What is the source of wealth?

wealth

Yesterday marked the first day of my 52nd year (although I would prefer 39) here on earth. In reflection, I can appreciate how blessed I am to live in this time and place. I live in the most prosperous and free country that has ever existed in known civilization. Our form of government, under The Constitution, affords me the highest level of human rights ever granted a society.

I have a very comfortable and a paid for home. I have all the material possessions I need. I walk out my front door and take in beautiful, panoramic mountain views. I have access to quality medical care. Food and clean water is abundant. Life is good and not too challenging.

How did I get here? What series of events brought me here to this relative position of wealth and ease? I did not have a remarkable advantage in life (or did I?). I was the eighth child of nine in a very modest, blue-collared family growing up in the prosperous decades of the United States following World War II.

One advantage I did have was an excellent public school education, which instilled in me the fundamentals of reading, writing, and arithmetic. Yet I took the opportunity of education and built upon it throughout my adult life. My parents could not afford a private education for their children, but we had access to, a great public school system. However, nothing is free, and there had to be a system of wealth to pay for that education.

We live in a country of great wealth, one that can afford to educate its children from ages 5 to 18 with relatively little out of pocket expenses for the family. This begs me to ask the question, why are we so rich? What is so unique about the United States and in a greater perspective the Western Civilization which now dominates our global economy? There are primarily two schools of thought in economics that attempt to answer this question.

First, is based on the writings of Adam Smith, who is considered the father of modern economics. In the 18th Century, Smith laid the foundations of classical free market economic theory. In summary, if the markets are allowed unhindered competition and the greatest freedom to operate (i.e. freedom from outside restriction and regulation), then the economy will be given the greatest opportunity to grow and wealth will spread to all people.

On the other hand is the school of economics that believes that the best way to promote economic prosperity is through government institutions that ensure that capital resources are shared by the entire population and that the needs of the disadvantaged in society are protected and provided. Communism in its purist form falls into this school as well as Socialism.

Recently I read an article by economist Deirdre N. McCloskey that proposes a different view on the source of prosperity in our world (The Wall Street Journal, May 21, 2016). She notes that the past two hundred years have provided great increases of wealth to almost all peoples and all nations. Two centuries ago, the average world income per human (in present-day prices) was about $3 a day, and was so throughout prior recorded history. Now it is $33 a day per human on the planet.  Incredibly, today the average American earns $130 a day. These figures do not take into account the significant improvements of life and the standard of living since the early 1800s, such as modern medicine, the internet and telecommunications, global travel, and improved water and food supplies.

McCloskey argues that it is not the free market economy nor government institutions that have prompted this massive increase in global wealth, but rather “the liberation of ordinary people to pursue their dreams of economic betterment”.  It is freedom of thought and freedom of action that has been the catalyst of economic prosperity. Intelligent people were allowed to share ideas and work together to make them a reality. The ideas of a country carpenter or a boy telegraph operator or a teenage computer geek were allowed to grow and multiply.

The coupling of ideas in the heads of the common people yielded an explosion of betterments.” Better ways of doing things. More efficient processes for producing common products. This all came from the free sharing of ideas between men and women in a tavern, coffee shop, or make-shift garage laboratory.

McCloskey’s hypothesis provides the answer to my first questions. What is so unique about the United States that we enjoy such massive wealth in comparison to other nations? For over two centuries, we have stood for individual freedom and the sharing of ideas. Our Founding Fathers developed the fledgling ideas of democracy and established a “government by the people and for the people” which has continued to grow and take advantage of the immense opportunity to share ideas and build upon them.

This type of freedom should remain the foundation of our country. The freedom to exchange ideas and through hard work reap the rewards of building those ideas into useful goods and services. Government institutions are not good (or should I say terrible?) at fostering economic prosperity; government regulation continues to hinder such in our country. Yes, we should protect the health and well-being of the unfortunate in our country. However, this should not be forced through social welfare programs and wealth redistribution, but rather through the opening of doors for religious and social organizations to meet the needs in their local community. As the Apostle James said:

Religion that is pure and undefiled before God, the Father, is this: to visit orphans and widows in their affliction …”  James 1:27

The point is that government should allow its people to freely exchange ideas and pursue business without undue restriction.  Neither is government in the best position to meet the needs of the basic provision for the less fortunate of society.  Government should promote the relief of those in need not through massive government social programs, but through the enabling of local religious and community organizations to meet the local and specific needs of people within their community.

The wealth that we enjoy is America is because of the freedoms that this nation was founded upon.  We should all endeavor to preserve those freedoms and ensure the opportunity for prosperity in future generations.

What do you think about the freedom? Is it the source of wealth in our country? Is our current government helping our hindering prosperity?

 

About John Forrest

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