Down with the Rich, Again?

[jhaag]

http://www.campaignforliberty.com/article.php?view=1030

Down with the Rich, Again?

By Lew Rockwell

Maybe you saw the headlines blasting the rich (again!) for failing to spend money in order to enable us to get out of this everlasting recession. It turns out that in boom times, the rich spent $145 per day. Now they are only spending $119. So, there we go: a new scapegoat! Those greedy rich people are failing to do their duty.

The press reports that the rich are not booking at the Four Seasons, not putting on the Ritz, and not filling their closets with furs and jewels from Saks. It gets worse. The women who shop for goodies by Dries van Noten and John Galliano told the New York Times that their husbands are telling them to cool it on designer bags, shoes, and dresses. Yet another reason for the recession: patriarchy!

But still, I'm not entirely sure I can follow this. In normal times, we are told that the rich are rich only at the expense of everyone else. One man's wealth is another man's poverty. It's a fixed pie, and one reason for human suffering is precisely the tendency of the rich to spend their filthy lucre on fripperies. They engage in conspicuous consumption that does nothing but feed their egos even as the world's poor suffer.

Suddenly, the line has changed. Now it is the moral obligation of the rich to cough up in order to help the rest of us. Especially now that government stimulus has proven to be ineffective, the rich should make it their patriotic obligation to spend, spend, spend! To be sure, the left-leaning commentariat is not willing to go so far as to favor tax cuts for the rich. For that would put us "in an Alice in Wonderland world," says Sam Pizzigati of the Institute for Policy Studies, in which we help the people we are supposed to hate.

I'm just trying to come to terms with the intellectual model here. On the one hand, the rich are usually blamed for poverty simply because they have money while others do not. On the other hand, their failure to behave like rich people is also to blame for economic hard times. It's like this swath of the population can't do anything right.

Now, under crude Keynesian thinking, one can sort of make sense of this. The idea is that a rich person buys a yacht and that provides jobs for yacht salesmen, boat makers, wood finishers, boat repairmen, paint makers, and everyone else involved in making and maintaining the yachting world. These people get money and in turn spend it on clothes, booze, movies, and other things along those lines. This is the circular flow of perpetual economic motion that keeps the world afloat; any saving then becomes a "paradox" because it delays recovery.

The trouble is that spending is not the cause of economic growth. Investment, which begins in saving, is the root of economic growth. It doesn't matter that consumption makes up a certain percentage of economic activity. That's only the surface you are looking at. Spending and consumption without saving and investment is a prescription for devouring the prospects for prosperity down the line. In this case, the best thing that the rich can do for a future of economic growth is not to spend but to save toward investment.

The circular-flow model that sees spending as the fuel of economic activity fails to account for saving and investment, which come about only through deferred consumption. The view that economies grow through consumption leaves out the real drama behind the scenes. As Robert Murphy explains, "The finished goods you buy at the store are made of components that passed through probably thousands of different hands, in dozens of countries, before all coming together into the item you throw in your grocery cart."

The core problem with the economic boom is precisely that it led to wealth-consuming activities that secretly ate away the core productivity of the economic structure. What needs to happen is a retrenchment, a new pattern of saving and deferred consumption.

And why would people save? In order to spend later, once the foundations of future prosperity are rebuilt. But this takes time (another feature of reality left out of circular flow). The best approach the government can take is to back off, let people keep what they earn, and permit the economy to rebuild on its own.

In other words, tax cuts for the rich would in fact help get us out of recession. But there is no reason to limit these cuts to the rich. There should be tax cuts for everyone. And that has to go along with massive cuts in government spending too, so that we stop running debts that have to be paid later with inflated dollars.

In other words, stimulus and browbeating the rich to spend more are going to have exactly the opposite effect. They will delay recovery. In fact, the current political environment is following the script of the Great Depression in delaying prosperity year after year through terrible political ideas and policies.

The rich can indeed help us all, not by spending but by being thrifty and even miserly for as long as necessary to fix what the government has broken.

Copyright © 2010 by LewRockwell.com. Permission to reprint in whole or in part is gladly granted, provided full credit is given.

[Disclaimer]

Another guy from the Ludwig von Mises Institute. I already called out the author of the past articles you posted: http://www.ohio-riders.com/showpost.php?p=528330&postcount=4

What makes this article any different? What gives this Lew Rockwell guy any credibility? Tax cuts for everyone...really? That's the solution, that's so simple, wonder why no one EVER thought of that...

