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More on Shopkeepers of the World Uniting

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This piece is a clarification. A reader noted that I should never confuse entrepreneur and the shopkeepers. (refer to my last piece Shopkeepers of the World Unite- http://blogcritics.org/archives/2005/03/03/224606.php) My point was and is very simple. Throughout history and even today, there is a battle between the productive members of society who create the wealth and those who merely live off the wealth created.

In the United States, the battle over social security reform is one prime example. There is one thing that no one can debate- Social Security will eventually implode. It has to implode, for all Ponzi Schemes eventually do. The question that remains, will we allow Americans be responsible for their own savings and allow them to profit from their invesments and decisions or should Americans be ever more dependent upon the government for their paltry retirement? The battle over tax reduction always is engaged over class warfare, that somehow the rich getting a tax cuts is evil even though the rich pay most of the taxes anyway.

Throughout the world, this battle goes on. In Europe, the biggest battle is between the entrepreneurs and the European bureaucracy. For the European elites, the perfect society is high taxes and high welfare payment followed by a regulated state. For many of those in Eastern Europe, who had just broke off the shackle of Marx, are not ready to replace it with a bureaucracy dominated by Brussels, Paris and Berlin. In countries like India, a new generation of entrepreneurs is developing a commercial class that is ready to challenge the world but first they must defeat the bureaucratic elite at home.

The reality is that today progressives are those entrepreneurs who fund the shopkeepers and businesses that create jobs and opportunities. There is only one progressive economic system that is compatible with political freedom and economic freedom- capitalism or free market economics. All other theories practiced are merely reactionary attempts to keep the shopkeepers and their entrepreneur allies downtrodden.

What progress that the world have seen can be traced to those individuals who bucked conventional wisdom whether it was in business or art. Only in a free market society can the conventional wisdom be challenged over and over and over again.

Shopkeepers and Entrepreneurs of the world unite!!

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About Tom Donelson

  • alienboy

    Tom, whilst appreciating your enthusiasm and, yes, evangelical drive, this argument seems flawed.

    Firstly, to characterize humans as split between wealth creators and those who live off them (parasites?) is deeply flawed as a basic premise, so all the rest that follows is tainted by extension.

    To re-cast the matter: free markets tend to be more efficient and this is normally a good thing. however, in the broader world of humanity, not economics, there are always going to be less or non-productive members – the ill, the insane, the infirm, the young, the old, the less gifted or intelligent or whatever.

    It doesn’t really matter whether you look at it from an extreme capitalist analysis or a social, humanitarian perspective, it is still the right thing to do, the efficient thing to do, to look after the less able amongst us. The only other solutions, neglect or extermination, are both rightly repulsive.

    One of the great things about governments is that they can do some things better than private enterprise, as not all activities can be run on a purely economic basis. So some kind of social security is absolutely necessary as both the capitalist free market and the social need combine to help each other and there is no conflict.

    Your proposal for self-reliance is completely flawed as there can not be successful investors without unsuccessful ones. This proposal would just turn all the economic losers into paupers, probably homeless and hanging around outside YOUR house begging, rather like in the time of Dickens.

    This battle you portray may be blessed with dramatic simplicity but it is a false picture. The challenge is to harness the dynamics of the market to serve the needs of the people and not vice versa.

  • http://www.elitistpig.com Dave Nalle

    >>One of the great things about governments is that they can do some things better than private enterprise, as not all activities can be run on a purely economic basis. < <

    This has never been actually proven. There's no real evidence to suggest that it's correct for that matter. In every instance where a business solution to a problem is put up against a governmental equivalent the business model wins out as far as efficiency and ultimate output for the consumer.

    >>So some kind of social security is absolutely necessary as both the capitalist free market and the social need combine to help each other and there is no conflict.< <

    Private retirement accounts like IRAs and 401Ks clearly massively outperform any equivalent governmental retirement program. The only role government needs to play in the system is to assure that each individual actually sets aside some reasonable amount of money for retirement in a reliable system with a reasonable return.

    >>Your proposal for self-reliance is completely flawed as there can not be successful investors without unsuccessful ones. <<

    This is absolutely fallacious. As long as there is economic growth investment is not a zero-sum system. In fact it’s never a zero-sum system. Those who succeed in investment absolutely do not do so at the expense of others. They do so by sharing in the benefits of a growing economy. There are no guaranteed losers to balance out the winners. That’s just not the way it works.

