Adam Smith believed it. Lee Iacocca believes it. By golly, Milton Friedman believed it. I beleive it, too. What is it we four believe? More than believe; we KNOW the only source of wealth is production of goods and services.
Many equate capitalism with democratic society, personal freedom, but this isn’t historically true. For example, China, arguably the most populous nation on the face of the earth, is short on personal freedom and yet said by many to “do capitalism better than the U.S.“. This is not to say America isn’t the wealthiest nation on earth – we are, but look who’s running up behind us. Look at this up to date chart from Wikipedia. By the way, Hong Kong is in China, just so you remember.
Back on Point
Ah, yes, we were talking about the source of wealth. Let’s understand from where the wealth of a nation arises. Consider these words of Adam Smith from his famous book AN INQUIRY INTO THE NATURE AND CAUSES OF THE WEALTH OF NATIONS.
The increase of revenue and stock is the increase of national wealth. The demand for those who live by wages, therefore, naturally increases with the increase of national wealth, and cannot possibly increase without it. It is not the actual greatness of national wealth, but its continual increase, which occasions a rise in the wages of labour. It is not, accordingly, in the richest countries, but in the most thriving, or in those which are growing rich the fastest, that the wages of labour are highest.
Let’s start with revenue: Smith wasn’t referring to government tax revenue. He was referring to revenue received by private citizens and corporations. We summarize how well we gain or lose national wealth by measuring our Gross Domestic Product (GDP). Want to peek? Would you like to know how well or how poorly we’re doing? I’m going to tell you whether you want to know or not. – We are doing poorly.
Real gross domestic product (GDP) is the output of goods and services produced by labor and property in the United States, says the Dept. of Commerce. In the fourth quarter of 2012 GDP declined at an annual rate of 0.1%.
Obama fiscal policies, if you can call them that, are driving us into a very deep hole from which we may never climb out. No nation has ever taxed itself into prosperity. Heard that before? Taxation deprives persons of property. Re-read that sentence in the previous paragraph “…produced by labor and property”. Yes, your money is your property. Without your property, you cannot build wealth, at least not as fast as if you were able to hold onto it.
Back to It
If we have less of it, we will have less. As GDP declines or remains flat, national wealth declines. There must be continuous increase in national productivity to have increase in national wealth. Remember this when stock markets collapse and banks close their doors.
We could survive, thrive even materially, under Obama’s grand socialist plan, but not if he and his Democrat lawmakers persist in the confiscation of private property through increased taxation.
Gross National Production is the key indicator of our ongoing growth in wealth. It’s not mysterious. Even a Democrat should understand it.