[Casper]

Another guy from the Ludwig von Mises Institute. I already called out the author of the past articles you posted: http://www.ohio-riders.com/showpost.php?p=528330&postcount=4

What makes this article any different? What gives this Lew Rockwell guy any credibility? Tax cuts for everyone...really? That's the solution, that's so simple, wonder why no one EVER thought of that...

Or smaller government and no federal income tax like it was supposed to be?

[SAMBUSA]

Moar fear!!!!!!!!!!!!!

[Disclaimer]

Or smaller government and no federal income tax like it was supposed to be?

But who'll fight the War on Terror? The Michigan Militia?

[SpeedTriple44444]

I don't think most people have a problem funding the military, or roads, or other necessities. We are all just a little fed up with funding failing corporations, money give-aways to losers, and bigger government.

[SpeedTriple44444]

One more thing that pisses me off about the current administration: UNNECESSARY ROAD PROJECTS! They have been laying shitty chip and seal over more good roads in eastern Ohio where the road is not even in bad condition. I think "F Obama" everytime I see one of those damn "American recovery investment act" signs in front of one of my favorite roads... you know it's never going to be as good of a ride once they get done with it.

[Disclaimer]

But where does the line get drawn at what's a "necessity"?

You don't wanna fund failing institutions - then you have to regulate them so they don't get too big or greedy to fail and disrupt the entire economy

You don't wanna give away money to losers - then we should just close down all the prisons and let all those "losers" take care of themselves.

You don't want bigger government - then we need to become responsible and self-policing instead of regulating. Good luck with that, capitalism doesn't really lend itself to responsibility and ethics. Not saying it can't be done, but it appears to be a rarity.

[Casper]

But who'll fight the War on Terror? The Michigan Militia?

There is no war on terror, only a war for oil. If we'd spend this money on research for alternative fuels, we'd be rocking ethanol/hydrogen hybrids that fly.

[flounder]

There is no war on terror, only a war for oil.

Seriously? I really hope you dont believe that!

[SpeedTriple44444]

But where does the line get drawn at what's a "necessity"?

You don't wanna fund failing institutions - then you have to regulate them so they don't get too big or greedy to fail and disrupt the entire economy

You don't wanna give away money to losers - then we should just close down all the prisons and let all those "losers" take care of themselves.

You don't want bigger government - then we need to become responsible and self-policing instead of regulating. Good luck with that, capitalism doesn't really lend itself to responsibility and ethics. Not saying it can't be done, but it appears to be a rarity.

I see you fully swallow the party rhetoric. "If we don't police the world, it will all go straight to hell". While I understand that financial gain with no responsibility can destroy things in a hurry, the only thing regulation does is line the pockets of those that are imposing the laws. The OP is right, in that freedom to produce will create jobs and prosperity for everyone because it does trickle down in the form of jobs and opportunity (for those that want to work). The only thing this system that is failing in front of us is doing is digging the hole a little deeper and making full recovery less of a possibility.

If we really want to get back to where we were as a nation (a stable, strong economy) we need to do a few things. 1. get government out of people's pockets, including business. 2. Tariffs or other laws to level the playing field for US manufacturing to be able to compete. Anything not produced here should be taxed, with the money going to tax incentives to the poor and to reduce the cost on competing items that are produced here. A strong manufacturing base is essential for a strong and safe nation. 3. Quit trying to police the world. Spend all this money used in sand land to secure our borders, and build a strong military to protect our interests. 4. Quit selling out to the UN and other world organizations that don't have our best interest as their primary concern. 5. Energy independence through realistic means. Anyone who understands energy knows that solar and wind are a pipe dream and won't produce nearly the amount of energy as fossil fuel (often times showing no net gain in energy production compared with the cost of producing the means). I think we need to continue on in the research and refinement of these ideas, but we also need to look at better fuel economy and smaller vehicles for commuting purposes, as well as the possibility of rationing at some point to tighten the belt and get the population used to the idea that it's not in unlimited supply. If you do that and get the government off of people's back, the true innovators will come out of the woodwork and new and innovative ideas will start to happen.

You've hinted on something, but I think you have the concept reversed. Capitalism does indeed only work when there is a responsible and ethical population. True. But the system is failing because of the lack of ethics, not because it wasn't being policed by "moral" governors. In fact, the financial collapse had a lot to do with people interfering in the financial institutions. Do you think government is the answer, really? DC is one big sewer full of rats. They are just another part of the problem. Until we get them out of the way, there is no chance. The more they meddle, the worse it gets.

