FUNDAMENTAL TRUTH #65: “The only thing the market is inefficient at is funneling money to anti-business politicians.” -Old Pithy

Posted by PITHOCRATES - May 10th, 2011

The Natural Order and a good Last Name

There are two types of people in America.  Those who work.  And elitists who want others to work for them.  It’s been this way since the dawn of civilization.  One group asserted their power over the masses.  The masses then worked.  The ruling elite didn’t.  They just gave the work orders.  The masses dutifully followed their orders and grew the food.  The ruling elite took in the bounty and ate until they were full.  And then some.  While famine thinned out the masses.  It was the natural order once upon a time.  And those who held dominion over the land liked it.

Land, then, was key.  The aristocracy owned the land.  Hence we called them the landed aristocracy.  They owned the land, the food and the wealth.  And the people.  In European and Russian feudalism there were serfs.  In the antebellum American South there were slaves.  The landed aristocracy may buy and sell land and move.  But the serfs/slaves stayed on the land.  Forever.  As their parents did.  As their children would.  It was the natural order.

Your name was very important in the landed aristocracy.  For land was hereditary.  As was wealth.  As was political power.  And it stayed this way for a long time.  While everyone who worked farmed.  But over time, something happened.  People got smarter.  They were able to grow food surpluses.  And they took these surpluses to markets.  Which became cities.  Where we saw the rise of artisans.  Skilled people who made tools and crafts that further improved our lives.  Allowed people to leave the farms.  And create a middle class.  Greatest thing that ever happened for the masses.  It allowed a way out from the back-breaking toil of working the land.  Even if you didn’t have a ‘good’ last name.

Representative Government changes the Natural Order

Of course, not everyone was keen about this.  Because it disrupted the natural order of things.  And threatened the old power structures.  Some adjusted.  Some shared the power.  Like in England.  Where there was a representative government.  There was a bicameral house.  The Parliament.  Representing all people.  The rich in the House of Lords.  And the common people in the House of Commons.  And, of course, the king.  Who represented the king.  And the state.  Now, kings like to wage war.  Conquer.  And add to empire.  But it takes soldiers and sailors to fight.  And money to pay for armies and navies.  Which the king didn’t have.  The rich people had the money.  The landed aristocracy.  The Lords.  So the king just couldn’t wage war unless Parliament consented.  Pretty nice thing this check on power.  This representative government.  It made for happy subjects.

It wasn’t like this in France. While the English were checking the king’s power, the French monarchy was absolute.  It  could do whatever it wanted.  And did.  Spent a lot of money.  Ran up great debts.  Fought a lot of wars.  Including the Seven Years’ War that lost much of French North America to Great Britain.  And helped the Americans in their War of Independence.  Helping them to gain their independence from the British monarchy.  Which proved to be a deadly game for the French monarchy.  For the French people grew fond of representative government themselves.  And they thought if the Americans can overthrow king-rule maybe they could, too.  So they gave it a try.  The French Revolution was a bit bloodier than the American Revolution, but it got the job done.  France, too, had a representative government.  Until Napoleon declared himself emperor, of course.  And then he did a lot of kingly things.  Waged war.  Conquered.  Built empire.  And added to the debt.

Great Britain gave up on minority rule.  France tried to hang on to it, lost it then Napoleon got it back.  The reason minority rule failed in these countries is because a minority ruling power needs money.  And it was easier to get money in an agrarian economy.  When all the wealth was concentrated in the few who owned the land.  The rise of a middle class changed all of that.  Artisans and merchants made a lot of money.  Some even without ‘good’ last names.  The people who didn’t have to kiss any royal ass to get or maintain their wealth.  It was a whole new game out there.  Minority rulers needed to find another way to amass money and power.  And they found it.  In the ‘lie’.

Lies from Marxism to Socialism

A ruling power lying wasn’t anything new.  But some of the lies were.  Marxism, for example, was a new brilliant lie.  It made those the ruling elite wanted to oppress ask to be oppressed.  In the name of egalitarianism.  Rise up you miserable oppressed factory workers.  Attack the industrial bourgeoisie (i.e., the middle class).  You have nothing to lose but your chains.  Karl Marx may have believed the claptrap he wrote.  But those who used it could care less about the underlying philosophy.  They just liked the power it gave them.  So those who aspired to rise to power and rule over the majority led worker revolutions.  And after they won, the workers went back to suffering just as they had before.  Only they had less.  Because the communist commissars knew jack squat about the means of production.  But that was okay.  For it just helped to enslave the masses more.  Well, that.  And the brutal police state that discouraged any inappropriate behavior.  Or thought.

