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Updates from the Prairie Centre Policy Institute from Regina, Saskatchewan.
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web posted January 27, 2003
Wealth can be destroyed
Those who refuse to believe that wealth can be created sometimes begin to understand when presented with the idea of wealth destruction.
It's foolish to believe wealth can't be destroyed, just as it's foolish to believe it can't be created. But once a person realizes that something can be dismantled, smashed apart or consumed into a state of uselessness, they'll be well on the way to conceding that other kinds of efforts might achieve the reverse of destruction. Conceding the reality of wealth destruction is a big step toward admitting that wealth creation might also be possible.
Think about it. If wealth can be destroyed but not created, this means the sum total of the world's wealth has to be diminishing. If this is true, how come even the rich folks are still getting three square meals a day? Wouldn't this mean that consuming a meal reduces the sum total of wealth in the world to the tune of one meal? Where's it all coming from? The answer is that people are creating it.
People who are determined to believe wealth is not creatable will be particularly keen to talk about minerals, for there are indeed, for the time being, only a certain number of copper atoms on the planet. But wealth, to be wealth, has to be usable. Getting copper from a mile beneath the surface of the earth to the surface of the earth is itself an act of wealth creation. So is devising new ways to make electrical wire which uses less copper and more of something else. And so is finding cheaper ways to get copper from rubbish heaps or devising ways to make synthetic copper or synthetic diamonds or synthetic oil.
A very wise economist once said that there are no shortages there are only prices. If you allow the price system to function properly, then any interruptions to copper supplies will cause the price of copper to go up, and the search for copper and for ways of making do with less copper will intensify. It also means alternative products will be searched for and developed which could take the place of copper. One hundred years ago, who would have believed in artificial diamonds or synthetic oil? Why not synthetic copper?
The only serious obstacle to ensuring there are no shortages is that
in an attempt to preserve what is perceived as 'balance' somewhere or
other, fixed quantity of wealth fallacists or some shortsighted politician
who believes in it will freeze the price of a resource or product well
below its market level. This will cause the resource to be over-consumed
The same principle applies to the idea of a shortage of energy. This too will only run out if people decide to stop producing it.
Excerpted from, 'Prairie Agricultural Digest Wealth Creation' published by the Prairie Centre. Originally adapted from 'How To Make Yourself Miserable About the Past, Present & Future.'
web posted January 20, 2003
The "Fixed Quantity of Wealth" Fallacy
The word fallacy means falsehood. A fallacy is something that is believed by many yet, despite this common assent, is untrue. There are many fallacies in the world, but the one which has perhaps had the most significant impact on government economic policy, and indeed on our lives, is the myth that the amount of wealth available to citizens, or to a country, is fixed.
At the core of this fixed quantity of wealth argument is the mistaken assumption that wealth cannot be created only rearranged. People who believe this look at the world and think they see rich people getting their hands on more and more wealth. Because they either don't believe or fail to understand that wealth can be created, they falsely conclude that if somebody has more money than the average, this means somebody else who "should" have some money isn't going to get it. After all, if there's only a fixed amount of wealth available, every dollar a rich person has is one less dollar available for everybody else.
Karl Marx, the father of socialism, claimed capitalists were becoming wealthy by stealing from workers. He propagated the fixed quantity of wealth fallacy, and greeted every tremor of economic difficulty in the latter half of the nineteenth century as the beginning of the end of capitalism. By the beginning of the twentieth century, such rhetoric had already become hard to believe because the poor people of the rich countries, in defiance of what Marx had stated, were becoming less poor.
The Russian revolution then put the disciples of Marx in command of Russia and launched what would eventually become the Soviet empire.
As the twentieth century moved along, the question which increasingly demanded answers was "if the doctrine of Marx is true, why are the poor who live in the rich countries getting less poor?" Marx was dead by this time, so the leader of the Russian Revolution, Lenin, supplied the next lie: "The people in the rich countries were getting richer because rich countries were stealing wealth from poor countries." This lie was not only believed by Russian socialists, it's still preached by some people right here in Canada.
For about as long as the world's poorest countries remained poor, this revised version of the lie retained some plausibility. By the second half of the twentieth century, however, a few of the formerly poorest countries in the world, most notably Hong Kong, Taiwan, Singapore and South Korea, were getting rich. Were these increasingly wealthy countries which came to be known as the Asian Tigers getting rich by assembling radios and other electronic components as everyone believed, or, in reality, were they secretly looting other parts of the world? Hardly.
There have always been men and women who saw through the fixed quantity of wealth fallacy. But the complete collapse of the credibility of this myth has coincided with the collapse of socialism itself and most of the regimes founded upon and justified by it. By the early 1990's, it was apparent that all of humanity was capable of producing wealth even the world's poor countries.
Although there are still some who cling to the myth like the tin pot dictators of Cuba and North Korea and a few North American union leaders and social activists even the so-called "democratic socialists" of the world are beginning to speak of, and think about, wealth creation.
