The simple concept that production comes before consumption must not be as simple to understand as I think. Since before the tech bubble popped in 2000, our Government and the Federal Reserve have tried to spend, and electronically print, our way to prosperity. Government spending and money printing are not just consumption activities, they also work to distort the production process. We have been consuming more than we have been producing for about a decade or more. We have essentially been eating our seed corn.
Government’s wealth distribution policies are put forth by politicians as charitable activities. But, since Government doesn’t produce anything, it must first confiscate what it redistributes. That is theft not charity.
Here are three short articles from Mises.org that address the above topic.
1) Technology Needs Capital To Produce Economic Growth, by Frank Shostak. Here are some excerpts from the article.
“Most modern theories that emphasize the importance of new ideas and new technologies give the impression that these ideas and technologies have a “life of their own.” Many experts hold that because of the limited amounts of capital and labor, without technological progress, the opportunities for growth will eventually run out.”
“So regardless of how clever we are and regardless of various technological ideas, without an adequate pool of funding nothing will emerge. It is through the expansion in the pool of real savings that an increase in the stock of capital goods is possible. And it is the increase in the capital goods per worker that permits economic growth to emerge.”
2) Wealth Must Be Created Before We Give It To The Poor, by Steve Patterson. Here are some excerpts from the article.
“Charity is seen as ethically superior to business. After all, what could make a greater impact on the world than giving to the needy?”
“This view of the world is shortsighted. While it’s true that charity helps people, business makes a far greater contribution to humanity. Virtually all of the increases in society’s standard of living are because of simple commerce, and it’s the poor, in particular, who benefit the most…”
“In the developed world, it’s easy to forget that poverty is the default state of human existence. Wealth is not found in nature; it must be created, and this is precisely the role of businesses and entrepreneurs. They are the force which takes us out of the state of nature. All cases of poverty have the same solution — not wealth distribution, but wealth creation. This is not merely a theoretical argument. It’s witnessed everywhere around the globe.”
“… Not everybody has the skills necessary to create a new invention or become a successful businessman. But that doesn’t preclude them from making a positive difference in the world. However, we should be realistic: a donation of furniture to Goodwill does not create the same ripple effect as selling affordable food or power tools to everyone.”
“Many economic truths work this way. We’re quick to praise what’s easily seen…… but we overlook or even condemn what happens behind the scenes….. The farmer, the butcher, the truck driver, the cook, the engineer, and the businessman should also be praised for their work. Without them, there would be no surplus food for the charity worker to give away.”
3) Let’s Hope Machines Take Our Jobs: We Want Wealth Not Jobs, by Peter St. Onge.
When we use technology and machines to become more productive it destroys jobs, and this is a good thing. This article explains this abstract concept that I have found to be difficult to get people to understand. The article starts with the thought experiment that a machine is created that is capable of producing everything with a push of a button. Its creation puts a lot of people out of work. Now what happens? Read the article it will make you think which is a good thing.
Related Article – What Comes First, Production Or Consumption, at austrianaddict.com.
Related Article – Capital Consumption, aka Eating Our Seed Corn, at austrianaddict.com.
Related Article – Real Savings = True Credit, Printed Savings = False Credit, at austrianaddict.com.
Related Article – Producing Capital Goods, Requires Restricting Present Consumption, at austrianaddict.com
Related Article – Why Do People Think The Government Is The Economy? at austrianaddict.com.
Related Article – Entrepreneurship Can Be A Stinky Business, at austrianaddict.com.
AUSTRIAN ECONOMICS ADDICT 