FT200: “Only force can make people live in a world without choice.” —Old Pithy

Posted by PITHOCRATES - December 13th, 2013

Fundamental Truth

College Students and Hippies of Yesteryear have a Soft Spot for their Communist Heroes

The hippies in the Sixties saw a brotherhood of man.  They wanted to link arms and sing Kumbaya.  Live in their communes.  Get high.  Have unprotected sex with multiple partners who bathed infrequently.  While being one with nature.  And poop and pee in the great outdoors.  Like the animals.  Only with less grooming.  For they hated the Man.  And didn’t want anything to do with their parent’s generation.  They protested any figure of authority.  Protested the Vietnam War.  And protested against their government.  Speaking truth to power.  And yearned to bring the Marxist-Leninist revolution to America.

The hippies were rabid anti-capitalists.  Which is why they loved communism.  Where there were no possessions.  No religion.  Or greed or hunger.  Just imagine all the people sharing all the world.  Words from John Lennon’s song Imagine).  Former Beatle.  And one of the leaders of the counterrevolution.  Not to be confused with the other Lenin.  Vladimir Ilich Lenin.  Of Soviet Marxism-Leninism fame.  Or, rather, infamy.  One of many icons of the counterrevolution.  Along with Mao Zedong.  Ho Chi Minh.  Fidel Castro.  And, of course, Che Guevara.  Whose bearded and beret-wearing image adorns many a university dorm room wall and student t-shirt to this day.

College students today, just as the hippies of yesteryear, still have a soft spot for their communist heroes.  Thanks to many of these hippies of yesteryear having joined the establishment.  And are now teaching our kids in college the evils of capitalism and the goodness of government.  Despite their one-time fierce opposition to the Man.  Guess things change once you get money.  Like someone in the rock band The Who said when asked if he still hopes to die before he gets old (a line from My Generation-a song about youthful angry rebellion against their parent’s generation).  The reply was that being old wasn’t all that bad when you were rich.  Something the old hippies of the Sixties no doubt discovered.  And best of all they got rich by taking money from the capitalist pigs.  Their students’ rich parents.  Or the taxpayers who worked in that detested capitalist system.

Nations with the Marxist Brotherhood of Man with No Possessions have been the Worst Places to Live

It is ironic that without capitalism these communist-loving parasites could not be parasites.  For if no one was creating economic activity there would be no income to tax.  Or to pay for the one thing growing more expensive than health care.  College tuition.  Interestingly, there is no ‘Obamacare’ for our colleges and universities.  No.  They never label them greedy despite their being the greediest of them all.  But you know who they do label as greedy?  The taxpayers who oppose higher taxes to pay for the ever higher cost of higher education.  They’re the greedy ones.  Not the old hippies of the Sixties.  And their fellow anti-capitalists.

Another interesting thing about these anti-capitalists?  They yearn for one-party rule.  Which is why public education teaches our kids to distrust capitalism and to trust government.  And our colleges and universities teach our kids to be ashamed of their nation’s past.  And the importance of diversity.  Which is code for anything that isn’t American.  For America was founded by rich white slave-owners who stole the land from the Native Americans.  And America’s imperialist aggression is the only source of strife in the world today.  While ignoring the expanding communist revolution that was spreading out from the Soviet Union into the Eastern Europe, Asia, the Middle East, Africa and the Americas.  The one ideology that has killed more people than any other.  Through state oppression, wars and famine.

Yes, this brotherhood of man where there are no possessions have been in fact the worst places to live.  The Soviet Union, Eastern Europe, Mao’s Peoples Republic of China, North Korea, Vietnam, Cambodia, Cuba, etc.  These are all nations that had gulags or reeducation camps for political prisoners.  Those people who spoke—or thought—truth to power.  They all had police states where the people lived in fear of their government.  They suffered for the want of the most basic items (soap, toilet paper, etc.).  There was state censorship.  They persecuted anyone practicing any religion.  The people suffered from constant hunger.  And the occasional famine.  They killed anyone trying to escape their communist utopia.  Or sent them off to hard labor and torture.  If they escaped successfully then the state punished any family remaining behind.  To warn others what would happen if they escaped their communist utopia.

The Great Flaw of Socialism is being unable to Determine What is the Greater Good

Why did these communist states have police states and brutally oppress their people?  Because they had to.  When the communists built the Berlin Wall it wasn’t to keep people from West Berlin out of East Berlin.  It was to stop people escaping from East Berlin to West Berlin.  For the East Germans were suffering a terrific brain drain.  Capitalists believe in liberty.  The freedom to do what they want.  And to get paid for their services.  A highly skilled doctor expects a higher salary than a janitor.  And that just isn’t going to happen in a communist state.  You get what the state gives you.  No more.  Creating a heck of a free rider problem.  When your economic system works based on the Marxist premise from each according to ability to each according to need what you get is a lot of people showing little ability and a lot of need.  For the more ability you had the harder they forced you to work.  While the greater your need the more you got.  Such a system encourages people to do the minimum and not be extraordinary.  Which is why Sony, Samsung, Microsoft, Apple, The Beatles, etc., did not come from communist countries.

A communist state has a planned economy.  Instead of a free market economy.  Communist state planners manage the economy from top down.  Telling the raw material industry what materials to extract.  They tell what factories get these raw materials and what they are to build.  Etc.  Whereas in a free market economy the economy is driven bottom up by the consumers.  When consumers start buying a lot of one thing the price for that one thing rises.  Attracting other businesses into the market to meet that rising demand.  Who place orders with their wholesalers.  Who place orders with their manufacturers.  Who place orders with their industrial processors.  Who place orders with their raw material extractors.  Hundreds of thousands of decisions happen as this consumer demand travels up the stages of production in a free market economy.  Giving the people what they want.  And not what a state planner decides to give to the people.

This is why communist (and socialist) states are oppressive dictatorships.  Because state planners decide for the people.  Which must start with the supreme decision maker.  The Joseph Stalin, the Mao Zedong, the Ho Chi Minh, the Kim Jong Un, the Raul Castro, the Hugo Chávez, etc.  And these people don’t take polls or hold elections.  Well, at least elections that are legitimate.  Kim Jong Un continues the state policy of his predecessors.  No economic reform.  Money goes to the military first (especially for his nuclear toys) and whatever is left over may go to the people.  And anyone who disagrees with him or thinks wrong goes to the gulag.  Or is executed.  Like his uncle.  While the people suffer the want of the most basic things.  Like food.  North Korea to this day still suffers the occasional famine because of its economic policies.  But one problem the North Koreans don’t have?  Deciding where to go for lunch.

“Where do you want to eat?  I don’t know, where do you want to eat?”  This can go on until someone forceful makes the decision for the group.  Often making no one happy.  But it will end the endless “where do you want to eat?”  This is the great flaw of socialism.  Being unable to determine what is the greater good.  Because people rarely agree on what’s best for other people.  Just look at the recent budget agreement that made few people happy.  They were unhappy because they disagreed on what was the greater good.  People are different.  One size does not fit all.  You just can’t please all of the people all of the time.  So you have to force your will on the people.  The only mechanism that makes socialism work.  Force.  Because people can rarely agree on where to go to lunch let alone national policy.  And this is why all communist/socialist states end in brutal dictatorships.  Because only force can make people live in a world without choice.