Excerpted from, "Prairie Agricultural Digest Wealth Creation" published by the Prairie Centre.
web posted January 13, 2003
Wealth ceation vs wealth redistribution
By Kevin Avram
Try this for a week: Watch the news every day and pay attention to how many stories talk about what the government should do for people. Government spending on health care, education, welfare and other aspects of the social safety net are regular features on just about every evening newscast. Appended to them is the debate over which level of government should pay: federal or provincial.
Ironically, the thing that is overlooked in all this wrangling is frank discussion over the one thing humanity is most capable of doing creating wealth.
There are several policy components that facilitate the creation of wealth, among them are: an unwavering loyalty to the principle that an individuals right to own and manage his or her property will not be infringed; a bare minimum of regulation; and very low tax rates.
An unwavering loyalty to property rights is essential for a couple of
The right to property also ensures that societys risk takers and creative thinkers will be harnessed in a way that brings benefits for all. Bill Gates is the richest man in the world because he provides a product and service that makes life easier for millions of people. Property rights and the opportunity for personal gain in the form of monetary compensation make his creation possible. This is the same reason that farmers and ranchers improve their land holdings and other assets, why the owners of commercial property are careful to maintain their buildings, and why those who own their own car change the oil.
A bare minimum of regulation is necessary to make certain that peoples energies are channeled productively. Regulation consumes resources and impedes development, thereby ensuring that opportunities for wealth creation are diminished or nonexistent. Consider how much government regulation actually costs: Thousands of lawyers and accountants spend most of their time and a good portion of their clients money figuring out how to dodge bureaucratic decrees. Excessive regulation demands that their creative energies and those of the people they represent are drawn away from more productive undertakings.
Low tax rates are necessary for wealth creation because wealth cannot be created without accumulated capital. Capital is to wealth creation what a pipe wrench and soldering torch are to a plumber. Without capital new buildings are not built, wells are not dug, mines are not opened, and new businesses do not start. Taxes slow down or stop the accumulation of capital, making the entire nation poorer.
The moral of the story is that Ottawas constant propensity to look to provinces that create wealth such as Alberta and Ontario so it can redistribute that wealth to provinces that do not create it indicates that Ottawa doesnt understand one of the most important lessons of the 20th century: The abundance and availability of wealth are always a consequence of policy rather than geography or natural resources. With the right mix of policies, ordinary people have the opportunity to bring almost unlimited new wealth into being.
Kevin Avram is a former director of the Prairie Centre. He currently serves as president of the Edmonton-based Citizens Centre for Freedom and Democracy. This article was originally printed in May 2002.
web posted January 6, 2003
The role of government in wealth creation
Over the years, governments around the world have looked for models, approaches, and policies that could raise standards of living. As populations continued to grow, economies were not always able to keep pace and standards of living fell. In the industrial countries of the developed world, populations grew only slowly as women entered the labour force and birth rates fell. For these countries, Canada included, the economy and incomes generally grew.
In the lesser developed countries of the world, population growth generally vastly exceeded the rate of economic growth and wealth creation. Consequently, incomes and standards of living fell. Accordingly, wealth creation became a subject of much research and investigation for many international development agencies. The findings of this work all identified important lessons for sustainable wealth creation. These lessons are now being applied in many countries of the world and realizing benefits in the form of expanded economic growth and incomes.
In 1991, the World Bank finished a detailed investigation of its development programming for the previous forty years. The report reviewed the historic approaches towards development, the lessons learned from billions of dollars of development spending, and the evolving development theory underway around the world.
The Bank identified a combination of factors that were seen as critical to growth. The Bank described "a market-friendly approach in which governments allow markets to function well, and in which governments concentrate interventions on areas in which markets prove to be inadequate." Allowing markets to operate and allocate resources in response to price signals within a freely trading environment was central to the approach.
Ultimately, the World Bank stressed wealth creation was highly dependent upon the domestic policies and institutions managed by government. Put another way, from the lessons of development, many governments had the necessary tools to improve the level of wealth creation within their jurisdictions. Successful development was therefore dependent as much on the actions and approaches of local governments as the natural resources they might be sitting on.
Central to a more effective public policy framework for development was the notion that institutions and policy frameworks would be adjusted to meet the current and emerging social, economic and technological practices of the day and the foreseeable future. In times of structural social, economic, and technological transformation, it is important that the policies of government be changed to support and not to constrain the new technology and economy. The balance between the government institutional and policy framework and the state of technology, the economy, and society can be critical to the pace of growth.
For example, government policies and institutions can be restraints on
the economy and society. Subsidies, for example, may keep people in jobs
and institutions that long ago lost their economic and even social rationale.
The key here is to rethink the nature and role of the state to meet the aspirations of the day and the available social, economic, and technological opportunities within the global marketplace. If we fail to do this, institutions and policies developed for an earlier era and economy can today constrain the introduction of new technology and the related contributions to wealth creation.
Excerpted from, "This Year Country", by Dr. Graham Parsons. Dr. Parsons sits on the Prairie Centre Policy Institute's Academic Advisory Board and is former Chief Economist for Western Canada with the Canada West Foundation. Printed April 8, 2002.
Dr. Parsons' entire report can be downloaded from the Prairie Centre
Policy Institute's website at www.prairiecentre.com.
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