Germany and Japan. They were forced to retool from the ground up. It hurt  and took time, but with their new industries up and running those countries progressed more rapidly than our older technology. Giant China emerged from its long sleep and started new industry with new technology. What was China’s secret? The oppressive government finally recognized that people had to be free to use their natural initiative based on hope of reward rather than fear of punishment motivation that destroyed the Soviet Union.

General Motors was a dying dinosaur, diseased with greed, but instead of letting it die,  the Government put it on life support. Greedy executives thought only of their bonuses. Their partner in crime, the Auto Workers’ Union, demanded and got two or three times more pay than equivalent workers in other industry. The results were decreased productivity and shoddy products. Had General Motors had been allowed to die a natural death, something better would have replaced it. Volkswagen after World War II was practically worthless, it rose up like a phoenix from its ashes and became a major auto producer. As in other WWII cases of renewed technology strength and enthusiasm, VW first had to be reduced to ashes. That’s the way nature works.

 The Government fooled with nature by encouraging sorry mortgages, resulting in fat cat corporations “too big to fail” teetering on the edge of oblivion. It was a concocted artificial problem. So the Government threw around a trillion dollars, so we have an artificial solution to an artificial problem. It’s not working.

AIG was “too big to fail,” we heard. Its layers of top management and partnership with quasi government mortgage companies had swollen it into a monster too fat to rise and walk. Its failure would have had an impact world-wide and it would have hurt. But after disintegration the pieces have a way of coming back together into new and efficient companies. But we have to allow a top heavy beast to collapse.

Apparently most of the stimulus money went to banks. How productive is two entities swapping money? Not very. They are like an old story of two little boys, one with a lemonade stand and the other across the street with a popcorn stand. They had only a nickel between them. So the lemonade boy bought popcorn all day and the popcorn boy bought lemonade, trading their single nickel. After running out of the products their moms had so generously provided, each boy reports that he made a dollar. Each bought the other’s product with the same nickel. They produced nothing, used up their stock, and while crossing the street, they lost their only nickel to a bully who claimed to be a tax collector charging 10 per cent of net profit. They were short five cents and would be subject to late fees and interest.

While the banks got the money, the workers got laid off; small businesses had to cut benefits and reduce workforce. Business that produces wealth is hurting, while those who trade money prosper.

The economic stimulus behaves like a morphine addict: feel good now, hurt later. (When Heroin was first introduced it was hailed as a cure for morphine addiction.) The economic stimulus has not increased productivity. Rather it is the narcotic that keeps recipients going back for more and has decreased output of real goods.

 The Government can keep on printing more money, but it only makes the addiction worse.

Bureaucracies and politicians don’t produce, they consume. They may take our money and give some of it back, and we feel good temporarily. But the money we have left is worth less. Inflation is lower than I can remember, but it is being held up artificially. When the natural order of things begins to come together, we will see how inflation is the equal opportunity