    Dave

  • tom donelson

    Alien boy,

    Thanks for the response and appeciate your ideals. Actually, this is a theme that I have been dealing with for years. First, I don’t discount the need for goverment and I have stated in past writings including my books.

    Goverment role is needed but need to be limited to its proper role- whether defending the nation from outside foe or enforcing laws in as fair and equitable means. I am not anarchist.

    The reality is that goverment role is to encourage entreprenuers and individuals in their pursuit of liberty, not to control.

    Social Seccurity is a classic example. This program was designed as a ponzi scheme and now we are faced with a system that will collapase and leave us in economic ruin. If a private company had organize such a program, the ceo be in job for it is legal for any private company to run a ponzi scheme. So allowing Americans to invest their own while providing a safety nest is compitable with a just society. Designing a program that would be illegal in a private society is immoral.

    A politician recently remarked that tax cuts are essentially a gift from government and need to be given back. That is the difference with a large portion of the political class. My money is my money, period. I willing to give a portion to allow government function that are designed to protect our liberty. When a goverment over taxes for services that are nothing more than transferring wealth from one sector to another, it is interferring economic liberties. For example, it is right for taxpayers in New York to contribute money to support corporate farmers in Iowa, which represent less than 3 percent of the population? The answer should be obvious.

    There is a limit to government power. There are aspect that Americans need to be responsible.

  • http://paperfrigate.blogspot.com DrPat

    Free ASINs for you: 068486374X (The Economic Institutions of Capitalism); 0674843711 (Structural Holes: The Social Structure of Competition); 091088434X (von Mises, Bureaucracy).

  • JR

    alienboy: One of the great things about governments is that they can do some things better than private enterprise, as not all activities can be run on a purely economic basis.

    Dave Nalle: This has never been actually proven. There’s no real evidence to suggest that it’s correct for that matter. In every instance where a business solution to a problem is put up against a governmental equivalent the business model wins out as far as efficiency and ultimate output for the consumer.

    Five Things Private Enterprise Did Not Do:

    1) End slavery
    2) Eradicate smallpox
    3) Defeat Hitler
    4) Put a man on the moon
    5) Put Son of Sam behind bars

    And where was the “business solution”?

  • http://www.diablog.us Dave Nalle

    JR, don’t be a dumbass. I didn’t say there was no role for government in the world. Most of the things you list aren’t ‘programs’, they’re things like wars and police investigations. Those are the appropriate realm of government.

    Though I will point out that on at least one of them you’re wrong. The smallpox vaccine was marketed commercially – and in fact most medical research is undertaken for the eventual sale and distribution for profit of the cure sought.

    Oh, and on #4 – the business solution to space flight was cut dead because of the government getting involved. Putting a man on the moon had no real value at all, but I guarantee you that without NASA we’d be farther ahead today in satellite and rocket technology than we are. Without NASA private enterprise would have had to step in and do the job to get satellites into orbit and they would have done it better than NASA has.

    Dave

  • JR

    Dave Nalle: Most of the things you list aren’t ‘programs’, they’re things like wars and police investigations.

    What alienboy said: One of the great things about governments is that they can do some things better than private enterprise, as not all activities can be run on a purely economic basis.

    The list: Five Things Private Enterprise Did Not Do

    Though I will point out that on at least one of them you’re wrong. The smallpox vaccine was marketed commercially…

    Great. So somebody figured out a way to make a profit off of it. However the effort eliminate smallpox was undertaken and executed by the Smallpox Eradication Program launched by the World Health Organization.

    I guarantee you that without NASA we’d be farther ahead today in satellite and rocket technology than we are.

    Prove it.

  • http://www.diablog.us Dave Nalle

    JR, are you mentally defective?

    >>The list: Five Things Private Enterprise Did Not Do< <

    I can list a million things private enterprise didn't do. That doesn't diminish the desirability of private enterprise. Here's my list of things which neither government nor private enterprise did:

    1. Put the moon in orbit around the earth.
    2. Cause water to run downhill.
    3. Make babies cuddly.
    4. Cause me to go bald.
    5. Make birds migrate south in the winter.