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Liar, Liar, Pants on Fire, Hang them up on Telephone Wire, President Obama

Posted by PITHOCRATES - December 12th, 2013

Politics 101

Oppression and Lies are Standard Fare for a Communist Dictatorship

Communists are pragmatic.  They know what they want.  And they do what it takes to get what they want.  For them the ends justify the means.  No matter how horrible those means can be.  And they’ve been pretty horrible.  As communists have been among the greatest abusers of human rights.  Something their people are not too keen on.  As well as those living in the free world.  So communists do something else a lot.  They lie.

When you want to do things against the will of the people you need to either lie to the people.  Or oppress the people with a large police state.  Which can be costly.  Because you have to take care of your police apparatus so they oppress the people and don’t turn on you.  That’s how all dictators stay in power.  Life is horrible in their countries.  But it’s pretty good at the top.  And those who protect those at the top.  North Korea still suffers from recurring famines.  Yet those at the top never go hungry.  Or suffer the abject poverty of the people.  And it’s been this way for a long time.  A system maintained with the firm hand of the state.  From Kim Il Sung to Kim Jong Il to Kim Jong Un.  As the Kim family succession continues to keep life horrible in North Korea (see North Korea announces execution of Kim Jong Un’s uncle, Jang Song Thaek by Chico Harlan posted 12/12/2013 on The Washington Post).

There have been no outward signs of instability under Kim Jong Un, and the North has largely maintained its key policies, resisting economic reform, devoting money to its weapons program and maintaining a gulag system for those accused of political crimes.

Kim Jong Un’s uncle was Jang Song Thaek.  I say was for he is no more.  Jang was in the inner circle of Kim Jong Il and thought to be a potential successor.  But that didn’t happen.  As Kim Jong Un had those honors.  But Jang was around a long time.  And knew a lot of people.  Which, of course, made him a threat.  So Kim Jong Un had him arrested, put him on trial for crimes against the state and executed.  Telling the people he was a “traitor for all ages” and was “despicable human scum” and was “worse than a dog.”  He demonized him to get the people to accept that this execution was just.  And to send a message.  He held power.  And anyone thinking otherwise will be demonized and executed.  Standard sort of fare for a communist dictatorship.  Oppression.  And lies.

You get the People to ask for more Government by Buying their Votes with a Cradle-to-Grave Welfare State

A communist state has its drawbacks, though.  The aforementioned abject poverty and recurring famines.  Because as an economic system planned economies just don’t work.  But a free market economy tends to put ideas into people’s heads.  Such as we don’t really need the government as much as the government wants us to believe we need them.  In the movie V for Vendetta this was something Chancellor Sutler impressed upon his lieutenants.  It was imperative to let the people know how much they needed British socialism.  Which is not quite communism.  But it’s anti-free market capitalism just like communism.  And a little easier to sell to the people.  For despite the left’s love affair with communism it is hard to spin that as anything other than it is.  Horrible.  I mean, people aren’t trying to break into North Korea and Cuba.  They’re risking their lives to escape these communist utopias.

So those on the left adopted a new type of socialism.  Social democracy.  Which was communism/socialism lite.  It wasn’t as anti-free market capitalism as communism/socialism was.  So as not to bring about the abject poverty and recurring famines you got with communism/socialism.  And you backed off on the oppressive police state.  Instead, you get the people to ask for more government.  By buying their votes with a cradle-to-grave welfare state.  And a lot of government jobs with decent pay and wonderful benefits.  To make the people love the state.  And impress on them how much they need the state.

Of course this bloated welfare state is costly.  Which they pay for with a progressive tax system.  A tax system that is ‘fair’.  By making the evil rich pay higher taxes so the good poor and the innocent children can have a decent life.  Not just those evil rich people.  And how do you oppose this?  You can’t.  Unless you hate the poor.  And the children.  Which is what the left says about the opposition whenever they oppose new spending.  Or higher taxes.  Of course, having to fight these battles over taxes and spending can be a pain in the behind.  So the state takes care of those in the inner circle of power.  Those who think correctly.  Who help get the people to ask for these taxes and spending.  The media who helps to spread their propaganda.  And the educational system.  That teaches the young to grow up loving government.  And fearing free market capitalism.  Then you add the coup de grâce.  National health care.

President Obama lied over and over again to put America onto the Pathway towards National Health Care

Every communist/socialist dictatorship had/has national health care.  For once the people become dependent on the state for their good health the state has them for life.  And whenever the opposition resists higher taxes for more spending all you have to do is kill some people by making them wait longer for health care that the opposition denied them.  Causing outrage among the people.  Who demand that the opposition stop playing politics with their lives.  The left’s kind of oppression.  Having the people beg for more government.  This is why national health care (or something that will help usher in national health care) is the holy grail of the left.  And why President Obama lied through his teeth to pass the Affordable Care Act (aka Obamacare) into law (see Lie of the Year: ‘If you like your health care plan, you can keep it’ by Angie Drobnic Holan posted 12/12/2013 on PolitiFact.com).

PolitiFact has named “If you like your health care plan, you can keep it,” the Lie of the Year for 2013. Readers in a separate online poll overwhelmingly agreed with the choice…

The Affordable Care Act tried to allow existing health plans to continue under a complicated process called “grandfathering,” which basically said insurance companies could keep selling plans if they followed certain rules.

The problem for insurers was that the Obamacare rules were strict. If the plans deviated even a little, they would lose their grandfathered status. In practice, that meant insurers canceled plans that didn’t meet new standards.

Obama’s team seemed to understand that likelihood. U.S. Health and Human Services Secretary Kathleen Sebelius announced the grandfathering rules in June 2010 and acknowledged that some plans would go away. Yet Obama repeated “if you like your health care plan, you can keep it” when seeking re-election last year…

Also on Oct. 1, insurers started sending out cancellation letters for 2014…

One example: PBS Newshour interviewed a woman from Washington, D.C., who was a supporter of the health care law and found her policy canceled. New policies had significantly higher rates. She told Newshour that the only thing the new policy covered that her old one didn’t was maternity care and pediatric services. And she was 58…

First, they tried to shift blame to insurers. “FACT: Nothing in #Obamacare forces people out of their health plans,” said Valerie Jarrett, a top adviser to Obama, on Oct. 28.

PolitiFact rated her statement False. The restrictions on grandfathering were part of the law, and they were driving cancellations.

Then, they tried to change the subject. “It’s important to remember both before the ACA was ever even a gleam in anybody’s eye, let alone passed into law, that insurance companies were doing this all the time, especially in the individual market because it was lightly regulated and the incentives were so skewed,” said White House Press Secretary Jay Carney.

