Monday, November 7, 2011

Memo to the occupy Wall Street protestors and class warfare politicians:

If you’re against wealth, then you’re for suffering.

By Dean Kalahar

The Occupy Wall Street movement and class warfare politics we are experiencing is no less abhorrent than racism. We should call this behavior a more proper name, “Wealthism.” Just as racists believe in superiority by division and discrimination, “Wealthists” seek superiority by division and discrimination of wealth creators. There is just one problem; the so called villains being demonized are the very people that enhance and save lives.

Basic economics teaches that wealth is created by the actions of man in altering and adding value to scarce raw materials and resources to make them more useful in meeting demand. This additional value is considered capital, which economist Hernando DeSoto explains originally came from the word “cattle.”

Because cattle have always been important sources of wealth beyond the basic meat they provide. Livestock are low maintenance possessions; they are mobile and can be moved away from danger; they are also easy to count and measure. But most important, from livestock you can obtain additional wealth, or surplus value, by setting in motion other industries, including milk, hides, wool, meat, and fuel. Livestock also have the useful attribute of being able to reproduce them-selves. Thus the term “capital” begins to do two jobs simultaneously, capturing the physical dimensions of assets (livestock) as well as their potential to generate surplus value. From the barnyard it was only a short step to the desks of the inventors of economics, who generally defined “capital as that part of a country’s assets that initiates surplus production and increases productivity
Because we do not live with unlimited abundance like the Garden of Eden, scarcity places value on resources that are directly or indirectly owned based on human demand. When capital in the form of goods and services is exchanged, wealth is created.

Wealth is often defined in terms of a tangible currency. But money only acts as a certificate of performance in meeting the needs and demand of others. Capitalists must first serve before they can earn in a free market of voluntary exchange.

In a market economy, human nature and incentives allow scarce resources to efficiently flow from those who have to those who need. Greater wealth comes from increased economic efficiency in meeting needs while answering the fundamental scarcity question. In turn, wealth creation means more of mans unlimited desires including food, clothing, shelter, and medical care, are being met. As a beautiful result, the standard of living rises which equates to a greater quality and quantity of life.

In short, economic growth creates wealth which saves lives. By default then, wealth creation is compassion by action, which is a far cry from the compassionate chest and drum beating coming out of Wall Street and Washington. Proof can be seen in the world wide increase in the standard of living, population, and life expectancy while infant mortality and poverty rates decline.

We can even add a formula to the explanation. If amount of economic growth raises the standard of living Y amount, then Z numbers of people are saved who would have otherwise perished as a result of the previously lower standard of living. In turn, any economic inefficiency that prevents economic growth to Y will cost Z lives.

For example, if for every 1% of growth in GDP the quality of life increased by X amount and Y people were saved, then a government program that restricted growth by 3% would cost the lives of 3Y peoples minus the number of lives saved by the program. In mathematical terms, if $50 million equals 1% GDP growth and for every 1% increase in GDP 500 lives are saved, then a program that costs $100 million would in effect take the lives of 1000 people minus the number of lives the program saved. If the program saves 1001 people it would be worthwhile, if it saves 999, it is inefficient and in fact would indirectly cause the death of one life.

Thomas Sowell explains this concept in more eloquent terms:

There have been various calculations of how much of a rise in national income saves how many lives. Whatever the correct figure - X million dollars to save one life - anything that prevents national income from rising that much has, in effect, cost a life. If some particular safety law, policy, or device costs 5X million dollars, either directly or in its inhibiting effect on economic growth, than it can no longer be said to be worth it “if it saves just one human life” because it does so at the cost of 5 other human lives. There is no escaping trade-offs, so long as resources are scarce and have alternative uses.

Thus anything that inhibits the market economy from operating freely costs potential economic growth which means the economy does not expand as much as it could have. As a result needs go unmet and more perish than would have otherwise if the market had been freer. In other words, “smaller pie and people die.”

Wealth creation is fostered by property rights, the rule of law, and limited government in the free market. Crony capitalism, where government picks winners and losers abuses these fundamental tenets. Class warfare politicians, who feel entitled to make economic decisions for others, cover their tracks and protect themselves politically by stirring up protestors to deflect attention away from their social engineering.

Those who impugn wealth creation are championing a cause whose end result will be greater human suffering and death. “Wealthism” is either ignorant economics or the vicious side of human nature masquerading as compassion. If class warfare politicians divide and discriminate, while protestors shut down commerce and demand the end to the efficiencies inherent in a system that save lives, the “Wealthists” need to understand, it is they who will have blood on their hands.

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