Coming to us today from the RealClearPolitics site, another winner from the always-worth-reading Dr. Thomas Sowell: The Inequality Bogeyman. Excerpt:
One of the problems with so many discussions of income and wealth is that the intelligentsia are so obsessed with the money that people receive that they give little or no attention to what causes money to be paid to them, in the first place.
The money itself is not wealth. Otherwise the government could make us all rich just by printing more of it. From the standpoint of a society as a whole, money is just an artificial device to give us incentives to produce real things — goods and services.
Those goods and services are the real “wealth of nations,” as Adam Smith titled his treatise on economics in the 18th century.
The esteemed Dr. Sowell hits to the very heart of the matter with this definition of “wealth,” and in so doing illustrates why government can not – by definition – create wealth. Government can not create work; the only services government legitimately produces are ‘distributed’ services, such as fire and police protection, services which add value only retroactively following some unforeseen event. Only private enterprise innovates, developing new goods and services before the need is anticipated. This creates value; this creates wealth. The very definition of entrepreneurship, creating value from ideas, is the wellspring of wealth.
Example: Many of us on the wrong side of fifty remember what things were like before microwave ovens – and yet today, not only does every kitchen have one, most folks can’t imagine doing without one. Value was created in the form of an entire line of products, producing wealth for millions, because of that innovation. For a more recent example, see the iPod and iPad, devices that changed the way we listen to music and access information. How many jobs were created by the production of those two devices alone?
Dr. Sowell concludes: Intellectuals’ obsession with income statistics — calling envy “social justice” — ignores vast differences in productivity that are far more fundamental to everyone’s well-being. Killing the goose that lays the golden egg has ruined many economies.
As usual, Dr. Sowell has it exactly right.