But what really set everyone off was when Obama tried to rewrite his slogan, telling political supporters on Nov. 4, “Now, if you have or had one of these plans before the Affordable Care Act came into law, and you really liked that plan, what we said was you can keep it if it hasn’t changed since the law passed.”

Pants on Fire! PolitiFact counted 37 times when he’d included no caveats, such as a high-profile speech to the American Medical Association in 2009: “If you like your health care plan, you’ll be able to keep your health care plan, period. No one will take it away, no matter what.”

President Obama lied.  Over and over again.  He lied to get this pathway to national health care into law (for once he destroys the private health insurance industry what will be left but a public option?).  And he lied to win reelection.  President Obama lied.  And his fellow Democrats lied.  Over and over again.  To put America onto the pathway towards their holy grail.  National health care.  The linchpin of the massive cradle-to-grave welfare state.  The one thing that allows the state to tax and spend more than anything else.  And puts the opposition into the position of wanting to kill people anytime they oppose higher taxes and more spending.  Which has a lot more staying power than a government shutdown.

What can you say about someone who lies (at least) 37 times?  That person is a pathological liar.  A pragmatic.  A person who believes the ends justify the means.  That the rule of law is only a suggestion.  A person that will say anything and break any law to get what he wants.  And is willing to kill people by taking away the health insurance they liked and wanted to keep.  By taking away the doctor they liked and wanted to keep.  And by taking away the medication they liked and wanted to keep.  Fear and suffering President Obama and his fellow Democrats and supporters in the media and education are indifferent to.  For their greatest concern is how will this hurt President Obama?  This is what those on the left worry about.  Their dear leader.  Not the people.  Just like the inner circle surrounding every tin-pot dictator worry about.  For if the people turn on the dear leader they may overthrow him.  And with him go their privileged lives amidst the abject poverty and recurring famines surrounding them.

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Division of Labor

Posted by PITHOCRATES - November 4th, 2013

Economics 101

(Originally published October 24th, 2011)

The Division of Labor gives us our Houses, Food, Cars, Televisions, Smartphones, Laptops and the Internet

We can’t do everything ourselves.  It’s not efficient.  And most times not even possible.  We don’t build our own houses.  Grow our own food.  Build our own cars.  Manufacture our own high-definition televisions.  Smartphones.  Laptops.  And we don’t build our own Internet.  No.  Instead, people everywhere across the economy specialize in one thing (i.e., work for a living).  And together these specialists fit into the big economic picture.  Which gives us our houses, food, cars, televisions, smartphones, laptops and the Internet.

It started with the most basic division of labor.  Prehistoric women raised their young.  While prehistoric man hunted.  Which was necessary for the propagation of the species.  And us.  For if they all hunted and no one nursed the young the young would have died.  And with them the species of man.  For there was no formula back then.

The next great leap forward on the civilization timeline was the indispensible plough.  The prime mover of civilization.  With the food problem managed, famines were more the exception than the rule.  And with fewer people needed to produce a food surplus, people could do other things.  And they did.

The Division of Labor let us Create Surpluses in Food, Ploughs, Shoes, Tools, Harnesses, Etc.

The division of labor gave rise to artisans.  The first skilled trades.  Made possible by a food surplus.  As other people grew the food the artisans made the tools and crafts the farmers used.  They specialized in plough making and designed and built better and better ploughs.  Lots of them.  Shoemakers made shoes.  Lots of them.  Metal workers made tools.  Lots of them.  Leatherworkers made harnesses.  Lots of them.  See the pattern?

The food surplus gave us surpluses in ploughs, shoes, tools, harnesses, etc.  The division of labor let us create these surpluses.  Specialists made continual improvements in their areas of specialization.  Producing better things.  And more of them.  Which led to another key to the advanced civilization.  Trade.

The shoemaker didn’t have to grow food.  He could trade shoes for food.  Ditto for the plough maker.  The metal worker.  The leatherworker.  And the farmers didn’t have to make any of these things because they could trade food for them.  So we became traders.  We created the market.  And traders took their goods and/or services to these markets to trade for other goods and/or services.  First by foot.  Then by animal.  Then by boat.  Then by train.  Then by truck.  Then by airplane.  Artisans (i.e., workers) traded their specialization for the product and/or services of another’s specialization.  Then.  And now.

The Division of Labor made the Complex Simple and our Lives Rather Comfortable and Fun

The division of labor gave rise to the artisan.  The skilled trade worker.  The middle class.  People who can specialize in one thing.  And trade that one thing for the other things he or she wants.  Whether it be a skilled blacksmith hammering out farming tools.  A tool and die maker working in a factory.  An accountant.  Or a software engineer.  We have a skill.  Our human capital.  And we trade that skill to get the other things we’re not skilled in.  The end result is a modern, bustling, free market economy.  An advanced civilization.  And a high standard of living.

All thanks to the division of labor.  Which made the complex simple.  And our lives rather comfortable.  And fun.  Unlike prehistoric man.  Who knew of no such things as iPhones.  Indoor flush toilets.  Movie theaters.  Or restaurants.  No, he didn’t do much other than survive.  Which was no easy thing.  But he did.  And for that we are grateful.

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FT190: “The children are our future. God help us.” —Old Pithy

Posted by PITHOCRATES - October 4th, 2013

Fundamental Truth

Our Universities praise Government Intervention, Vilify Capitalism and Denigrate US History

I recently saw some students on television from our most prestigious universities.  I won’t say who or where they were because it doesn’t matter.  For they all pretty much think the same.  There were liberal Democrats.  And conservative Republicans.  Young people.  Just into their twenties.  They spoke of economics, health care, free markets, investing in education, etc.  Kids too young to have experienced life.  In fact, most were still on their parent’s health insurance policies.  But they knew everything there was to know.  Particularly the liberal Democrats.

In college kids don’t know anything.  That’s why they are there.  So someone can tell them all those things they don’t know.  The problem is this.  The people telling them what to think have a liberal bias.  It’s no secret.  The teachers’ unions demand pay and benefit packages well beyond what most people can get in the private sector.  The government let’s them gouge taxpayers.  And in return they teach our kids in public schools to become Democrat voters.  Then it’s on to college.  Where the anti-capitalist hippies of the Sixties went on to become college professors.  Who talked about the fairness in the former Soviet Union and the former East Germany.  Where they put people before profits.  Admiring their love of people.  And hatred of profits.  While glossing over on their oppressive police states, thought crimes, prisons for political dissidents, torture and wholesale executions.

These radical hippies took over higher education.  And wrote the curriculum.  Which praised government intervention into the free market economy.  Vilified capitalism.  And denigrated the United State’s role in history.  Programming our children to hate whatever they hate.  And to love what they love.  Even when the facts get in the way.  Which they can fix with a little history revisionism.

