Abundance and its Sources–Poverty and its Causes

Knowledge

The original and primary source of material abundance is knowledge in the form of scientific discovery which leads to technical innovation.

Knowledge also promotes physical health and lack of knowledge is the source of sickness and death. For example, as David Deutsch observed in his magnificent book, The Beginning of Infinity:

“Many of the millions of victims of cholera throughout history must have died within sight of the hearths that could have boiled their drinking water and saved their lives; but . . . they did not know that.”

Poverty

In The Conquest of Poverty (1973), economic journalist Henry Hazlitt said:

The history of poverty is almost the history of mankind. The ancient writers have left us few specific accounts of it. They took it for granted. Poverty was the normal lot.

The Congressional Research Service estimated that, adjusted for inflation, welfare spending amounted to $700 billion a year in 2009, larger than spending for Social Security and Medicare. Yet in November 2012 the U.S. Census Bureau said more than 16% of the population lived in poverty in the United States, including almost 20% of American children.

The foregoing indicates that achievement of abundance and the alleviation of poverty cannot be accomplished by political means. It must be found elsewhere, in the freedom of people to act for their own benefit by individual action and trading and cooperating with others.

Saving

As the eminent economist Ludwig von Mises (1881-1973) observed before recent developments in China, the difference between the American truck driver and the (then) Chinese Coolie was the truck, which enabled the driver to out-produce and, therefore, out-earn the Coolie by a factor of perhaps 1,000 to 1. Although the average Chinese coolie had no less native intelligence than the average American truck driver, China lacked the capital to mass produce motor vehicles and the infrastructure of roads on which they operate.

In order for capital to accumulate people must work and save, and the fruits of their labor must be protected from theft and confiscation.

Without capital for investment, there is no abundance.

Production, Consumption, and the law

In American society there is a plethora of laws to protect consumers from producers. However, when government through its plethora of laws “protects” consumers so much that it hampers and reduces production, then consumers as a group will have a less abundant supply of goods and services for consumption.

The U.S. Food and Drug Administration (FDA) is just one example. It has delayed introduction of a vast amount of new pharmaceutical medicines and medical devices, keeping them off the market for years after they have become available and have been proven successful elsewhere.

Peace and War

Human abundance, where it exists, requires peace. It is in peaceful activities that humans cooperate to create life, property and abundance.

War destroys human life and property, including intellectual property, by killing talented young people. Henry Moseley (1887-1915) was an English physicist who died in battle during World War I in 1915, at age 27. Before his enlistment in the British armed forces Moseley accomplished outstanding contributions to advancements in chemistry and atomic physics.

War is caused by politics carried on by a state or an organized religion as noted in the famous quotation of the German military strategist Carl von Clausewitz that “war is a continuation of politics by acts of violence to compel our opponent to submit to our will.”

Galambos’ work was totally dedicated to the eradication of wars. In his view political states cause war. He said states not infrequently justify their monopoly of force by conjuring up an external threat and if the threat does not materialize, by provoking conflict with another state.  He saw the necessity of ending war, and innovated a vision of building a different kind of social structure where the common defense was provided without the state, and hence without war.

 

 

Freedom

Looking around the world we see that the countries with greater freedom for individuals have achieved a far higher standard of living than countries with less freedom for individuals.

Beginning in 1918 a Marxian vision of society was imposed by force in the self-described communist countries: Russia and its conquered peoples known as the Soviet Union, as well as in eastern Europe, China, North Korea, Cuba, Vietnam, Cambodia and several African countries. Other countries followed suit in lesser degree with forms of socialism that greatly curtailed property ownership and individual freedom.

As a result, such countries had the lowest standard of living in the world. Meanwhile, as Galambos observed, other once poor countries “. . . that went in the direction of private ownership of the means of production and greater individual freedom—which is commonly called capitalism—were the ones that provided the highest amount of personal standard of living to the people who lived there.”

The founders of the Russian communist party declared that a principal goal was to establish a “classless society”—where everyone would be equal. Instead, they established a privileged class made up of members of the communist party, called the nomenklatura. These people held key administrative positions in the state, the military, industry, agriculture, education, and all other important aspects of Soviet society.

Despite perennial shortages of housing, food and just about everything but bread and vodka, the nomenklatura had access to special food stores, special hospitals and the best housing. This situation was satirized in George Orwell’s novella Animal Farm (1945) about a society of animals in which the rules of society were summarized by the motto “All animals are equal, but some animals are more equal than others.”

 

 

 

 

 

Property

Human freedom and the right to private ownership of property are inseparable. Property in this sense means all the fruits of one’s labor. In 1689 English political philosopher John Locke expressed the then radical view that government is morally obliged to serve people by protecting life, liberty, and property.

The attempt to bring about complete abolition of private property was a disaster in the early years of the communist Soviet Union of Russia and its conquered people. Between 1929 and 1933 the Soviet communist party launched devastating blows against the peasant farmers in the Ukraine and neighboring regions: the abolition of private property in farm land, deportation of millions of peasant families to Siberia (where most perished) and removing every source of food while preventing help from the outside. In the process millions died of starvation.

Work

The path to abundance starts with productive work. Whatever impedes or prevents people from working leads to poverty. Whatever fosters work tends to lead to greater prosperity.

Immigrants coming to America were an important factor in the growth of the U.S. population from four million in 1790 to 92 million in 1910. Many of these immigrants came in search of work and a better life. Despite this massive immigration, unemployment was seldom a major social problem in 19th century America as the rapid growth in the American economy caused a near permanent labor shortage.

Since the start of the 20th century the U.S. and its constituent states have enacted a panoply of laws controlling work and working conditions. While these laws are intended to benefit workers and to protect them from exploitation by employers, the laws actually cause unemployment.

For example, more generous unemployment benefits provide disincentives for people out of work to seek new work. Studies show a statistical relationship between the duration of unemployment benefits and long-term unemployment.

Knowledge and Freedom as the True Sources of Abundance

The growth of prosperity in America over the first 150 years after independence from Britain has been attributed to low population density and an abundance of natural resources. This is a mistaken idea.

Population density is irrelevant. Some of the most prosperous countries on earth have a high population density and few natural resources, including Holland, Belgium, and Switzerland in Europe; Israel; and Hong Kong, Japan, Singapore and Taiwan in Asia.

Some countries with a relatively low population density and an abundance of natural resources, are either very poor or have a terribly large portion of their population living in extreme poverty, for example Russia, much of Latin America, and Zimbabwe in Africa.

Examining these countries one can see a direct correlation between the relative lack of freedom and poverty. With freedom comes the ability of people to employ scientific and technical knowledge to create better paid employment. Prosperity is directly related to relative freedom from political impediments that create disincentives to work and production.

To see examples of this correlation in history, please proceed to the full text of the chapter.