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Posts Tagged ‘economy’

Don’t Give Politicians Credit for a Growing Economy | Mises Wire

Posted by M. C. on September 10, 2019

“It is hardly possible to misrepresent in a more thorough way the fundamental facts of economics. The average standard of living is in this country higher than in any other country of the world, not because the American statesmen and politicians are superior to the foreign statesmen and politicians, but because the per-head quota of capital invested is in America higher than in other countries. Average output per man-hour is in this country higher than in other countries…… because the American plants are equipped with more efficient tools and machines.”

https://mises.org/wire/dont-give-politicians-credit-growing-economy

“One of the amazing phenomena of the present election campaign is the way in which speakers and writers refer to the state of business and to the economic condition of the nation. They praise the administration for the prosperity and for the high standard of living of the average citizen ‘You never had it so good,’ they say, and, ‘Don’t let them take it away.’”

The above statement sounds like something Republicans say in supporting Donald Trump for reelection. The White House proclaims the successes of the Trump economy while those who side with the Democrats say that Obama should also be given credit for any current economic successes. Both sides give presidents too much credit for our standard of living.

However, the quote above comes from a speech that Ludwig von Mises gave in October 1952. As with so much of Mises’ work, this speech is timeless. Much of this talk, “Capital Supply and American Prosperity,” applies to current events.

It’s true that government policy affects the economy. And Trump should get credit if any of his policies have reduced the governmental burden on our businesses. But the fundamental reason wages in the U.S. are higher than in most countries is not because of marginal policy changes. Our economic well-being is largely due to our capital accumulation, not the benevolence of our elected officials.

In this speech, Mises hammers away at this point, “It is implied that the increase in the quantity and the improvement in the quality of products available for consumption are achievements of a paternal government. The incomes of the individual citizens are viewed as handouts graciously bestowed upon them by a benevolent bureaucracy.”

This statement reminds me of the recent Democratic debates where the candidates were each trying to outdo one another with promises of new programs of federal largesse. They seem to believe that all of our economic problems are due to ungenerous government officials. The current federal budget deficits demonstrate the fallacy of this position.

Mises continues,

“It is hardly possible to misrepresent in a more thorough way the fundamental facts of economics. The average standard of living is in this country higher than in any other country of the world, not because the American statesmen and politicians are superior to the foreign statesmen and politicians, but because the per-head quota of capital invested is in America higher than in other countries. Average output per man-hour is in this country higher than in other countries…… because the American plants are equipped with more efficient tools and machines.”

That’s right. Our economic prosperity is due to our capital accumulation. And why do American businesses have so much capital? “Capital is more plentiful in America than it is in other countries because up to now the institutions and laws of the United States put fewer obstacles in the way of big-scale capital accumulation than did those foreign countries.”

But why did this happen in the U.S.? How do we account for our economic prosperity? The answer: capitalism.

“What begot modern industrialization and the unprecedented improvement in material conditions that it brought about was neither capital previously accumulated nor previously assembled technological knowledge…. the early pioneers of capitalism started with scanty capital and scanty technological experience. At the outset of industrialization was the philosophy of private enterprise and initiative, and the practical application of this ideology made the capital swell and the technological know-how advance and ripen.

“One must stress this point because its neglect misleads the statesmen of all backward nations in their plans for economic improvement. They think that industrialization means machines and textbooks of technology. In fact, it means economic freedom that creates both capital and technological knowledge.” (Italics added for emphasis.)

Mises also provides us with a stern warning that we face dire consequences if we destroy the engine of capital accumulation:

“The main problem for this country is: will the United States follow the course of the economic policies adopted by almost all foreign nations, even by many of those which had been foremost in the evolution of capitalism. Up to now in this country the amount of savings and formation of new capital still exceeds the amount of dissaving and decumulation of capital. Will this last?”

Mises provides us with the answer: “One must substitute sound economic ideas for fables and illusions.” We must influence public opinion. We must promote capitalism. We must explain the necessity of having economic freedom and free enterprise. In short, we must popularize Misesian ideas.