The Arts did Very Well during the Eighty thanks to the Generosity of Gainfully Employed People

They call the Eighties the decade of greed.  While at the same time calling President Reagan’s economic policies a failure.  Supply-side economics.  Of the Austrian school.  Everyone did well.  Everyone made money.  Which is why they were so materialistic.  Because they had good-paying jobs that allowed them to be materialistic.  Allowing them to buy Sony Walkmans and CD players.  Which everyone had to have.  Even though no one knew what they were before they hit the stores.  Proving Say’s law.

Say’s law is a part of supply-side economics.  In general it states that supply creates its own demand.  No one was clamoring for Sony Walkmans or CD players in the Eighties.  But when these companies explained how great they were all of a sudden we were demanding them.  Supply created demand.  Just as PC supply created PC demand.  PCs were on the market long before they were in everyone’s home.  It was a tough sell in the beginning.  Because no one knew what they would use them for.  But they have them now.  Just like the Internet.  For a generation who had just mastered the recording functions on their VCRs (video cassette recorders—what we used to record TV programs on before DVRs) the Internet was a confusing thing.  And many said “thank you, but no thanks.”  Then people began creating content and putting it on the World Wide Web.  Today, people can’t live without their Internet connection.  Again, supply created demand.

This is Say’s law in action.  Supply creates demand.  You make it easier for people to be creative and bring things to market and they will.  Two ways to do this is to lower tax rates and reduce the regulatory climate.  So people are more willing to take risks.  Which they will do if there is sufficient reward for taking that risk.  Reagan did both during the Eighties.  The economy exploded.  Everybody was working.  The jobs were so good that we had money for material comforts.  And generous donations.  The arts did very well during the Eighties thanks to the generosity of gainfully employed people.

Obamacare will take Money from the Young and Healthy to pay for the Old and Sick

But this isn’t what they’re teaching in our universities.  They say that Reagan did cut taxes and created an economic boom.  But at what cost?  For he had record deficits.  Because of those tax cuts.  Which is where that history revisionism comes in.  Yes, he cut tax rates.  And when he did tax receipts (actual money flowing into the treasury) nearly doubled.  But our universities don’t teach that.  As demonstrated whenever a liberal talks about Reaganomics.  Instead they attack Reagan.  Capitalism.  And Republicans in general.  Because they all believe that limited government is best.  Which threatens a ruling class.

Our universities teach our kids the economics school that benefits the ruling class.  By supporting an ever expanding government.  Keynesian economics.  Which has a proven track record of failure whenever we’ve tried it.  John Maynard Keynes himself advised FDR during the Great Depression.  FDR didn’t think much of Keynes.  But he liked his idea about government spending during times of recession.  Even though it only delayed the correction—and prolonged the recession—by interfering with market forces trying to correct market prices.  Giving us the Great Depression.  Keynesian economics also gave us the stagflation of the Seventies.  Japan’s Lost Decade in the Nineties.  The American dot-com bubble and recession in the Nineties/early 2000s.  The 2008 subprime mortgage crisis.  And the ongoing European sovereign debt crisis.  All of these crises have their roots in Keynesian economics.  The school of economics of the ruling class.  But what do they teach in college?  Free market capitalism is bad.  And Keynesian economics is gospel.

These twenty somethings were anxious to show how smart they were.  How in a mere 2-4 years of college they had learned everything there was to learn.  And could regurgitate the party line.  Rolling their eyes at the idiots around them.  Laughing with all-knowing condescension.  Praising President Obama.  Obamacare.  Believing that it will provide more for less.  When nothing in the world works that way.  More costs more.  Yet they naïvely bleat what they were taught.  These kids who haven’t opened up a letter from their private health insurer advising them that their premiums will rise by 50%, 75%, 100%, or more, to comply with Obamacare.  Because it costs more to have more.  And people now have to pay more even if they don’t want more.  In particular young people.  For Obamacare is a transfer program.  Where Obamacare will take money from the young and healthy (like these college students once they graduate) to pay for the old and sick.

These kids, of course, blame the Republicans for the government shutdown.  And that their concern for our deficits is silly.  For they believe we don’t have a deficit problem.  Yet the smaller Reagan deficits were the end of the world as we knew it.  And they don’t have a problem with members of Congress and their staff getting subsidies to pay for their Obamacare.  As paying for their Cadillac health care plans with their six-figure salaries would have been too much of a burden for them.  And beneath them.  So we should pity them while record numbers of Americans have disappeared from the labor force.  Especially during the government shutdown.  Where the grooms of the stool may not be there for them.  Forcing the ruling class to wipe their own bottoms after they go potty.

This is what government and the political left is turning into.  A ruling class.  The very thing we fought our independence from.  And they are getting away with this because they control education.  And because they do they can revise history.  And change their failures to successes.  And change conservative successes to failures.  All you need are fresh young minds to corrupt.  And corrupt they do.  These kids talk like they know everything.  But they know nothing.  Which is sad.  For the children are our future.  God help us.

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The American Left loves the Chinese Economic System despite its Inefficiencies, Income Gap and Crimes Against Humanity

Posted by PITHOCRATES - January 6th, 2013

Week in Review

The American Left looks at China with awe and reverence.  They see that huge export economy and they know how they did that.  Massive government control over the economy.  And Keynesian economics on such a grand scale that it would  even impress Paul Krugman.  Nobel-winning Keynesian economist who’s constant refrain is that the government just never spends enough.  Something no one can say about the Chinese Communists.  And that’s why the American Left loves China.  For when it comes to the economy they wield dictatorial power.  If the American Left had those powers they could accomplish so much.  Beginning with the arrest of the Republican opposition and deportation to reeducation camps.  Then they could make our economy hum.  Just like in China.  Where brilliant government bureaucrats educated in the finest Ivy League universities called all the shots.  For only those who despise free market capitalism would know how to truly optimize economic output (see Game Over for China’s Photovoltaic Manufacturers by Gao Zitan & Frank Fang posted 1/6/2013 on TheEpochTimes).

It was in October of 2011 when the U.S. and European PV companies decided that enough is enough. Over the last years they had to compete against Chinese companies selling their products below cost. As a result many European and U.S. companies had to close down. The remaining ones chose to appeal to regulators to stop the unfair practices.

Note once again who is complaining about companies selling things too cheaply.  It is not the consumer.  For the consumer never complains that they aren’t being charged enough.  It is always another business requesting antitrust protection against a company they cannot compete against.

The Chinese regime viewed solar photovoltaic production as a promising industry with rapid scalability and production, and high profits. It could add to GDP growth and employment. This is why the regime greatly promoted the growth in the domestic PV market through business-oriented regulations and incentives. Banks, local governments and other financial agencies were ordered to heavily subsidize the solar industry with cheap loans.

Starting in 2009, the regime sponsored some large-scale national PV projects. The Solar PV building program comprised 111 projects and the Golden Sun program included 275 projects. Provincial or municipal funded programs provided the framework for many other PV related projects.