    This says nothing about whether business or government will be better at doing other things.
    My original statement was that when there are things which private enterprise CAN do it does them better than government does. Your list of things that government does which have nothing to do with private enterprise isn't a response to that statement, it's a goofy irrelevancy.

    >>Great. So somebody figured out a way to make a profit off of it. However the effort eliminate smallpox was undertaken and executed by the Smallpox Eradication Program launched by the World Health Organization.<<

    The first effective smallpox vaccine was developed by Mather and Boylston almost 300 years before the WHO existed and the modern vaccine was developed in 1796 by Edward Jenner, 150 years before the creation of the WHO. What the WHO did was distribute vaccine to developing countries in the 1970s so that they would be able to eradicate it the way the more advanced countries had already done. Every bit of the vaccine distributed by the WHO was produced commercially for profit and then sold to them by pharmaceutical companies.

    Dave

  • JR

    Dave Nalle: My original statement was that when there are things which private enterprise CAN do it does them better than government does.

    Looks to me like your original argument was that there ARE NOT things that governments can do better than private enterprise.

    alienboy wrote in Comment 1: One of the great things about governments is that they can do some things better than private enterprise, as not all activities can be run on a purely economic basis.

    You responded (Comment 2): This has never been actually proven. There’s no real evidence to suggest that it’s correct for that matter.

    Then you tried to back that up with the selective assertion that:
    In every instance where a business solution to a problem is put up against a governmental equivalent the business model wins out as far as efficiency and ultimate output for the consumer.

    I would argue that if there is something that the government can accomplish which private enterprise won’t even bother to address, then the government does it better.

  • http://www.diablog.us Dave Nalle

    >>I would argue that if there is something that the government can accomplish which private enterprise won’t even bother to address, then the government does it better.<<

    Well sure, but unfortunately it’s often been the case as with NASA and our transportation systems that government has stepped in and taken the initiative away from private enterprise and set itself up in unfair, subsidized competition which basically shuts commercial enterprises out of those areas of endeavor, so we never get to find out if they can get the job done better.

    Dave

  • JR

    For 150 years no one was stopping private enterprise from eradicating smallpox.

  • Maurice

    Private enterprises are now launching satellites into orbit for much less than the cost from NASA. Boeing has been doing so since 1990.

    FedEx and UPS are much more reliable (and kill fewer people) than the US Postal service.

  • http://selfaudit.blogspot.com Aaman

    Their employees don’t ‘go postal’?

  • http://www.diablog.us Dave Nalle

    >>Their employees don’t ‘go postal’?< <

    I hear UPS drivers do a lot of drugs to make their jobs bearable. They have a really high rate of firings over failed drug tests. Postal workers are more conservative as a group and hold out longer without drugs and therefore flip out more often, perhaps.

    >>For 150 years no one was stopping private enterprise from eradicating smallpox.<<

    And for that same 150 years no one was stopping the government from going into business manufacturing vaccine.

    That said, private production of vaccine DID eradicate smallpox everywhere but in the third world. It was gone in the US and Europe by the 1960s, all through the work of private healthcare innoculating enough people.

    Dave

  • alienboy

    < <>>Your proposal for self-reliance is completely flawed as there can not be successful investors without unsuccessful ones. < <

    This is absolutely fallacious. As long as there is economic growth investment is not a zero-sum system. In fact it's never a zero-sum system. Those who succeed in investment absolutely do not do so at the expense of others. They do so by sharing in the benefits of a growing economy. There are no guaranteed losers to balance out the winners. That's just not the way it works.>>

    Dave, some new info about the way it works … pasted from http://www.newscientist.com/article.ns?id=dn7107

    “19:00 09 March 2005 Exclusive from New Scientist Print Edition by Jenny Hogan

    Wealth in the US

    The rich are getting richer while the poor remain poor. If you doubt it, ponder these numbers from the US, a country widely considered meritocratic, where talent and hard work are thought to be enough to propel anyone through the ranks of the rich. In 1979, the top 1% of the US population earned, on average, 33.1 times as much as the lowest 20%. In 2000, this multiplier had grown to 88.5. If inequality is growing in the US, what does this mean for other countries?