It was a good run for the communist powers that be.  While the masses suffered they lived a very comfortable life.  Just like the landed aristocracy of old.  Unfortunately for them, their ruling policies sent their economies into nosedives.  And they suffered recurring famines.  Marxism was a failure.  The ruling elite knew it.  And most of the people knew it, too.  Often, those who could escape from their communist utopias did.  Because they were anything but utopian.  So those aspiring to ascend to the ruling elite needed a new lie.  And they found it in communism-light.  Socialism.  Which appealed to the people they wanted to oppress for the same reasons Marxism did.  It would stick it to the rich in an egalitarian utopia.

But there was little difference between Marxism and socialism.  Both systems tried to manage the economy.  And both did a horrible job.  Why?  Because state planning is not about improving the lives of those they rule over.  It’s about maintaining power.  An economy left alone will always outperform a managed economy.  Everyone knows this.  But if they leave the economy alone, how can the ruling elite amass power and wealth?  It can’t.  Ergo, the lie continues.  Not to improve the lives of the masses.  But to improve the lives of the ruling elite.  The minority power.  Who only ascends to power by a good lie.

Wealth Redistribution Killed the Golden Goose

The free market does have one inefficiency.  It does not enrich those who do not partake in it.  The ruling elite aspire to be in a minority rule for a couple of reasons.  First of all, when you’re stealing from and oppressing the people, the fewer people in the ruling elite the wealthier each member gets.  Which is what they want.  Wealth.  And being in the ruling elite gives them access to wealth.  Because they are so completely untalented that they could never make any wealth in the free market.  So they use the lie to acquire their wealth.  To live the good life.  Like the landed aristocracy of old.

So they become the champion of the working man and woman.  And promise to deliver that egalitarian society via wealth redistribution.  They promise to tax the rich.  And give to those who will vote for them.  It has proven to be a very effective system.  And in its heyday they were reaping in the money.  Even found a way to funnel tax money directly to them via public sector union dues.  But they just got too greedy.  Pulled too many people into the new aristocracy.  And too many people out of the work force who paid the taxes that paid for their comfortable lives of plenty.

The taxes and policies of the ruling elite have grown so anti-business that it’s reduced economic activity.  And tax generation.  So not only have they bloated the public sector with nonworking people and reduced the taxpaying workforce, they killed the golden goose as well.  And no lie may change the mess they created.  They may have no choice but to unfetter the free market.  And get real jobs.

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LESSONS LEARNED #44: “Liberal Democrats have to lie because there are more taxpayers than tax consumers.” -Old Pithy

Posted by PITHOCRATES - December 16th, 2010

Lying to Make Future Liberal Democrat Voters

Ask anyone some questions about the Great Depression and they’ll probably get them wrong.  Why?  Because their history teachers revised history to make government look better.  Government wore the white hats.  And business wore the black hats.  Because their teachers were public school teachers.  And the teacher unions are one of the strongest unions in the country.  The government takes care of them.  And, in return, the public school teachers takes care of government.  By turning out as many future liberal Democrat voters as they can.

So what did our teachers teach us about the Great Depression?  Evil rich people caused it.  By speculating in the stock market.  And it was their speculation that caused the Great Crash which caused the Great Depression.  Rich business people bad.

Then Franklin Delano Roosevelt (FDR) rode into Washington and saved the day.  FDR expanded federal power and went to work to fix things.  He punished the rich (raised taxes).  Created a huge federal bureaucracy to manage the economy.  And spent money like there was no tomorrow.  Public works programs.  Even gave us Social Security.  He made everything better.  Big hearted government people good.

That’s the history in our history books.  The only problem is that it’s wrong.

Tax Cuts and the Roaring Twenties

This is the story told because it favors those who favor expanding government.  Big Government wants to tell us what’s best for us.  And our public schools want to shield our children from their parents.  Because they (and Big Government) are smarter than parents.  So they revise history.  And lie to our kids.

Really?  Come on, they’re not really lying to our kids.  I mean, what reason could they possibly have to lie to our kids?  Just look at the demographics.  The far Left, those in government who like to spend money and tell us how to live our lives, are about 20% of the population.  The other 80% have real jobs and pay taxes.  And this is a problem.  How do you convince 80% of the people (who pay taxes) to pay more taxes so the government can spend it against their wishes?  All the while having the government telling these taxpayers how they should live their lives?  Easy.  You lie.  And you lie to their kids.

There was an economic boom before the Great Depression.  The economy was roaring so strong that they called it the Roaring Twenties.  And it had nothing to do with speculation.  We were building automobiles.  Electrifying the country.  Selling electrical appliances.  And building radios.  This was no speculative bubble.  It was real and strong economic growth.  And guess what kicked it off?  Tax cuts.