This is exactly what the Left wants to do.  What the Obama administration did.  They want smart government bureaucrats to tweak market forces to make things better.  At least this is what these government people think.  Because they are so smart.  Even though they have no business experience.  So the American Left wants to do exactly what China did.  What the Americans did but on a much grander scale.  Because their communist government had the power to do it on a grander scale.  Something the American Left laments that the American government doesn’t have that kind of power.  Yet the Americans want to penalize the Chinese for unfair practices.  Despite constantly championing the Chinese way.

In 2008, there were less than 100 PV enterprises. But by the end of 2011 there were more than 500 PV companies, a five-fold increase, according to Guangzhou-based business newspaper 21st Century Business Herald…

On the surface, Chinese companies were doing well. Revenue of the PV industry was more than 300 billion yuan ($48 billion) and Chinese companies occupied five spots in the top 10 of global solar cell manufacturers, according to the report. However, the fast expansion of PV production capacity did not match domestic demand.

According to statistics of EU ProSun, in 2011, China reached a total PV production capacity of 45 GW but domestic consumption was only 2 GW. The production capacity spurred by massive subsidies and state incentives was over 20 times higher than actual demand for solar powered electricity. The only way out was exporting the surplus production…

As a result of lower subsidies in Europe and tariffs in the United States, the overproduction stimulated by state subsidies can no longer be exported. One indication is a rapid growth in inventories. Sixty-six listed Chinese PV companies of the Shanghai A-Share Stock Market showed a 20 percent increase in inventories compared with the same period of the previous year…

President of EU ProSun Milan Nitzschke said, “Chinese subsidies shield manufacturers from insolvency, and are pumped into solar companies even if they are unprofitable. Most Chinese solar companies would have gone bankrupt a long time ago if not for endless government subsidies.”

This is what happens when you have ‘smart’ government people take over the free market economy.  You build a lot of stuff no one will buy.  Just like the Soviets built a lot of tractor parts that sat on store shelves unsold while people stood in line to buy soap and toilet paper.  This is why the command economies of communism failed.  And while the command economy of the Chinese Communists will fail, too.  What Friedrich Hayek of the Austrian school of economics called malinvestments.  Which directs resources from making things people want to making things people don’t want.  Creating shortages of the things people want (like soap and toilet paper in the Soviet Union).  And overflows inventories with things people don’t want (like solar panels in China).  All because a government bureaucrat decided to make more tractor parts and solar panels instead of soap and toilet paper.

And if that wasn’t bad enough there are other costs for the Chinese way (see Never Mind the Fiscal Cliff, China is Headed For a ‘Real’ Cliff by Michelle Yu posted 1/6/2013 on TheEpochTimes).

China is dangerously close to a catastrophic political, economic, and social meltdown, according to a Chinese business scholar, who cites China’s growing income gap as one of its serious crisis indicators…

Rural versus urban inequality has long been recognized as a key factor in China’s income gap. Not only does the rural income level fall far below the urban level, but the income inequality is also more obvious within rural regions…

Another notable factor is high unemployment rate. The SUFE study suggests that China’s national unemployment rate was 8 percent in July 2011, suggesting an unemployed population of 27.7 million, which is almost twice as high as what authorities have admitted to. The unemployment rate doubles for 51-55-year-olds, reaching 16.4 percent, and is attributed to mergers and standardized bankruptcy of state-owned enterprises in the early 2000’s. (An explanation of mergers and standardized bankruptcy are available here  and here.)

Surprisingly, the unemployment rate for 21-25-year-olds who hold college or above degrees is also 16.4 percent—the same as for the 51-55-year age group. By contrast, the rate for 21-25-year-old poorly educated migrant laborers from rural areas is only 3.4 percent. A shortage of cheap labor has affected some of China’s key export industries such as apparel and electronics, especially on the east coast.

But the root cause of the income inequality and a battery of other economic problems in China can be found in the communist regime’s overexploitation of social wealth, according to Winifred Tung, an attorney and commentator from Taiwan.

The exploitation has been realized largely through preferential policies in favor of state-owned enterprises and suppression of the private sector, Tung told NTD Television, citing recent data, which says that the GDP of large-scale state-owned enterprises (SOEs) accounts for 60 percent of China’s overall GDP. However, among the different culprits of tax evasion in China, SOEs came in first place with 26-28 percent.

So this is why they can make so many solar panels (and other export goods) so cheaply.  By exploiting poor rural laborers in their big city factories.  Resulting in something the American Left say wouldn’t exist if they had control over the economy like the Chinese do.  An income gap.  Income inequality.  Something that is apparently worse in the country where the government has the power to make life fair.  But it’s more than just an income gap.

The Chinese factory workers aren’t like UAW workers.  They have low pay, no benefits and often live in dormitories in the factory compound.  And these have it good (see The Difficulty of Smuggling a Slip of Paper From a Chinese Labor Camp by Guo Jufeng posted 1/6/2013 on TheEpochTimes).

Like the person whose plea made headlines around the world, I was also in Liaoning Province, China. Twelve years ago, I was imprisoned in Huludao City Forced Labor Camp, Liaoning, for 2.5 years for practicing the meditation discipline of Falun Gong. My companion Cao Yuqiang, who was eventually tortured to death, and I were watched 24 hours a day by two criminals, so that we could not exchange information regarding the persecution of Falun Gong.

One day, I came up with the bold idea to find a way to communicate information about the persecution to the outside world.

The first obstacle we faced was that we didn’t have pen or paper. So, as more and more information was passed on to me, it became quite a challenge to memorize everything! To improve my memory, I repeated the information to myself every day, since I couldn’t communicate regularly with Cao Yuqiang.

One day, out of the blue, Cao told me he had found a refill for a ball-point pen. I suspected he must have gone through a great deal of trouble to procure it, but I did not have the opportunity to ask him for any details at that time.

Now I had a pen, but there was still the question of what to write on. I finally realized that the only possibility was toilet paper, and to avoid being caught, I would have to write the message after midnight.

I had to keep strengthening my mind to overcome fear and anxiety as any negative thoughts could lead me to give up. Questions and doubts plagued my mind: “Would this work? How could we get the information out? Would I be able to withstand the torture if it was discovered? Had other prisoners found out about my plan? Were they waiting to catch me in the act?” I was certain that if my plan were discovered, I would be tortured mercilessly with electric batons.

This is part of that Chinese economic system the American Left so admires.  An economy that is based on cheap labor.  In some cases even slave labor.  And it’s no secret.  Which is odd for the American Left who are champions of the labor movement.  Who bankrupted countless businesses (GM, Chrysler, Hostess, etc.) by demanding ever higher pay and benefits packages.  Yet here they are.  Admiring an economic system that just exploits labor in the worst ways.  Even using torture.  And it bothers some.  Maybe not the American Left.  But the Chinese themsleves (see A Young Chinese Man’s New Year Wish for His Father by Gao Zitan posted 1/1/2013 on TheEpochTimes).

As 2013 begins with an atmosphere of joy welcoming in the new year, a young man from Hubei, China, is worried about his father who is a member of the Communist Party.

