You Can’t Steal Your Way to Prosperity
By Gary Alder – 2/24/2009
The way to build wealth is to exchange value. This takes place in a context of creation called production. We therefore must create something of value for someone or add to the value created by someone else. Let us here use the example of building a home. For the purposes of this illustration we won’t take time to go into detail about a lot of the areas where value is created in the construction trade so we will narrow our discussion to a single board. The point that I want to show is that in every step along the way, value is created and added to the end product.
This example starts with a tree being selected to be part of a house. Rather than discuss more about the origin of the tree, let us just give credit to God for providing value in the form of a tree for us to use. We first see a man with a chain saw walking up to the tree to harvest it in order for it to begin the journey toward being part of our home. But wait. The chain saw that he is holding was designed by someone and created using the efforts of countless others. The gasoline and oil used in operating the chain saw as well as that used in conveying the man to the mountains in his truck was also the result of people adding value to these products. Countless other components go into the production of the board of which we speak. Some of the more direct things are the hauling of the logs to the mill, the milling and processing of the wood until it becomes a board. We must include also the storage and transportation of the wood to the retailer. We mustn’t overlook the creation of all of the tools and facilities along with the education of people who are to operate the machinery and use the tools. Each had a vital role in the creation of the board of which we speak. Each received value in exchange for his efforts.
The only means that we have available to us of describing this value is to use some standard of measurement. This standard of measurement needs to be common to both parties in a transaction. We therefore use money for this purpose. By using the terms of the units of a monetary system we have a way to describe the value that will be understandable to both parties in any transaction. Even though the measurement of value is not precise like the measurement of distance, volume, or weight, money provides the mechanism with which we can make comparisons and exchange.
The money is not the value but it represents the value. It provides the means to exchange value with people whom we do not even know. It facilitates exchange over time and can be considered a means of storing past value produced for future exchange. It also shows us who has produced value in the past which will help us determine who can provide that kind of value for us. As an example of this, would you rather save your money in a bank that appears solid and stable or one that is obviously on the brink of collapse?
One of the definitions of prosperity is success. When we say that we want to be prosperous what we usually mean is that we want to be successful. One of the errors in judgment that is too often made is to take the indicators of success and equate them to success itself. This could be likened to the indicators on the dashboard of a car. Let us take a fairly common occurrence in older cars as an example. Often the indicator that the park brake is engaged (a light on the dashboard) starts to fail so that the particular indicator light is on all the time whether the brake is on or not. When we first notice it we make every attempt to disengage the park brake. After a very few times we change our tactic and learn to ignore it. That works pretty well until the brake is actually engaged.
As another example of an inordinate trust of the value of an indicator let us consider the engine check light. This light can be a major annoyance. Try this logic on for size-if you want your engine check light to not come on so you don’t have to take your car to those expensive mechanics just cut the wire that goes to it! Are there any takers for that plan?
We need to have indicators in many areas of our lives. We need to look at them on occasion and determine if the condition expressed by the indicators is actually what is happening. The indicator of the value creation and retention and exchange that we use is expressed in dollars.
What takes place when dollars are stolen? Dollars stolen are not a result of value created. We wouldn’t want to depend upon the thief for future services any more that we would want to be treated by a doctor who we knew stole his diplomas and credentials. Unfortunately we don’t always know with regard to diplomas and credentials. Much more unfortunate is the fact that when dollars are stolen, debased, or counterfeited, they are in many instances much more difficult to detect. The immediate thief does seem to prosper (at least individually) except when again called upon to produce value. Here he cannot succeed, he can only steal more indicators of value created.
A Society Can’t Steal Its Way to Prosperity
As individuals we can actually appear at times to succeed by stealing the indicators of prosperity. With a society it just won’t work. When we measure the wealth of a nation we do so in terms of net worth. If the dollars obtained are not the result of the value creation, they are the result of theft. This is basically what Frederic Bastiat describes as plunder. Bastiat goes on to say that:
“When a portion of wealth is transferred from the person who owns it-without his consent and without compensation, and whether by force or by fraud-to anyone who does not own it, then I say that property is violated; that an act of plunder is committed.” [The Law p 22]
If it is done using the force of law, Bastiat refers to it as legal plunder. He lists two roots for legal plunder-human greed and false philanthropy:
“Nothing can enter the public treasury for the benefit of one citizen or one class unless other citizens and other classes have been forced to send it in. If every person draws from the treasury the amount that he has put in it, it is true that the law then plunders nobody. But this procedure does nothing for the persons who have no money. It does not promote equality of income. The law can be an instrument of equalization only as it takes from some persons and gives to other persons. When the law does this, it is an instrument of plunder.