Until people start to look out for the common good and their neighbors rather than their own selfish motivations, capitalism will fail. In my opinion, it is imminent, and the only way things will turn around will be when the system totally collapses. Then you will see what people are really made of... the good, and the really really bad. We can only hope that there is more of the former than the latter left when it happens.

As far as oil being the reason for the war.... where is the oil? I haven't seen it. When you can show me what we've gained in ANY way by being over there, I'll believe it. You know, I think it would be better if we had taken all the oil, and could at least have a justification for marching into Iraq and killing so many US men and women in the process.

[wrillo]

I agree with you about the whole free market bit, about DC being sewer rats, and people looking out for each other... but rationing to "tighten the belt"?

edit: I also disagree with wind and solar not being realistic sources of energy. The problem is in distribution, not production. We don't have a whole lot of main lines out to the middle of nowhere aka where we would put wind farms.

I think we also need to recover from the stigma against nuclear energy. That is the answer. People ask for free energy, they get it, then they say "fuck that" because we're still learning about it. Nuclear is now a whole lot safer than it used to be

Edited July 26, 2010 by wrillo

[4DAIVI PAI2K5]

one more thing that pisses me off about the current administration: Unnecessary road projects! They have been laying shitty chip and seal over more good roads in eastern ohio where the road is not even in bad condition. I think "f obama" everytime i see one of those damn "american recovery investment act" signs in front of one of my favorite roads... You know it's never going to be as good of a ride once they get done with it.

rip 715

[obesityrules]

One more thing that pisses me off about the current administration: UNNECESSARY ROAD PROJECTS! They have been laying shitty chip and seal over more good roads in eastern Ohio where the road is not even in bad condition. I think "F Obama" everytime I see one of those damn "American recovery investment act" signs in front of one of my favorite roads... you know it's never going to be as good of a ride once they get done with it.

yep, in UA they have been building sidewalks to nowhere. but they make sure to post the "putting america to work" signs around the 3-4 house length of sidewalk

[wrillo]

just saw this

[SpeedTriple44444]

I agree with you about the whole free market bit, about DC being sewer rats, and people looking out for each other... but rationing to "tighten the belt"?

edit: I also disagree with wind and solar not being realistic sources of energy. The problem is in distribution, not production. We don't have a whole lot of main lines out to the middle of nowhere aka where we would put wind farms.

I think we also need to recover from the stigma against nuclear energy. That is the answer. People ask for free energy, they get it, then they say "fuck that" because we're still learning about it. Nuclear is now a whole lot safer than it used to be

I understand the dislike about rationing. It doesn't go along with the typical free-market party line and verges into too much regulation... HOWEVER... it's become a matter of national security due to the outpouring of money into the middle east. If we don't start to do something to make everyone aware of the situation, we really are just paying for our demise as a nation. What is more important- unlimited use of gasoline, or having a future? When there is a situation where people are knocked out of their comfort zones, there will be a drive for improved efficiency that is grass-root, rather than imposed by some big government idea based on BS environmental climate change nonsense. Then you will see innovation that the government can't produce (because government doesn't produce... it's a wealth consumer, not a wealth generator).

I agree about nuclear, but it makes me nervous, honestly. There is a real dilemma what to do about the waste produced.

[SpeedTriple44444]

Also... forgot to mention...

I agree we need to keep going with solar and wind, but it will never be the real answer... only a supplemental form of energry. I have read that the solar panels and wind turbines often do not last long enough even to recoup the energy that went into producing them in the first place. As far as distribution? I don't see the problem. A lot of copper wire, a DC to high voltage AC converter, and you have it. The investment in that might never recoup the cost either though, as expensive as wire is.

[SpeedTriple44444]

yep, in UA they have been building sidewalks to nowhere. but they make sure to post the "putting america to work" signs around the 3-4 house length of sidewalk

Sad, isn't it? They think we are that stupid as to see this as a good use of our money. You have to wonder if they're sitting around saying "they're not buying it... we need MORE SIGNS" lol.

[ironbuttwannabe]

I didn't read all of it, but does that mean I'm rich if I spend over $119 a day? I sure wouldn't call that rich

[wrillo]

Check this out http://www.npr.org/templates/story/story.php?storyId=110997398

More insight on the problem of distribution. Make sure to turn off the proposed lines by clicking the link on the left.

[Kahooli]

Sad, isn't it? They think we are that stupid as to see this as a good use of our money. You have to wonder if they're sitting around saying "they're not buying it... we need MORE SIGNS" lol.