The term “San Tui” in Chinese refers to the three distinct renouncements. It means to quit the Chinese Communist Party (CCP) and its two affiliated organizations: the Communist Youth League, and the Young Pioneers, which people are made to join in their youth.

In recent years, “the three renouncements ensure safety” has become a well-known saying in China, and many consider it a rational choice for mainland Chinese to guarantee themselves immunity from all the crimes perpetrated by the Communist Party when the day of reckoning comes. So family members of those who refuse to consider the wisdom of this option are very worried for their loved ones…

“The three renouncements ensure safety” has been widely recognized by the Chinese public since 2004, when The Epoch Times published the truth about the CCP in “Nine Commentaries on the Communist Party” in 2004, and began registering those wishing to make the three withdrawals.

As of Dec. 30, 2012, more than 130 million people had registered with The Epoch Times to quit the CCP and its affiliated organizations.

The American Left may be enthralled with the Chinese communist way just as they were enthralled with the Soviet communist way but those living under those oppressive regimes weren’t.  And aren’t.  China is not the China it was under Mao.  But the hard-line communists are.  But even some of these committed their crimes against humanity for a higher purpose.  To prevent the anarchy that followed in parts of the former Soviet Union when the Soviet Union collapsed.  So some may commit their crimes for good.  While a lot no doubt just enjoy the privilege that comes with being in the party leadership.  And the very comfortable lifestyle.  Much like liberals in this country.  But not the average Chinese.  At least 130 million of them.

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Unemployment

Posted by PITHOCRATES - October 1st, 2012

Economics 101

When Prices Rise Businesses Increase Output and when Prices Fall they Decrease Output

No one likes losing their job.  Even if you hate your job.  In fact, that’s why so many people stay in jobs they don’t like.  Because it’s easier than finding a new job that provides decent pay and benefits.  Sure, there are some aggressive go-getters out there who advance themselves up the earnings ladder by making career moves.  But most people prefer a steady paycheck that meets their needs.  At least, meets their needs with only a modicum of complaining.

But resigned to our places of employment as we may be change happens.  And we lose our jobs.  For a variety of reasons.  Mostly through the ebb and flow of the free market economy.  The normal business cycle.  The boom-bust cycles of the economy.  On the boom side prices rise as people are buying a lot of things.  High prices translate into business profits.  So businesses increase output to sell at those high prices.  And other businesses enter the market.  Adding jobs to the economy.  Retailers increase their orders at their wholesale suppliers.  Who increase their factory orders.  And the factories increase their orders with their suppliers.  Adding a lot of jobs to the economy.  And lowering the unemployment rate.

But eventually too many businesses flood the market with their goods and services.  Supplying more than the people can buy.  So stuff sits on shelves longer.  Retailers reduce their orders at their wholesale suppliers.  So inventories grow at the wholesalers.  So they cut their factory orders.  Leaving the factories with excess production.  So they cut back and reduce their orders with their suppliers.  As everyone cuts back on their business operations they lay off workers.  Removing jobs from the economy.  And increasing the unemployment rate.

When Capitalism destroys some Back-Breaking and Unpleasant Jobs it creates New and Better Jobs

The business cycle is normal.  And necessary.  By using prices in the market place it constantly adjusts supply to demand.  Making sure we efficiently use capital (raw materials, factories, equipment, etc.).  And human resources (labor, research, engineering, etc.).  When we under-utilize capital and human resources prices tend to rise (demand increases).  Encouraging an increase in supply.  The boom time.  When we over-utilize capital and human resources prices tend to fall (demand falls).  Encouraging a decrease in supply.  The bust time.  Or recession.  The business cycle maintains the optimum amount of economic activity automatically.  If we let this process operate automatically.  Yes, there will be recessions.  But they will typically be short in duration.  The less prices rise during the boom the shorter the duration.  The higher prices rise during a boom the longer the duration.  But one thing for certain is that prices have to fall to correct to actual demand.  And that only happens with a recession.

There are other contributors to unemployment besides the normal business cycle.  Like structural unemployment.  Such as when technology changes and makes old jobs obsolete.  A lot of ditch diggers lost their jobs when we developed mechanized excavating equipment.  People in the whale oil business lost their jobs when John D. Rockefeller brought kerosene to the market.  The Pony Express riders lost their jobs with the advent of the telegraph.  The telephone put telegraph operators out of work.  Cell phones put people in the phone booth industry out of a job.  And destroyed a lot of jobs in the pager industry.  The personal computer put a lot of secretaries and typists out of work.  The DVD destroyed jobs in the VCR industry (and those little video cassette rewinding machines).  When they found asbestos caused lung cancer it destroyed the asbestos industry.  The Internet is putting the printed newspapers out of business.  Digital cameras destroyed jobs in the instant camera business (e.g., Polaroid).  And email and texting is causing the U.S. Postal Service to go bankrupt.

There are always unemployed people.  Thanks to the normal business cycle.  Structural unemployment.  Even to changes in consumer preferences that puts some businesses out of business.  (Wearing legwarmers was a fashion trend that sold well in the Eighties but disappeared by the Nineties.)  So there are always people losing their jobs.  But that’s normal.  And necessary.  For all of those new technologies and new consumer preferences create new industries.  And new jobs.  Jobs they staff from the unemployed.  So while free market capitalism destroys some jobs it creates new ones.  Jobs that are often better than the ones destroyed.  Such as back-breaking and unpleasant manual labor jobs replaced by less back-breaking and less unpleasant jobs.  Such as the ditch diggers being replace by a machine and an operator.  And all those workers who build, transport, fuel and maintain those machines.

Some of our Worst Recessions have happened since the Keynesians set out to make Recessions a thing of the Past

Then there’s a worse kind of unemployment.  The kind government causes.  In part with their policies that are not business-friendly.  That increase the cost of business.  Which reduces the number of jobs they can create.  Such as increasing taxes and tariffs.  And mandatory employee costs.  Such as Social Security, Medicare, unemployment taxes, health insurance, etc.  As well as corporate income taxes.  Regulatory compliance costs.  And a minimum wage.  Which discourages hiring unskilled workers.  As well as increases pay levels for those earning above the minimum wage.  Who expect a much higher pay than minimum wage because of their education and/or experience.

So these policies depress the job market.  Because they increase the cost of business.  Then they compound their anti-business policies with bad monetary policy.  Keynesian economists don’t like capitalism.  Or the private sector.  Because of the business cycle.  Keynesians say they can get rid of the business cycle.  By doing what the private sector won’t do.  Hire people during times of recession.  Keynesians encourage the government to run deficits during recessions so they can spend money.  Creating government jobs.  And by creating government projects (e.g., building roads and bridges) for the private sector.  Creating jobs that the private sector won’t.  They even push interest rates below where the market would have them.  By expanding the money supply.  To encourage business to borrow money to expand their businesses for a consumer demand that isn’t there.  And they encourage consumers to buy big ticket items like houses and cars.  To further go into debt to stimulate economic activity.

