From: Lee Corbin (lcorbin@tsoft.com)
Date: Sat Jul 05 2003 - 17:46:54 MDT
I have been thinking in my mind upon the old question of
wealth creation.
I will sheeplishly admit that my first recent thoughts
on this eternal subject a couple of days ago projected
my own spending habits onto other people.
The reality is that most Americans want many goods that
they do not have, and will spend almost everything that
they have in order to obtain them. Of course, as always
there is wide diversity and a continuum between complete
thrift and complete abandon.
So when the Republicans began to talk about putting money
in the hands of those who would go spend it and that this
would help the economy, I was skeptical. It seemed to me
that this would not result in any true wealth creation.
"Consider", I told one acquaintance, "what would happen
if in order to inspire confidence in the economy, the
government simply exhorted all the citizens to go buy
something, or printed up a lot of money and distributed
it at random. This would fail to create wealth because it
would only cause a lot of people to engage temporarily in
"fake work" and produce a lot of crap that people didn't
really want---didn't really want, that is, badly enough
to spend their own money on it".
I went on to say that this is how socialist countries often
operated; by trying to get the masses to have such a positive
frame of mind that they'd all work themselves to the bone for
the greater good, and that indeed while the economic metrics
might for a short time reflect what looked like an advance,
it was simply a dog chasing its tail. True wealth creation
is a mysterious, magical process that cannot be so easily
engendered.
However, upon talking to yet others, I have been subsequently
thinking (perhaps mainly only in my mind, after all, like normal
people) that the phenomenon of wealth creation, in a number of
circumstances, indeed can be advanced by tax cuts, and perhaps
even by printing more money! How is this possible?
Under certain special circumstances (which probably human beings
are really not so good at identifying, and probably governments
even less) it could be that a thing could happen which would
make everyone happy, and advance progress: people could be
employed making goods (which in this day often means using
more-or-less advanced technology) that other people really do
want, but which the latter folks are scared to purchase. It
could happen, as it did during the depression of the 1930's,
that if were people only more confident of the future then they'd
spend, and not spend on junk, but spend on things that they
TRULY WANTED and which provided them, ultimately, with the
incentive to ever work (themselves) in the first place. Thus,
money placed into the hands of most Americans would (i) cause
a number of people to make purchases of things they wanted,
and (ii) result in a slight lengthening of the capital structure
as workers would get more practice turning out stuff. (The
latter, too, would be very happy to have the work.)
Why, just where do I stop with this train of thought? Why not
indeed when confidence is low have some state (say California)
print up a lot of money and distribute it to its most reliable
citizens, namely those who have to pay taxes?
If the unemployment is being caused in this case primarily not
because entrepreneurs don't know what to do (the usual case)
but because those with money are afraid to spend it (or afraid
to go into more debt), why not?
Lee
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