It’s Capital that Makes the World Go 'Round
Very broadly defined, capital is anything that makes people more productive. When people are more productive and save their money, they can become wealthy. If a lot of people save and become wealthy, their country becomes wealthy. This is exactly what happened in the United States from its early founding days until 1971 (when the value of the dollar began to erode because it was no longer backed by gold).
In 1982, China also adopted the policy of accumulating capital. They called it “Socialism with Chinese Characteristics.” In short, they simply adopted capitalism (without calling it that) in an effort to increase the amount of capital invested per head of the population; thus, raising the productivity and standard of living of the people, and eventually making China the second-largest economy in the world.
So, where is the United States today? Somewhere along the line, at first in small steps and then bigger ones, Americans became jealous of their neighbors, which led to a sea change in attitude, and a growing faith in government’s ability to "protect" us from our more prosperous neighbors. Governments began holding the more successful people back through anti-trust laws, income taxes, banking regulations, and labor laws that put labor outside the court system with the establishment of the National Labor Relations Board (NLRB). Once people felt safer about their federal government, they entrusted the government to establish the Social Security System to ensure a comfortable retirement. This system takes money out of the pockets of working individuals and puts it into the pockets of people who are not working…in effect, it is a giant Ponzi scheme. By the time World War II came along, there was no questioning the need for U.S. involvement. When the Korean War came along, Congressional approval was no longer required to get involved in a war on the other side of the planet. Then there were Vietnam, Iraq, Afghanistan, and now Iran. Unfortunately, wars consume capital by destroying property and re-directing production toward destructive purposes.
For any Americans who don’t realize that consuming capital makes people poorer, I would like to point out that holding U.S. companies back (so they can’t compete with foreign businesses), paying people not to work, and participating in one war after another, consumes our capital and makes us poorer. In fact, it makes us the world’s largest debtor. At this point, because the dollar is no longer backed by gold, there is no limit to how many dollars the U.S. government can print. Of course, the more dollars it prints without an increase in the quantity of goods to be purchased, the more the value of each dollar declines. This shows up as price inflation.
If the United States were to make it safe for capital accumulation, the trend of making people poorer could be reversed. Unfortunately, this is not likely to happen, as we still have anti-trust laws, a Social Security System on the brink of collapse, politicians proposing ever more taxes (including wealth taxes and exit taxes), and a new war that will require ever more spending, taxing, borrowing, and printing of money. The trend is clear. The only remaining question is, “When will the people lose their faith in the government’s ability to protect their money and capital?”
Robert F. Sennholz