The problem with these Keynesian policies is that they interfere with the automatic price mechanism to match supply to demand.  So when prices tell suppliers to reduce output these policies encourage them to increase output.  So while they may actually stimulate some economic activity it is not real economic activity.  Not driven by real demand.  Prices will continue to rise as if the boom is continuing.  The inflation created by that expansion of the money supply will even increase prices further still.  Which means when the correction happens those prices have a lot farther to fall.  Making the recession longer.  And more painful.  So the Keynesians not only failed to remove the bust-side of the business cycle.  They made the bust-side last longer than it normally would have had there been no government intervention.  Which is why some of our worst recessions have happened since the Keynesians set out to make recessions a thing of the past.

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Free Market Competition

Posted by PITHOCRATES - July 2nd, 2012

Economics 101

Competition makes Everything Better for Consumers

Let’s go back a hundred years or so.  When the railroads were making their way west.  Through barren and unforgiving country.  Where a depot is built in the middle of nowhere.  One day it will become a city but now is just a shack or two.  And a water tower along the tracks to replenish the steam locomotives.  This is the closest thing to civilization for hundreds of miles.  Railroad building supplies head west on the new track to continue the track further west.  And the trains stop to fill their locomotives with water.  You look at all that traffic passing that depot and decide to open up a diner/saloon to replenish all those people.  Who are earning wages.  But have nothing to spend them on for hundreds of miles around.

There’s no electricity yet.  Or ice.  So the meat shipped to the diner may not be the freshest.  But you can cook it with a lot of spices to hide any bad taste in case the meat is rancid.  Liquor comes out without any spoilage.  It’ll last so long that you can keep watering it down to make more money per bottle.  Your diner/saloon can be dirty and overrun with bugs.  You can just throw the bugs into the pot to make the meat go further.  It doesn’t matter.  Because for most of your customers this is the only place to come to eat and drink.  Even if they get ill from eating bad meat they’ll keep coming back.  Because where else are they going to go?

Your costs are low.  And your prices are high.  You’re doing very well.  It’s nice being the only diner/saloon at this depot.  But then a town starts growing around the depot.  And another diner/saloon opens.  It’s cleaner.  They serve fewer bugs in their food.  Their meat is less rancid.  Their liquor is less watered down.  And their prices are lower.  Everyone who eats and drinks at this depot-town eats and drinks there.  Not at your filthy shack.  You quickly go from making a lot of money to making nothing at all.  Because this new competition in town took away all of your business.  For competition makes everything better for consumers. 

When the Government Interferes with the Free Market there is no Incentive to Please their Customers

Competition is key to the free market economy.  And it’s the most important thing.  Even more important than government regulation.  Because with competition you don’t need regulations.  You don’t need inspectors.  You don’t have to file complaints.  You don’t have to wait for corrective action.  Because if you have competition you have something that works better.  And faster.  Pleasing customers.  If you don’t please them more than your competition then you will lose your customers to your competition.  This is a powerful incentive to lower your prices.  Improve the cleanliness of your establishment.  And to improve your quality.  Competition makes businesses try harder to please their customers.  On their own.  Without compulsion.

In the above example the first diner/saloon owner could have appealed to the government.  Asked the government to prohibit the second establishment from opening.  Saying that it was destructive competition.  That they were dumping lower-priced food and drink onto the market to put the first establishment out of business.  So they could raise their prices higher and lower their quality when they do.  That the market wasn’t large enough to support two businesses.  That their lower prices mean they will pay their employees less.  And a whole host of other bad things that will follow if this second business opens.  Of course the second business has none of these complaints.  Because they offer better quality at lower prices.  They don’t need the help of government.  Just a competitive free market.

If the first business should prevail in their request for government help the government will take action.  Force the second business to shut down.  Make them sell their food and drinks at higher prices.  Charge them a special excise tax on all their sales to raise money to transfer to and help the first business.  Or some other action to make the market ‘fair’ again.  Which means allowing the first establishment to continue to sell lower quality at higher prices.  Which they would.  For with the power of government helping them they have no incentive to please their customers.  So they don’t.  So people with no choice have to pay more for lower quality.  And this is what happens when the government interferes with the free market.

Free Market Competition delivers High Quality at Low Prices with the Most Efficient Allocation of Resources 

Competitive free markets also guarantee that businesses use resources in the most efficient manner.   As they try to sell the highest quality at the lowest price they will buy very carefully.  They will buy only the things they can sell.  And only enough of them to meet their demand.  For if they buy more than they can sell it will only raise their prices.  As those prices have to pay for the things they sell.  And the things they can’t sell.  So there is a very strong incentive to buy only what they absolutely need.  Leaving things for others to buy.  Which is much better than having some government bureaucrat allocate resources.

Suppose the government owned the railroad and all the depot-towns along the line.  And each depot has a diner/saloon.  Each depot-town is about the same size.  So the government bureaucrat ships the same supplies to each depot.  One barrel of flour.  One barrel of cornmeal.  One barrel of salted pork.  Two sacks of beans.  Four sacks of coffee.  Five cases of whisky.  And so on.  But the people don’t eat and drink the same in each of these depot-towns.  Some drink more liquor than others.  Some drink more coffee than others.  Some eat more meat than others.  Some eat more beans than others.  Depending on the season.  The cattle drives.  Whether the farmers are sowing or reaping.  The religious pilgrimages.  The weather.  Etc.  The local diner/saloon owners are in tune with the rise and fall of demand.  But the government bureaucrat 2,000 miles away isn’t.  So some receive more than they can use.  Others run out before the next shipment.  Making the allocation of resources inefficient.  Leading to waste.  And higher prices to pay for all of that waste.

Free market competition always works best.  And the more problems that we solve by creating more competition the better the solutions are for the people ultimately paying the prices.  The consumers.  As free market competition delivers high quality at low prices with the most efficient allocation of resources.  Giving us things like the high-definition television.  The smartphone.  The tablet computer.  And our morning coffee.  Where quality just keeps getting better while prices keep falling.  When we don’t use free market competition we get high prices, poor quality and inefficient resource allocation.  From cable television that increases rates while lowering quality (we’ll be at your house either sometime in the morning or sometime in the afternoon tomorrow or the day after.  Please have someone available at your home to meet our technician).  To waiting in line to renew your driver’s license.  Which is about as enjoyable as a root canal.

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The Free Market Economy gives us Great Televisions while Obamacare will give us Poor Health Care

Posted by PITHOCRATES - December 31st, 2011

Week in Review

The free market economy is giving us tremendous value in televisions.  Pity there are no market forces in our health care (see TV Prices Fall, Squeezing Most Makers and Sellers by ANDREW MARTIN, New York Times, posted 12/27/2011 on Yahoo! Finance).

Televisions have become so inexpensive that the profits have largely been squeezed out of them, a result of a huge increase in manufacturing capacity that has led to an oversupply and continued downward pressure on prices from low-cost manufacturers and online retailers…

To help reduce costs, manufacturers invested heavily in sophisticated new factories or retrofitted old ones that were capable of cranking out more televisions at lower cost. The problem is that the factories became operational about the time the recession hit, creating a glut of televisions and forcing prices down.

