Philosophical Musings

Philosophical Musings

Thursday, October 8, 2015

Wealth is Created, not Declared

Real wealth is created, not declared. That seems obvious, but evidently not.. our whole financial system is based on declared value, not real production.

What is 'wealth'? It is not pieces of paper, or minted coins. Wealth is something of value that a human has found, created, or discovered. Labor was involved, even if it was digging gold nuggets from the ground. Here are some examples of wealth:

1. A farmer plants a crop.
2. A builder builds a house.
3. A miner extracts metals or value from the ground.
4. A manufacturer makes a tractor, washing machine, or other manufactured item.
5. A lumberjack harvests timber for boards & lumber goods.

These are all examples of REAL production. Now, let's look at some examples of non production:
1. A banker charges interest on a loan.
2. A govt taxes a producer.
3. A stock broker buys low & sells high & makes a profit.
4. A welfare queen draws a welfare check for years.
5. A sports figure gets paid to play a kid's game.
6. A hollywood actor gets paid to pretend to be someone else.

What is the difference? The second group had to do something.. they had to 'labor' to get the money. The sports hero had to practice, & even the welfare queen had to meet with the social worker & plead for some free stuff. IRS agents had to audit the taxpayers, so do they 'earn' their wages?

This is not about earning a wage, but the production of a nation. THAT is what WEALTH is based on, not just human work or effort. A person can labor long & hard & produce nothing. Another might labor efficiently & produce a great deal. The true wealth of the nation is not based on labor, but what that labor ACTUALLY PRODUCES.

There are support industries for the production of wealth that do not directly produce, but provide a useful service for the producers. Here are some examples of those:
1. Police, fire, & military. They provide protection, regulations, & justice so the producers can create the wealth.
2. Schools & education. They provide the knowledge base for the advancement of society, & build upon the successes of past producers, as well as learn from the mistakes.
3. Processing, marketing, & distribution. Much of the nation's wealth needs markets, & requires processing & distribution to get to the people who will buy it.
4. Capital. Acquired wealth can be used to enable the worker to expand the scope of their operation. They can buy tractors or lumber using their future production as collateral.

These examples rely completely on the producers.. they do not support themselves, but the demand for their services will rise & fall with production. But the ORIGINATION of the wealth begins with production. The farmer harvests a crop. He exchanges that crop for a new building or a tractor, or a washing machine. He sends his kid to school, to learn about better farming practices that will enable them to have increased production. His crop enabled the builder to hire laborers, buy lumber, & build a new house & barn. All of those activities are interrelated, & build what we call an 'economy'. But it begins not with printing currency, but REAL PRODUCTION.
This is why the emphasis of a successful society has to be on producing goods & services, instead of money shuffling, entertainment, or mooching. A healthy work ethic, that produces something of value is the only thing that keeps an economy going. Economies are cyclical. The are in constant flux. They self correct, & are affected by many factors, like weather, population increase, & new discoveries.

Some new discoveries can radically change an economy. The invention of the internal combustion engine & cheap, portable fuel put a big dent in the horse industry. It put a glut of food on the market, & made prices much lower. It enabled the industrialization of the world, & created a more complex economy.. the interdependence of other producers. It allowed the expansion of many support industries, including technology, education, research, mining, chemistry, transportation, & just about all of the world's economies. But everything begins at the simple act of food production. Without that, there is no demand for machines, education, technology, transportation, or anything. Food production then is the catalyst for the rest.. construction, machinery, education, law enforcement.. none of these are possible without the initial creation of wealth by the food producers.

A non food producing economy can survive, if it is able to exchange goods & services with another economy that has an abundance of food. Or, if they have superior military strength, they can take what others have produced by force. But that usually just motivates the producing nations to defend themselves better. They will allocate their resources to provide a better deterrence against foreign looters.

But without real production, there is no wealth created, & the society is in decline. As more & more jump on the support industries, or settle into the mooching sectors, production declines & the downward spiral has begun. Unless it is turned around & the society sees the common sense reality of production as the basis for any wealth, the illusion that wealth can be created, or just taken from someone else will permeate the culture & promote dependency. Moochers & looters will multiply, until the society collapses upon itself.

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