Poverty is not created – it is the natural state of man. For proof, see human history.
The question then becomes: How do we reduce poverty? This is the heart of economics: the study of rationing limited resources among unlimited desires.
From feudal systems to mercantilism, all historic economic systems had one thing in common: Poverty was the norm; wealth was the exception; and the definitions of neither poverty nor wealth changed very much.
Then came the chance for a fledgling country to decide what economic system it would adopt. Fortunately, the ideas of Baron de Montesquieu, John Locke and other great thinkers permeated the minds of the Founders of the United States. They took the position of certain thinkers that all men were created equal, and that the notion of the divine right of kingship was false.
After much debate, James Madison’s view that no economic system should be enshrined in the Constitution won the day. Instead, the people were left to themselves to create wealth … and create wealth they did.
From the time of the first human on earth until roughly 200 years ago, humanity has never known wealth like we do today. Only the most recent humans have enjoyed electricity, healthy and convenient water and plumbing, easy long-distance travel on land, air and sea, property and home ownership, and, most importantly, cronuts. For an inspiring illustration of this breathtaking change to the human condition, watch Hans Rosling’s 200 Countries, 200 Years, 4 Minutes on YouTube.
The reduction of poverty requires the ability to meet the demands of those around you – and to the extent you help others, you help yourself. That’s the beauty of the free market system: It incentivizes imperfect humans to succeed through helping others.
Of course, because we are all imperfect, humans have never created a perfect economic system. Though it’s the best economic system in history, injustice and suffering still exist in the free market. Some of us sometimes need extra incentives to not behave badly. The trick in a free society is balancing the need for an equal playing field that maximizes freedom to invent, grow, live, adapt, and so on against the reality that humans do bad things. A free and humane society needs to protect the freedom of others from the evils of a few. Thus we have things like laws, fines, jail time, and government regulations.
But government involvement can also cause harm. Instead of reasonable guidelines, government sometimes imposes excessive regulations. Take the Tesla car manufacturer for instance. Existing Utah auto dealers have worked with Utah lawmakers to make it impossible for businesses like Tesla to do business in the state. Government can also intervene in the market to pick winners and losers by giving them unfair advantages over their competitors. One Utah example of this would be the tax-incentive deals offered by the Governor’s Office of Economic Development. That needs to change.
And remember Solyndra? The company received more than a half a billion dollars of taxpayer money as the first recipient of President Obama’s economic stimulus program. Solyndra then went bankrupt, and the half billion dollars of taxpayer money vanished. The government could not know that market conditions would change, or what impact new technologies would have, or a million other factors that exist in the marketplace.
That’s why efforts by governments to control or influence the free market are so pointless and so harmful. No one person or group can possibly predict the future. Let the market handle it by simply getting out of the way. Keep regulations reasonable, don’t try to pick winners and losers, and don’t arrogantly act like government leaders always know best. Humans tried that for thousands of years with overwhelming poverty and lack of innovation as the result. Let’s not go back to the dark ages.
For Sutherland Institute, I’m Dave Buer. Thanks for listening.
This post is a transcript of the Sutherland Soapbox, a 4-minute weekly radio commentary aired on several Utah radio stations. The podcast can be found at the bottom of this post.
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Photo credit: Infrogmation of New Orleans