But what about income inequality? Won’t some people suffer under capitalism? Again, Mises provides us with an answer to this question.

“There are, of course, also Americans whose material conditions appear unsatisfactory when compared with those of the great majority of the nation. Some authors of novels and plays would have us believe that their gloomy descriptions of the lot of this unfortunate minority is representative of the fate of the common man under capitalism. They are mistaken. The plight of these wretched Americans is rather representative of conditions as they prevailed everywhere in the pre-capitalistic ages and still prevail in the countries which were either not at all or only superficially touched by capitalism. What is wrong with these people is that they have not yet been integrated into the frame of capitalist production. Their penury is a remnant of the past. The progressive accumulation of new capital and the expansion of big-scale production will eradicate it by the same methods by means of which it has already improved the standard of living of the immense majority, viz., by raising the per-head quota of capital invested and thereby the marginal productivity of labor.”

Yes, a capitalist society will have income inequality. In order to help the poor we must build and maintain institutions that promote capital formation. Redistributionist solutions to reduce income inequality will continue to destroy capital formation trapping more people in poverty.

This wonderful essay, “Capital Supply and American Prosperity,” can be found in one of my favorite short books, Mises’ Planning for Freedom: Let the Market System Work . If you haven’t read this compilation of essays, I recommend that you add it to your reading list.

 

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Cartoon of the Day: Easter Bunny Fed

 

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Agriculture Is Only a Tiny Part of America’s Economy — And That’s a Good Thing | Mises Wire

Posted by M. C. on July 17, 2019

A century later, 3 million were employed on farms, while the USDA employed 105,000 workers. This increase in agency size represents the Federal government’s increasingly regulatory stance in the US economy.

https://mises.org/wire/agriculture-only-tiny-part-americas-economy-%E2%80%94-and-thats-good-thing

For decades, politicians and pundits in political media alike have said that the American farming and ranching industries are vital to our nation and must be protected from “unfair” competition and the threat of going out of business. This belief often materializes in the form of legislative or executive action undertaken by the government.

The federal government has long sought to promote the health of these industries, employing pro-farming policies since the days of FDR’s New Deal. These programs survive to this day, being expanded from their initial scope or their original sentiments reimposed through new acts of Congress. Strangely enough, this bureaucratic expansion occurs despite American agriculture output declining over the course of America’s existence.

Output Declines, Government Grows

Since 1900, the number of American farms in operation has fallen 63 percent. In 1930, agricultural GDP as a share of total GDP sat at a sizeable 7.7 percent — by 2002, agricultural GDP as a share of total GDP was a mere 0.7 percent. This 7 percent decrease signals the adoption of a new role in the world economy by the US.

The US now imports a large percentage of the fresh vegetables and produce it sells — while in 1975 the proportion of fresh fruit sold in the United States that was imported was 23 percent, it reached 51.3 percent in 2016.

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Source: New York Times

Domestic vegetable and fruit producers are being supplanted in the market by producers from countries such as Argentina, Chile, and Mexico. The City University of New York’s Urban Food Policy Institute reports: “…since the NAFTA Trade Agreement in 1994, U.S. consumption of tomatoes, peppers, cucumbers, limes, berries, avocados and mangos imported from Mexico is way up and still rising.”

Clearly, increased trade is impacting America’s agriculture sector. Surely then, the government’s relationship with the industry must be changing as well. Logic would suggest that the USDA and its subordinate agencies are laying off employees and reducing their size and scope in response to the decline of America’s beloved industry.

In reality, this is not the case. In 1900, 11 million Americans were employed on farms and 2,900 employed by the USDA. A century later, 3 million were employed on farms, while the USDA employed 105,000 workers. This increase in agency size represents the Federal government’s increasingly regulatory stance in the US economy.

Agriculture’s Death is Good News

How could an industry’s death spell prosperity for a nation? While the number of people employed in farming and similar occupations dwindled from 11 million in 1900 to 2.6 million in 2017, employment in STEM (science, technology, engineer, and math) occupations has grown 79 percent between 1990 and 2016 — increasing from 9.7 million to 17.3 million. The US economy is transitioning away from producing in primary and secondary level industries like agriculture and related enterprises such as food processing and packaging.