With this in mind, examine the protective tariffs, subsidies, guaranteed profits, guaranteed jobs, relief and welfare schemes, public education, progressive taxation, free credit, and public works., You will find that they are always based on legal plunder, organized injustice.” [The Law p. 27]
When a thief steals from an individual we can see that his bottom line increases while the bottom line of his victim is decreased by a corresponding number of dollars. The balance sheet of a society doesn’t seem to be affected. On the other hand when any of the above mentioned “programs” (which are characterized by Bastiat as based on legal plunder) are implemented, we think how wonderful and compassionate of a government we have. But where do the dollars come from to fund the programs? They come from increased taxes. Where do the taxes come from? From the people. Specifically they come from what is produced by the people. Even income taxes which are levied initially on incomes (in an attempt to “soak the rich”) end up back in the prices of goods and services which we all have to pay when we purchase those goods and services.
These programs which consist of people receiving dollars without creating corresponding value cause a decrease of productivity and an increase in poverty. At some point it is no longer politically palatable to increase taxes and we resort to a more subtle method of taxation. We call it inflation. More accurately it is the devaluation of the money. This is the damage which is done by counterfeiters. It is most to be dreaded when it is perpetrated by the entity that generates the nation’s money. Constitutionally this responsibility belongs to Congress. In practice it is done by a non-governmental organization (NGO) called the Federal Reserve. Lest we still be misunderstood let us restate it this way: The debauching of our currency called inflation is to be blamed on our own GOVERNMENT! Inflation destroys our ability to accurately use money as the means of measurement.
In my opinion the worst part of the whole scenario is the refusal of the government to take responsibility for the inflation that we experience. Instead of taking this responsibility, we find more and more government intrusion into every aspect of our lives both in a personal and business setting. There are continual increases of monitoring, regulating, and legislating at every level of our existence.
Inflation makes saving money unprofitable. Inflation is a debtor’s best friend because he can pay for today’s obligations with dollars that are easier to get in the future. It generates such things as cost-of-living raises, bracket creep in the income tax system and speculation that something will be of more value tomorrow because prices are rising.
The Constitution in Article I Section 8 Clause 5 delegates establishing certain standards as congressional prerogatives:
coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;
The same clause that describes the standard of weights and measures describes the standard of measuring value which is money. Money is meant to measure value.
We have gone into a major economic crisis in the housing industry with regard to the plunge in home “values.” What caused that crisis? Was it the price of the lumber, bricks, glass or other building material that goes into the construction of a home? Was it that the labor that goes into building the house. I maintain that it was none of these. Was it the greed of the builders or the speculation of investors? Was it the rising cost of land followed by a bust? Was it the negative amortization loan rates that banks allowed with stated income loans? These all were part of the problem. But why would anyone get involved in any of those things? I claim that it was because the government is in the habit of bailing out people when they get in trouble. It is also because we were all counting on inflation. We have learned to accept it as a way of life.
In recent months (2008-2009) there has been an outcry for an enormous bailout of banks and other industries that are not able on their own to maintain their business. There has been a counter cry against bailing out the “big guys.” This seems to large sections of the populace to be the wrong thing to do. It appears that many think that only the “little guys” should get bailed out. We can’t continue to have a government which will cause a problem then solve it by creating a worse situation. In my opinion whether to bail out the “big guys” or not is less of an issue than determining the proper role of government with regard to the economy. If the government was not in the business of bailing out anyone, this could be a total non-issue. My conclusion is that the only reasonable approach will be to get the federal government out of the economy except for its constitutionally mandated responsibility of maintaining a reliable standard of measurement for value-the monetary system. When the government ceases to be a player on one team or another it can do a better job of being an unbiased referee.
This will be a truly arduous task for we are so steeped in socialism that we have largely forgotten what freedom is all about. I do not advocate immediate cessation of all programs but we do need to recognize that we will have to rid ourselves of them as soon as we can do so in an orderly manner. Let us at least commit to not add more “programs” to the problem. We have become a nation of dependents. Moving too fast will surely kill the patient while attempting to cure the disease. It will take a cooperative effort of all who love freedom to make these changes. Freedom starts from within. The first step is to learn about freedom.
We need to get back on a gold and silver standard. We need a government with the courage to admit that employers create jobs, not the government. We need a government that will have the courage to follow the Founders of the nation and the Framers of the Constitution rather than following the doctrine of Karl Marx with their social programs.
In short we need a government that will not plunder the people neither allow the people to plunder each other but allow all to practice freedom
