Saturday, November 21, 2009

What Poverty IS...And What it IS NOT....

Poverty is not merely a lack of money or other “hard assets, that is a symptom of the malady called poverty.

What poverty is, in essence, is the lack of marketable skills and the entrepreneurial drive to develop such skills and to “sell yourself” to help others in order to enrich yourself.

Poverty is most often the result of poor planning, poor impulse control and a lack of focus, discipline and, like wealth creation, is NEVER the result of “bad luck.”

To understand poverty, one must first understand wealth and what wealth is.

Wealth is NOT currency, or real property, assets, like stocks and bonds or even the sum total of those possessions, again, those are symptoms or “the trappings” of wealth, not wealth itself.

Wealth is, in essence, IMAGINATION – the creative expression that turns ideas into solutions to other people’s problems and in the process enriches the imaginer.

So, in turn, poverty is, in essence, a lack of imagination, perhaps even more primordially, a lack of the will to help others, even when that help might well enrich yourself.

Just as specific behaviors (self-discipline, time management, attention to detail focus and thrift) produce wealth, poverty is also created or caused by specific behaviors, most notably, poor impulse control, recklessness and irresponsibility and the general inability to delay gratification and plan for a better, easier tomorrow.

That old saying, “If you’re failing to plan, you’re planning to fail,” is very much true.

Measuring Wealth and Poverty

We can all see that poverty costs those afflicted in a myriad ways, what we often overlook is that wealth creation also costs the producer.

It costs that person in terms of time. Time with family and friends, time for leisure and enjoyment and often, it’s the most valuable time of all – that time when we are most vital and able to enjoy life to the fullest.

Income and personal assets (ie. stocks, bonds, pension funds, real property, etc.) are just two measures of wealth. Others, like free time, good health, a close and loving family are often overlooked as “intangible assets,” and yet they are often as valuable, or even more so than “hard assets, like cash and real property, to those who lack them, or sacrifice them in order to produce.

For instance, a “beach bum” or alcoholic/drug addict is generally far “richer” in terms of leisure time than the man who runs a business, or a physician or investment banker, although the latter are generally far “richer” in terms of “hard assets.”

Choices and Trade-Offs

In a very real sense, all of this, all of what we are and what we become, comes down to a series of choices and trade-offs.

The producer (the physician, investment banker and the businessman) trade giving up more of their leisure time for more hard assets, while the “beach bum” and the alcoholic/drug addict partier trade giving up developing their other skills in favor of more leisure time.

It can be argued that each individual in the above case made a conscious and deliberate choice to value one form of wealth over another – the producers valuing “hard assets” more, while the non-productive, more epicurean partiers appear to value leisure time far more and in a free society individuals are free to make such choices and deal with their individual consequences on their own terms.

Therefore the focus on “redistributing the wealth” fails precisely because it fails to look at the full and complete scope of what wealth is. With its narrow focus on redistributing hard assets, it unfairly does that WITHOUT concomitantly redistributing leisure time and the other “intangible” aspects of wealth.

A fair “redistribution” requires that the producers be given back something for their sacrifices in hard assets and the recipient non-producers be required to surrender some of their intangibles (ie. leisure time) in return.

Yes, it can be argued that what the producers produce cannot be replaced by those without their high level of advanced skills.

So what?

That merely dictates that a “fair redistribution” require that the non-productive be forced/coerced into developing their skills to the fullest to produce more, thus allowing the other producers to have more free time and the other “intangibles” included in the full panoply of “wealth.”

The “Zero Sum Game” Canard

Some will argue that “intangibles” can’t be measured and thus can’t realistically be “redistributed” either, but that is untrue.

If people don’t own their own labors, their own property, then they don’t own themselves or their time either and yes, it CAN be “redistributed” by the same activist that would “redistribute” property.

Much of the justification for “redistributing” hard assets is based on the canard of the “zero sum game.” In other words, “There is only so much wealth, in terms of stocks, bonds, cash and real property available at any given time and therefore, one man “earning/producing too much” assures that ten others will do without or have to accept a minimum of such hard assets as their reward.

In fact, that is NOT TRUE.

Wealth is created by ideas, by human imagination, and as such is unlimited. When one individual produces a tremendous amount of wealth, that production increases opportunities for other like-minded and entrepreneurial individuals. In short wealth creation generates MORE wealth creation, NOT a “shortage of wealth” for others.

What happens when “redistributive” efforts are put into effect is that producers produce less, in effect, reclaiming, on their own, more of the free/leisure time they gave up to produce more in the first place.

That has two disastrous unintended consequences; (1) it reduces the overall productivity of that economy, given that there’s nothing in place to force the non-productive and less productive to produce more and (2) that lessening in wealth creation results in significantly lowered tax revenues for government, in effect, hampering government’s ability to engage in more social assistance, in the form of various anti-poverty programs, etc.

But, given the fact that we don’t exist in a “zero sum game” economy, there’s no reason to redistribute wealth in the form of hard assets, given that such wealth creation generates higher government revenues, while also creating ever MORE opportunities for ever more wealth creation!

This, in essence, is the primary fatal flaw in contemporary American Liberalism.

The problem “we the people” face is that government and the “political class” generally refuses to acknowledge this basic truth, as they are more motivated by seeking power and control over others than in actually “doing good.”


Fuzzy Slippers said...

Very interesting and thought-provoking post. I suspect I'll be turning this over for a while, but my immediate reaction is that the "wealth" that BO and libs want to redistribute is money. You can call it a bundle of radishes or a blade of grass, really, their goal is to spread it around because they somehow don't grasp the problem that you state here. Money is the root of the problem that they see, so money is the only way to "solve" the problem. It's insanity, of course, because people aren't going to work their butts off to support people who are sitting home watching Oprah on their big screen televisions. Sure, there are a minority of people who are "workaholics," but even they are getting something from their efforts, what do you get when you get nothing in return except sponged off of?

I do agree that creating wealth is a state of mind, in many cases. If you don't think you can, you won't. If you do think you can, you will. Even if you fail time and again, you'll stick to it because you *know* that you'll be successful. That's another problem with the nanny state, people who are motivated or might be motivated are essentially paid to do nothing. It's like paying a farmer not to plant a crop and then raising his taxes (something that didn't make sense during the Great Depression and doesn't make sense now).

Thanks for the great thought fodder! I suspect I'll be mulling over this and be back later. :)

JMK said...

"Money is the root of the problem that they see..." (FS)
That is the problem with most redistributionists, they don't understand that there are many forms of wealth and people make trade-offs and choices all the time. They may make some of those choices subconsciously, but they make them none-the-less.

Income is an especially poor indicator of wealth, as the truly wealthy the "rich," DO NOT rely on income for the bulk of their wealth, if they rely on it at all.

What schemes that seek to "soak the rich" (as defined as "high income earners") do is to punish productivity, so you get less of that.

Worse yet, is the fact that we are in a real economic crisis caused entirely by government meddling in the economy (Keynesian economic policy) and we are embarking on even more Keynesianism or hyper-Keynesiaism to get us out of that problem....that bodes for far worse economic times ahead.

I've been predicting widespread public sector layoffs as revenues continue to fall and a continued spiraling downward economically.

We are now, at the end of the very beginning, NOT "the beginning of the end" of this crisis. We haven't, for the most part, even felt the REAL pain yet....but it
s coming and it's looming large.

And yes, wealth is primarily created from it is only limited by the human imagination, which is functionally limitless.

Poverty is primarily the absence of marketable skills and/or new ideas or perhaps even more than that the unwillingness to produce or devote your efforts to help others (by solving their problems) even when that process might well enrich yourself.

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