The reduction in the number of people employed in agriculture and related jobs shows that America is actually abandoning low paying jobs. Compared to STEM jobs, occupations in the primary or secondary sectors of the economy tend to pay a very low wage. Farm hands and field laborers, who are often poor immigrants, are paid below minimum wage to perform tasks that take a significant toll on their bodies. Difficult manual labor poses both short-term and long-term risks to workers’ health, compared to the almost complete lack of health detriments presented by jobs in STEM fields. These agricultural jobs tend also to be seasonal. Workers will only have a secure source of income for between 3 and 6 months per year, depending on where they work, due to the fact that crops cannot be grown year round.

As the economy sheds the last remnants of its agricultural-centric past, new jobs are being created in new industries at a rapid pace. Occupations in the tertiary and quaternary sectors are far more beneficial to society and individuals, as they provide higher wages, a more stable source of income, and employment year round. In a bid to attract workers to fill positions, companies often offer benefits such as childcare and healthcare plans as part of an offer of employment. It is very obvious that we should seek to employ as many people as possible in tertiary and quaternary sector industries.

Primary and secondary products will never lose value. Humans will always have a need to consume agricultural products and build devices and structures from raw materials that are finished through secondary sector activities. As the US economy begins to be largely constructed of tertiary and quaternary economic activities, these lower-level processes will simply be outsourced to less developed countries.

Outsourcing: Oppression or Opportunity?

Since their ideology became a force in the mainstream a decade ago, the rallying cry of political leftists has been to stand for those being oppressed, exploited, or victimized by the status quo. The advancement of technology has meant that industrialization, combined with other factors, has left certain nations behind. Third world economies are not nearly as developed as their first world counterparts, with a bulk of their economic activity taking place in the primary and secondary sectors. These leftists take an anti-trade stance, positing that the outsourcing of production to less developed nations is capitalistic exploitation.

“Exploitation” Actually Benefits All Parties Involved

While it is true that a business owner may outsource simple manufacturing processes to countries where they may hire workers at cheaper wages, it is also true that the workers hired benefit from this self-interested move. The reason workers choose to work in these plants and industries is that they provide the best possible way to make money to the worker. If a corporation goes to a less developed nation and is able to hire 5,000 workers to work for them, it means that the firm is now offering the best employment opportunity in the country to 5,000 workers. Prior to the company’s arrival, laborers were likely making less money than they now do and working in worse conditions. Otherwise, why would they choose to work for the new company? Their condition has obviously been improved by the opening of a plant by a foreign capitalist…

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economics | The Rule of Freedom

 

 

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To Save Humanity, Stop Caring About So Many Problems | The Daily Bell

Posted by M. C. on October 14, 2018

https://www.thedailybell.com/all-articles/news-analysis/to-save-humanity-stop-caring-about-so-many-problems/

Why does it suck to be around someone who is always complaining?

Because they are “centralizing” their problems to the group.

We all get annoyed by things. But when people broadcast what annoys them, they force everyone around them to share in their annoyance.

So then, not only do we feel annoyed by whatever naturally irks us, but we also are forced to feel annoyed by the other person’s complaints.

By sharing their complaint with others, they have increased the overall annoyance of the group.

Instead of being annoyed for five minutes by my own problems, I am annoyed for ten minutes. Five minutes by the complaints I keep in my head, and five minutes by their complaints they force into my ears.

There are a lot of problems in the world. You can’t care about all of them.

And if you try, you will probably feel overwhelmed, depressed, and powerless.

Yet we rely on big centralized institutions like national media, national politics, and national monetary policy.

This produces the same result as our complaining acquaintances.

They force problems on all of us that really shouldn’t affect 320 million Americans from coast to coast. Read the rest of this entry »

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America’s Share of the World Economy

Posted by M. C. on March 1, 2017

http://www.garynorth.com/public/16285.cfm

Things aren’t so bad. 

Big bad Russia’s economy is the size of S Korea, smaller than Italy.

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