This is an excellent example of the role of prices in the free market economy.  Before the Great Recession these televisions were in high demand.  Prices were high.  So suppliers rushed to bring more to market.  With more features and better quality to outsell their competition.  As they did prices fell.  And kept falling.  Because supply grew so great that it surpassed demand.  So these televisions are now selling near cost.  Giving consumers incredible value.

These are market forces.  Providing state of the art quality at incredibly low prices.  Something government just can’t do.  And yet some are asking that government take over our health care system.  If they do, if Obamacare isn’t repealed, our health care won’t be anything like state of the art televisions.  It’ll just consume so much of our GDP that state of the art television will be unaffordable no matter how cheap they are.  Because there are no free market forces in state-run anything.

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Rule of Law

Posted by PITHOCRATES - November 21st, 2011

Economics 101

To take Civilization to the Next Level required the Rule of Law

Agriculture advances gave us food surpluses.  Food surpluses gave us a division of labor.  The division of labor gave us trade.  Money made that trade more efficient.  And religion allowed great gatherings of people to live together in urban settings.  Which was a start.  But it didn’t solve all the ills of packing a lot of people together in a crowded urban setting.

Religion did bring people together.  But organized civilization needs leadership.  And having a leadership position over the masses gives one great powers.  For good.  As well as bad.  And all too often leaders have become intoxicated on that power.  Especially if that leader was also the god that the people worshipped.  Who felt they could do anything they wanted.  To anyone they wanted.  And often did.

But it’s just not leaders who failed to choose good.  A lot of the people did, too.  Some people cheated each other.  Stole from each other.  Didn’t honor their agreements.  Fights broke out.  Some harmed others.  Even killed people.  Clearly, religion alone wasn’t enough to get everyone to live in peace and harmony.  They needed something more.  Some basic ground rules.  Rules of the game.  The game being living together in a crowded urban setting.  Working together.  And entering into economic transactions.  What they needed to take civilization to the next level was the Rule of Law.

We use the Rule of Law to Clearly Identify and Protect our Private Property

The key for economic development rested on the principle of private property.  Economic activity is based on trade.  To trade you need first to create things to trade.  Often requiring costs and great personal effort to create these things.  Which people will gladly undertake.  As long as if they own what they create.  And are free to do whatever they wish with it.  Keep it.  Use it.  Or trade it.

We use the Rule of Law to clearly identify and protect our private property.  We define what is ours.  And forbid others to take what is ours without our consent.  If they do they will be punished under the law.  Which will deter some.  And those undeterred will face the consequences.  Thus producing a safer environment to live in.  Where we are safe in our persons and property.  Especially in crowded urban settings.

This encouraged greater economic activity.  With more opportunity to trade.  Sometimes we didn’t exchange things after concluding our negotiations.  Instead entering into a contract for an economic exchange.  Such as summarizing the terms for the exchange of a piece of land.  Or for a future farm crop.  Agreements we freely and consensually enter into.  Because we trust the Rule of Law to protect and enforce these agreements.

Private Property Rights and Contracts are the Indispensible Requirements of any Free Market Economy

The Rule of Law picked up where religion left off.  For those who did not wish to choose good behavior.  Whether it be people in the masses.  Or the leaders.  The Rule of Law became supreme.  Everyone was answerable to the laws of the land.  Today, government leaders often swear an oath to support and defend these laws.

And by clearly setting the ground rules for economic exchange, the Rule of Law unleashed economic activity.  Perhaps more so than any other thing.  By establishing private property rights.  And creating contracts.  The indispensible requirements of any free market economy.

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Division of Labor

Posted by PITHOCRATES - October 24th, 2011

Economics 101

The Division of Labor gives us our Houses, Food, Cars, Televisions, Smartphones, Laptops and the Internet

We can’t do everything ourselves.  It’s not efficient.  And most times not even possible.  We don’t build our own houses.  Grow our own food.  Build our own cars.  Manufacture our own high-definition televisions.  Smartphones.  Laptops.  And we don’t build our own Internet.  No.  Instead, people everywhere across the economy specialize in one thing (i.e., work for a living).  And together these specialists fit into the big economic picture.  Which gives us our houses, food, cars, televisions, smartphones, laptops and the Internet.

It started with the most basic division of labor.  Prehistoric women raised their young.  While prehistoric man hunted.  Which was necessary for the propagation of the species.  And us.  For if they all hunted and no one nursed the young the young would have died.  And with them the species of man.  For there was no formula back then.

The next great leap forward on the civilization timeline was the indispensible plough.  The prime mover of civilization.  With the food problem managed, famines were more the exception than the rule.  And with fewer people needed to produce a food surplus, people could do other things.  And they did.

The Division of Labor let us Create Surpluses in Food, Ploughs, Shoes, Tools, Harnesses, Etc.

The division of labor gave rise to artisans.  The first skilled trades.  Made possible by a food surplus.  As other people grew the food the artisans made the tools and crafts the farmers used.  They specialized in plough making and designed and built better and better ploughs.  Lots of them.  Shoemakers made shoes.  Lots of them.  Metal workers made tools.  Lots of them.  Leatherworkers made harnesses.  Lots of them.  See the pattern?

The food surplus gave us surpluses in ploughs, shoes, tools, harnesses, etc.  The division of labor let us create these surpluses.  Specialists made continual improvements in their areas of specialization.  Producing better things.  And more of them.  Which led to another key to the advanced civilization.  Trade.

The shoemaker didn’t have to grow food.  He could trade shoes for food.  Ditto for the plough maker.  The metal worker.  The leatherworker.  And the farmers didn’t have to make any of these things because they could trade food for them.  So we became traders.  We created the market.  And traders took their goods and/or services to these markets to trade for other goods and/or services.  First by foot.  Then by animal.  Then by boat.  Then by train.  Then by truck.  Then by airplane.  Artisans (i.e., workers) traded their specialization for the product and/or services of another’s specialization.  Then.  And now.

The Division of Labor made the Complex Simple and our Lives Rather Comfortable and Fun

The division of labor gave rise to the artisan.  The skilled trade worker.  The middle class.  People who can specialize in one thing.  And trade that one thing for the other things he or she wants.  Whether it be a skilled blacksmith hammering out farming tools.  A tool and die maker working in a factory.  An accountant.  Or a software engineer.  We have a skill.  Our human capital.  And we trade that skill to get the other things we’re not skilled in.  The end result is a modern, bustling, free market economy.  An advanced civilization.  And a high standard of living.

All thanks to the division of labor.  Which made the complex simple.  And our lives rather comfortable.  And fun.  Unlike prehistoric man.  Who knew of no such things as iPhones.  Indoor flush toilets.  Movie theaters.  Or restaurants.  No, he didn’t do much other than survive.  Which was no easy thing.  But he did.  And for that we are grateful.

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