Starting with first principles and the scientific method
America First Books
Featuring ebooks that find a truer path in uncertain times

How is real wealth created in American society?

(- 5) Centralized (statist) view: The real wealth creation process in America starts with government spending that stimulates the economy. It also includes major government funded research and development programs and large corporations that use their vast staff and financial resources to expand their businesses. What has made America great is that we have developed a powerful government and large companies that have tremendous experience, financial resources, and expertise. They are able to pool their resources to achieve large economies of scale. As examples, government has advanced science and technology by providing major funding to corporate subcontractors in the space program. Government has created major highways in the 20th century. We necessarily have to depend on government to handle major projects rather than the private sector. This is why the government has to step in and periodically bail out major industrial companies to prop up their sectors. The creation of a mixed economy of government and capitalism was a great achievement of the 20th century that combines the best of each. There were very sound reasons to incorporate elements of socialism. Once Americans left their own farms and farming communities beginning in the late 19th century, they lost much of their "Jeffersonian" self-sufficiency. They became more atomized in big cities and found themselves more vulnerable in hierarchical and specialized manufacturing and service jobs. They felt they needed help from other sources such as government and organized labor. These other sources may not have had all the answers, but at least they helped provide partial solutions and helped Americans avoid being left completely out in the cold. You must make sure that you have friendly people in government and elsewhere looking out for your group and individual interests. We also need government and central bank intervention to correct imbalances in the economy, such as when consumer demand slacks off due to a rise in consumer savings. Without centralized fine-tuning, a complex advanced industrial economy is incapable of adjusting itself. Central planning can head off possible economic crises and maintain full employment.
. . .

(+5) Decentralized (libertarian) view: The real wealth creation process begins on a grass roots level through the process of entrepreneurial calculation. Here, the entrepreneur creates a viable business plan that identifies market demand for a new product concept. He then works backwards to see if he can achieve a desirable return on investment after paying for labor, materials, and other production factors. His value proposition usually entails a product that offers a superior ratio of value to price for the consumer compared to what is currently on the market. In addition, the continuing industrial revolution has been all about investing in ever more advanced generations of automation. Nothing can continually scale up productivity like advanced automation, which requires major continuing investment in engineering and scientific infrastructure. Everything else, to include setting of monetary policy by a central bank and fiscal policy by the federal government should be mostly irrelevant in a healthy economy. Most of the best new products and real job creation come from smaller entrepreneurial businesses, which are better suited for innovation than big corporations or government. In the 19th century, the private sector was able to fund universities, roads, and public works without government assistance, and handle these projects more efficiently. Government and the privately-owned central bank muscled in on the private sector in the 20th century mostly as a result of crooked dealings. It, along with controlled national media, has created a world of illusion. As greedy as private businessmen might be, government officials can be every bit a greedy --except they are much more dangerous because they are backed by the police power of the state. In contrast, greedy private businessmen are constrained by the voluntary nature of a free market. The best "trust-buster" policy involves preserving the right of entry of new competitors in a free market, and not government intervention which often favors politically-connected monopolies behind the scenes. The best way to raise wages is to have plenty of thriving businesses around in a free market environment that can afford to lure productive people away from exploitive companies, and not by going on strike to demand pay raises or by inviting government intervention to resolve disputes.

Return to Question 16

Flag carried by the 3rd Maryland Regiment at the Battle of Cowpens, S. Carolina, 1781

© America First Books
America First Books offers many viewpoints that are not necessarily its own in order to provide additional perspectives.