Look closely. "Putting America To Work" Subtext "made in China"

[John]

A "war for oil" I could justify' date=' but I'm pretty sure we haven't pulled a drop since we got there.[/quote']

its not about oil persay, its about PROFITS for the american corporations doing business there. CACI, Aegis, General Dynamics, Halliburton, etc etc etc

besides, the actual drilling is dirty work. they leave that to lesser people.

Edited July 26, 2010 by John

[SpeedTriple44444]

Check this out http://www.npr.org/templates/story/story.php?storyId=110997398

More insight on the problem of distribution. Make sure to turn off the proposed lines by clicking the link on the left.

I see what you mean now. The grid isn't up to it where they would need to locate the panel / turbine farms.

[Disclaimer]

I see you fully swallow the party rhetoric. "If we don't police the world, it will all go straight to hell".

Where do you get that out of anything I said? Policing ourselves isn't policing the world.

The OP is right, in that freedom to produce will create jobs and prosperity for everyone because it does trickle down in the form of jobs and opportunity (for those that want to work).

Now who's swallowing the party rhetoric? "Trickle Down" economics - laughable. I addressed that 2 weeks ago in a different thread.

http://www.ohio-riders.com/showpost.php?p=526852&postcount=46

The only thing this system that is failing in front of us is doing is digging the hole a little deeper and making full recovery less of a possibility.

If we really want to get back to where we were as a nation (a stable, strong economy) we need to do a few things. 1. get government out of people's pockets, including business.

Goes back to my original argument, what's essential and what do we need to pay for? A lot of this bloated bureaucracy is created from 'lessons learned' in the past. Ex. Homeland Security - created because we don't want another 9/11, more bloat. I'm not making an argument for or against it, just showing how it gets that way. History.

2. Tariffs or other laws to level the playing field for US manufacturing to be able to compete. Anything not produced here should be taxed, with the money going to tax incentives to the poor and to reduce the cost on competing items that are produced here.

Socialist, but...

A strong manufacturing base is essential for a strong and safe nation.

I will agree with you on that point.

3. Quit trying to police the world. Spend all this money used in sand land to secure our borders, and build a strong military to protect our interests.

Isolationist tendencies don't bode well for economic growth, jussayin'.

4. Quit selling out to the UN and other world organizations that don't have our best interest as their primary concern.

That's a different debate for a different time

5. Energy independence through realistic means. Anyone who understands energy knows that solar and wind are a pipe dream and won't produce nearly the amount of energy as fossil fuel (often times showing no net gain in energy production compared with the cost of producing the means). I think we need to continue on in the research and refinement of these ideas, but we also need to look at better fuel economy and smaller vehicles for commuting purposes, as well as the possibility of rationing at some point to tighten the belt and get the population used to the idea that it's not in unlimited supply. If you do that and get the government off of people's back, the true innovators will come out of the woodwork and new and innovative ideas will start to happen.

Who do you think is subsidizing a lot of this renewable energy source stuff? And you're wrong, between solar and wind, there is more than enough resources to meet America's energy needs when used as complementary sources, not single-sources.

You've hinted on something, but I think you have the concept reversed. Capitalism does indeed only work when there is a responsible and ethical population. True.

That's not what I said... you apparently have the view that people are inherently good, I don't. Capitalism works regardless of responsibility and ethics, we've seen it. The issue was the bailout. The way capitalism works is risk/reward/value-based, and when Wall Street too excessive risks and didn't create or protect value, they were supposed to absorb the punishment that the free market should've doled out, but no - we socialized the punishment. Privatize the profit, socialize the cost. And this'll happen all over again with SOME oversight.

But the system is failing because of the lack of ethics, not because it wasn't being policed by "moral" governors. In fact, the financial collapse had a lot to do with people interfering in the financial institutions. Do you think government is the answer, really? DC is one big sewer full of rats. They are just another part of the problem. Until we get them out of the way, there is no chance. The more they meddle, the worse it gets.

What has been meddled with that has gotten worse? Please cite examples that directly affect you, and how they were better before. Once again, I think history will show you WHY these "meddling" politicians has to step in and do something. Not making an argument for or against, just illustrating why, and proving your blanket statement wrong. It has nothing to do with politicians themselves being moral people -- they still are in charge of writing laws that can be fully read and critiqued by those that they affect. And you, as a voter, have a say every few years as to whether they're doing your bidding or not -- I like that. I can at least replace one rat with a less smelly one.

[Kahooli]

Politicians are like Milk, the older they get, the more spoiled they become.