    Almost certainly more of the same, if you believe physicists who are using new models based on simple physical laws to understand the distribution of wealth. Their studies indicate that inequality in market economies may be very hard to get rid of.

    Pareto’s law:- In 1897, Pareto showed that the distribution of wealth in Europe followed a simple power-law pattern, which essentially meant that the extremely rich hogged most of a nation’s wealth. Economists later realised that this law applied to just the very rich, and not necessarily to how wealth was distributed among the rest.

    Now it seems that while the rich have Pareto’s law to thank, the vast majority of people are governed by a completely different law. Physicist Victor Yakovenko of the University of Maryland in College Park, US, and his colleagues analysed income data from the US Internal Revenue Service from 1983 to 2001.

    They found that while the income distribution among the super-wealthy – about 3% of the population – does follow Pareto’s law, incomes for the remaining 97% fitted a different curve – one that also describes the spread of energies of atoms in a gas.

    Gas analogy: In the gas model, people exchange money in random interactions, much as atoms exchange energy when they collide. While economists’ models traditionally regard humans as rational beings who always make intelligent decisions, econophysicists argue that in large systems the behaviour of each individual is influenced by so many factors that the net result is random, so it makes sense to treat people like atoms in a gas.

    The analogy also holds because money is like energy, in that it has to be conserved. “It’s like a fluid that flows in interactions, it’s not created or destroyed, only redistributed,” says Yakovenko.

    Yakovenko also found that the total income of those in the poorer part of the distribution did not change significantly with time after accounting for inflation. But incomes for those in the Pareto curve shot up nearly five times from 1983 to 2000, before declining with the US stock market crash of 2001.

    Class jumping: This, along with research data from other countries, suggests that there are two economic classes. In one, the rich grow richer while in the other the poor stay poor.

    Yakovenko explains this by going back to the analogy of atoms in a gas. The atoms assume an exponential distribution of energy when they are in thermal equilibrium, and pushing the gas away from this state takes a lot of energy and it could prove similarly difficult to shift an economy to a different state. Randomness in the model does, however, mean that individuals can jump from one class to another.

    “It suggests that any kind of policy will be very inefficient,” says Yakovenko. It would be very difficult to impose a policy to redistribute wealth “short of getting Stalin”, says Yakovenko.

    Saving plans: A more sophisticated model developed by Bikas Chakrabarti of the SINP and his colleagues paints a slightly less bleak picture for the poor. His team adjusted the gas model to allow people to save various proportions of their money. This model predicts both the wealth classes that Yakovenko found. It also suggests that if you save more you are more likely to end up rich, although there are no guarantees.

    Changing people’s saving habits could be an effective way of making the wealth distribution fairer, rather than enforcing taxes.

    Macroeconomist Makoto Nirei at Utah State University in Logan, US, is supportive of the physicists’ work but has reservations about how they model the exchange of money. “The model seems to me not like an economic exchange process, but more like a burglar process. People randomly meet and one just beats up the other and takes their money.”

    Other economists warn it is too early to use such models to inform policies. “The models are too abstract,” says Thomas Lux, an economist at the University of Kiel in Germany. But J. Doyne Farmer, a physicist from the Santa Fe Institute in New Mexico, US, points out that these models have their place: “Many economic theories don’t even come close to producing the wealth distribution we see, and if you can’t produce that you’re dead in the water.”

  • Eric Olsen

    the system is basically meritocratic othe than the very top and the very bottom – but it still not a zero-sum system as long as the economy grows

  • http://www.wakeupzombies.com Dave Nalle

    The last sentence of that article says it all, I think. Trying to apply models from physics to a human system is an amusing way to entertain yourself for an afternoon, but it’s completely divorced from reality.

    the fact is that even if the rich are getting richer and the poor are getting poorer, there’s no reason to conclude that his is because the Rich are taking wealth directly from the poor. The structure of our economic system doesn’t support that conclusion at all.

    And the truth of the situation is that what’s actually happening is that everyone is getting richer, but it takes money to make money, and the more money you have, the faster what you have grows. So everyone is getting richer, it’s just that the rich have more wealth to build on and therefore get richer faster.

    Dave

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