Disclaimer: I’ve never taken a class in economics.  I was, however, a partner in a startup small business that we ran for 22 years, during which I often dealt with customers, vendors, government authorities, and (ahem) employees.  I’ve also read several books by Thomas Sowell.  And I was in the room when Milton Friedman admitted being the inventor of withholding tax.

For starters, unlike leftist dogma, wealth is both created and destroyed.  There is not a fixed pool of wealth that can only be redistributed instead of continuously harvested.  The best way to raise the standard of living, especially of the lower economic echelons, is to create more wealth.  This is done by adding value to otherwise raw materials.  Farmers take plots of dirt, plant crops, and harvest wealth.  Furniture factories take pieces of wood; add skilled craftsmanship; and, again, harvest wealth.  Standing in the way of this process makes the world less wealthy.

Money is not wealth, but it is an accepted symbolic substitute for it.  In the early days of the American republic, government money was laughed at.  Foreign currency such as pounds, marks, and francs was commonly used instead of “Continentals.”  Barter commodities were also of particular importance — especially tobacco.  In fact, colonial Virginia mandated that all of its citizens tithe to the Church of England.  Among other options, the tithe was specified in pounds of tobacco.

Inflation happens when government-issued paper money loses its value versus various commodities and gold...which is not really a commodity.  Silver is a commodity, but more of it used to be consumed before the advent of digital imaging.  Kodak alone would consume fifty million ounces of silver per year in order to produce film emulsion — which is no longer all that necessary for modern graphic processes.

A common misunderstanding is that inflation is temporary.  Its rate of money-value change may decline, but its effects accumulate, and prices do not go down — except for volatile commodities such as fresh produce and natural gas.  Disinflation or deflation has happened historically — and prices have gone down — but that usually occurs during severe economic downturns, when the public’s purchasing power crashes, such as during the Great Depression.  Enterprises that cannot afford to lower their prices either go out of business or have to change what they do.

Politicians, being so eager to distort reality, try to get expensive programs passed by misrepresenting who is really going to pay for their mandates.  For example: Pacific Gas and Electric company (PG&E) is being made to underground some of its transmission lines in areas prone to wildfire.  The usual gaggle of demagogues vociferously demand that PG&E’s customers not be financially impacted by this program.  This implies that PG&E has a printing press in its basement, where it can create some of its money.  Here’s a basic fact: Only two kinds of people in this world pay for everything — taxpayers and consumers.  Most folks actually belong to both groups.

Unlike taxpayers, consumers have a fair amount of discretion when it comes to what they do with their money.  The legendary Hollywood movie mogul Louis B. Mayer, the second “M” in MGM, aptly said: “If people don’t want to go see a movie, there’s nobody who can stop them.”  There are certain necessities such as food, clothing, and housing, but in a free, market-driven economy, there are degrees of added value above and beyond bare necessity available to the consumer.  It thus becomes incumbent upon each individual consumer to first provide what is necessary for his existence.  Any money left over after that can then be applied to both desirable extravagance and investing for future needs.  This is called budgeting.

A particularly harmful economic myth being promoted by craven politicians is minimum wage.  Supposedly intended to improve the standard of living of those on the bottom, persons seeking entry-level employment are, instead, having a much harder time finding jobs.  An employer often expects to lose money on a new hire while he is being trained.  Legally mandating an even greater cost for such efforts makes employers less likely to occur in the first place.  Bottom line: Businesses hire workers in order to increase, or at least maintain, their profitability.  If a person doesn’t offer that in return for his pay, then why bother?

Other damage is being done by making it harder to fire or at least lay off workers.  Businesses have two kinds of operating expenses: fixed and variable.  Fixed expenses include rent, insurance, and debt service.  Variable expenses include raw materials and payroll.  When a periodic recession occurs, workers are laid off.  When the recession starts to end, existing workers get more overtime, and then more workers are hired.

The European Union is particularly worse off than the U.S. in this regard.  A friend, who imports European housewares, went around and put together a substantial order for a unique brand of cutlery that was not yet available in the U.S.  He went back to the manufacturer to place the order — and was told to forget it.  Were the order to be filled, more workers would need to be hired, and E.U. rules forbade a layoff should the new demand not be sustained.

Don’t get me started on taxes — but here I go.  Along with death, we will always have taxes.  But the ease governments have had in extracting wealth from their citizens has allowed them to splurge on ridiculous programs, which are typically used to enrich their political patrons.  Corruption?  You think? 

A really stupid idea that refuses to die among the Bidenoids is the wealth tax.  Taxing capital gains, without indexing for inflation, is bad enough.  But now they want to tax potential capital gains.  Not only would that require an estimate on how much gain has occurred — which can change in either direction after the tax is assessed — but the taxpayer has yet to receive any proceeds that would otherwise be used to pay the tax, often forcing him to borrow the money needed.  This would likely murder the stock market along with other valuable components of our economy.

Demagogues use taxation as a ploy to appeal to the more numerous members of our society: the non-five-percenters.  Sticking it to the super-rich gets the juices flowing among the hoi polloi, even though the five-percenters pay over half of all income tax collected.  The late, great Walter E. Williams would never hesitate to say: “I wish there was some humane way we could get rid of the rich so we could have an honest discussion on tax policy.”

One of the greatest qualities of American social culture is its inherent mobility.  There is a constant changing of the guard: some of those at the bottom often rise up to the top, as five-percenters sometimes go broke and fall to the bottom.  Above all, we are not fatalistically made captive by the origin of our birth.

Image: pasja1000 via Pixabay, Pixabay License.