Bigger Government………..
Lower Wages Connect Dots

by

Ed Dedelow

Wealth envy appears to be a big concern among conservatives and this clouds the issues. I was planning to introduce another topic, but I am still getting comments from some readers that "wealth envy" has something to do with my stance.

This paranoia over wealth envy gets in the way of reason. What's wrong? People are DEFENDING CAPITALISM by pointing to a rise in wealth, rather than blaming government for a drop in wages. Many supporters of capitalism are suggesting that wage disparity is expected. Instead, bloated, out-of-control government spending should be getting blamed for the drop in private sector wages and for the many jobs lost in this current economic climate. CAPITALISM DOES NOT NEED DEFENDING. Its advocates should not cower at the mention of the decline in private sector wages. One of the great benefits of capitalism is the increase in living standards it creates(reflected in wage increases); it does not make people poor. Instead, charges should be thrust at governments, from federal to state and local levels, that have replaced the benefits of capitalism with the responsibilities of government.

Those people who use "wealth envy" as a defense are actually giving credence to liberals, the left-leaning media, college philosophers or the economists who are thrusting charges against the rich and calling for wealth redistribution. They are allowing liberals to take the offensive with an aggressive "blame capitalism" and "tax the rich" argument. These arguments ignore the government's extensive intrusion into the private sector. In Forbes, Michael Maiello, in "The Whole Point Of Capitalism," September 28, 2009, reported that "More than 85% of the financial wealth of the U.S. is held by 20% of the population." As with nearly everyone doing such reporting, they are not considering the factors involved in wealth. So, let us take a look.

Costs determine the amount of an investment
The amount of an investment drives its returns
Investment returns drive wealth

Therefore, cost drives wealth and government drives up the cost of an investment without enhancing production. In order to maintain pricing, businesses have no choice but to offset this increased cost by lowering wages and benefits. Thus, due to government driven costs, the rich appear to get richer because government drives up costs, not because of the increased productivity of their workers, that would otherwise have enhanced the worker's value.

The efficiencies generated by Capitalism release labor into the market place, just as Karl Marx pointed out. Barring government's interference, in a complex capitalist economy, such as ours, these workers would be reemployed by other industries to expand production, to produce new products or, in many cases, would start their own businesses. The efficiencies eventually result in lower prices and additional production. In this way, our economy expands and our living standards increase. Benefits of capitalism appear as either increases in wages or increases in purchasing power.

When the demands on labor that government adds through regulation, taxing and the courts are analyzed, it should be obvious that these act as inefficiencies. What then would you expect if government demands more workers than Capitalism releases into the market? When government's demand for labor exceeds that released through market efficiencies, wages decline. Because costs added by government offset any efficiencies, business costs increase or remain the same, therefore, wealth does not change or is enhanced relative to the wealth of the average worker. Private workers who take wage cuts or lose their jobs because of government expansionism often lose savings and assets, thus suffering wealth losses.

I repeat, the rich get richer and the poor get poorer and it is all because of government and the demands put on the private economy through taxes, regulation, shifted responsibilities and the courts. It is NOT because of capitalism or rich capitalists.

Michael Maiello also wrote: "Adam Smith, John Maynard Keynes and Karl Marx all have this in common-they used the discipline of economic philosophy to try to create systems that would one day eliminate poverty and scarcity.… Capitalism emerged from all these moral arguments as a successful, self-perpetuating system that people generally seem to agree is humanity's best shot at one day beating scarcity and poverty." There is nothing wrong with this comment and I believe that, if Karl Marx were alive today, he would be a capitalist.

Unfortunately, Michael Maiello continued: "In practicing what we call capitalism, America has recently been missing the point. Our current system isn't eliminating scarcity and poverty; it's causing scarcity for most people and delivering extreme prosperity to a powerful minority." Forbes has far more credibility in the market place of words than I. I will not hesitate, however, to question accepted norms, existing authority or the experts that demand our respect with faulty reasoning. The "blame capitalism" believers come from both sides of the political spectrum thus creating reason for the need to defend capitalism. Wealth envy is as weak a defense as anyone could devise and gets far too much play.

Because the prevailing defense of Capitalism is "wealth envy," my explanations and commentary are also interpreted as "wealth envy." Get over it. I assure you that smaller more efficient government is not going to affect overall wealth in the private sector. Rather, reducing the intrusiveness and size of government will result in a larger, more productive private sector and higher wages. It will not reduce wealth.

If we do not reduce government's demands, those who believe in America as the home of the free, land of the brave and if you work your butt off you might do well, are … otherwise screwed. It does not matter how noble, how generous, how environmentally important or whether the population voted 100% for a cause, government's acts are inefficiencies. If society demands programs for noble causes, and I support many, then we must also demand scrutiny of the programs created to solve these problems.

This will then be the America where freedom, innovation, invention and efficiency will improve our lives. Those who put in a good day's work should expect that life will get better. Those who antagonize over "wealth envy" need to stop using their heads as blocking dummies for liberals. For over 100 years, life styles in the US improved. Cars, radios, TVs, paved roads (built by government with taxes not private developers), dishwashers, self-cleaning ovens, canned foods, cheap foreign vacations, etc., etc., etc., are the innovations that have made our lives better. Nearly everything bought once had a "Made in America" stamp on it. Now, we are in an age when businesses have robots to speed up and reduce the cost of production, cell phones expand working days and reduce wasted time, computers design products in micros of time, cheap foreign-made products flood our market and commerce has expanded. We should be living a life better than anyone could have imagined and yet, wages continue to decline. Talk show host, the rich or whoever, do not have a real explanation for declining wages and, when questioned, they say it is simple "wealth envy."

The potential existing in smaller government is to grow the economy and, thus, to eliminate the financial problems for social security and Medicare, the trade deficit, health care needs, the transfer of jobs to foreign countries, devaluation of the dollar, and most importantly, the wage decline. Oh, it could also eliminate "wealth envy." Reducing waste and misguided government demands will result in making the USA not just the strongest country in the world, but the symbol of excellence.

Think about it.
Think outside the box.

Scientific Capitalist http://scientificcapitalist.com/