Higher Tax Rates Shelter Wealth instead of Creating Jobs

They don’t talk about this in the history books.  Because no public school teacher or government bureaucrat likes tax cuts.  Because economic growth created by tax cuts sends a very simple yet powerful message.  We don’t need Big Government.

Following World War I, government was a bureaucratic behemoth.  With a huge federal debt.  Fighting world wars can do that.  The Progressives, who gave us Prohibition and other nanny-state-like things, liked that big bureaucracy.  They liked activist government.  But even they knew that a high debt was not good.  And being the zero-sum economists they were, they knew only one way to reduce that debt.  Higher taxes.  And their candidate for the 1920 election, James M. Cox, promised to do just that.  And he lost the election.  Proving that Progressives don’t understand economics.  Or the American people.  Those Americans who have jobs, at least.

Warren G. Harding won that election.  And his secretary of the treasury, Andrew Mellon, understood economics.  To find a better secretary of the treasury you have to go all the way back to our first one.  Alexander Hamilton.  Mellon understood business.  And understood rich people.  High tax rates did not bring in more tax money.  Why?  Because rich people know how to shelter their wealth.  But give them a lower tax rate where they can make and keep what they earn, they’ll invest that money and create jobs.  They’ll pay more in taxes (even at a lower tax rate) because they’re not sheltering their wealth.  Their employees will pay more in taxes because they’ll have jobs.  And this is what happened during the Roaring Twenties.  People were working.  Making durable goods (cars, electrical appliances, radios, etc.).  Times were good.  Very good indeed.

Government Activism Gives us the Great Depression

The United States became an economic juggernaut during the 1920s.  The Americans were eclipsing the Europeans.  We were not a superpower yet.  But the Europeans saw the writing on the wall.  They wanted to form their own union of European states to compete against the economic powerhouse that was the United States.  We were kicking ass and taking names.  And no one could hold a candle to us.  We were unstoppable.

Then Herbert Hoover became president.  He was a progressive republican.  He liked activist government.  Hoover was a Big Government Keynesian and wanted to use the powers of government to end the business cycle.  He believed high wages meant high prosperity.  And in parity between farm and nonfarm prices.  He was everything FDR would become.  In fact, the Hoover administration started a lot of the FDR New Deal programs.

Farmers had mechanized their farms.  They plowed more fields than ever.  And grew more than ever.  With bumper crops prices fell.  Normally not a problem.  You just sold more.  But the war was over.  European farmers were farming again.  Not only did they not need our crops, they slapped tariffs on our exports to protect their farm prices.  So farmers couldn’t sell enough to make a profit at the lower prices.  Farmers went bankrupt.  Farm loans went unpaid.  Farm banks failed.  The Federal Reserve failed to provide liquidity to help other farm banks in trouble.  More failed.  This rippled into the nonfarm banks.  Which contracted the money supply.  Business started to hoard their cash because of the tight credit market.  They cut back on production.  Laid people off.  Then the Smoot-Hawley Tariff went to committee in Congress.  Business responded, knowing that that higher tariffs on imported goods they used would increase their cost of production.   They hoarded more cash.  Cut back on production.  Congress passed the Smoot-Hawley Tariff.  Other nations respond by imposing their own tariffs.  This resulted in a trade war.  Business sales fell.  Production fell.  More banks failed.  Hello Great Depression.

Tax Cuts Stimulate Economic Activity

This is the part they don’t teach you in history class.  It was government involvement that killed one of the strongest bull markets in history.  And would prolong the Great Depression.  The growth of government and the anti-business climate created great uncertainty.  And that didn’t go away until World War II.  When James Byrnes (head of the Office of War Mobilization) allowed business to make fat profits if they could deliver the vast quantity of war material needed to defeat Hitler, Mussolini and Tojo.  And they did.  The Arsenal of Democracy won World War II.  Private business doing what they do best.  Business.

But liberals like to spend money.  Our money.  And tell us what’s best for us.  To do that, though, they need us to vote for them.  And telling us that they want to take more of our money while telling us what’s best for us won’t make us vote for them.  It didn’t help Cox to tell the truth in 1920.  And no other presidential candidate since.  Because the 20% of the population that agrees with them isn’t enough to win an election.  You need some of the 80% who have jobs and pay taxes.

History has shown tax cuts stimulate economic activity.  They did when Warren Harding cut taxes.  When JFK cut taxes.  And when Ronald Reagan cut taxes.  This truth doesn’t make a good argument for raising taxes, though.  So our public schools and Big Government revise that part of history.  And lie to our kids.  Until they bleat “Business bad.  Government good.”  Like good future liberal Democrat voters.

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