WHERE DOES “MORE” COME FROM?
Most everyone, regardless of their political persuasion, desires that their fellow citizens who are in need might have more. But where does “more” come from? Many say from the government. However, truth be known, the government has no resources of its own. Consequently, 100 percent of “more” must be obtained from private individuals and businesses—from the private sector.
Most everyone recognizes that the greater the size of the pie, the more there is to go around. It is no coincidence that, worldwide, the poor enjoy the highest standard of living in the nations with the strongest economies—regardless of the government’s wealth redistribution policies. For the best results, economic growth must have a higher priority than redistribution. When those priorities are reversed, the poor suffer the most. No amount of sincerity and compassion can raise any nation’s total wealth. On the contrary, too much redistribution results in a decrease in total wealth—less not more. The competing goals must be given their proper weight.
This is so because “more” does not come from government printing presses but from productive, private sector activities. Too much redistribution stifles wealth creation and decreases the size of the national pie. Presently, about a third of the annual income generated in the private sector is taken by government. Most of that (about 58%) is redistributed through government transfer payments. With a third fewer resources to spend and invest, the private sector simply cannot grow the size of the national pie (and create jobs) at a substantial rate, if at all. Nearly all of us are suffering from that circumstance today. The greatest obstacle to eliminating poverty in American is not Wall Street, it is government.
A recently released, well regarded report (Economic Freedom of the World: 2011 Annual Report) documents the positive relationship between economic freedom and a range of indicators of standard of living including wealth, economic growth, longer life spans, better health care, lower poverty, civil and political liberties, and so on. A strong economy is central to a nation’s standard of living. And economic freedom is central to a strong economy. And limited government is central to economic freedom. Therefore, limited government, not wealth redistribution, is central to a high standard of living and less poverty.
Numerous economic studies have documented the relationship between limited government and a strong economy. One recent study conducted by two Swedish economists (Government Size and Growth: A Survey and Interpretation of the Evidence) reports that, “...research has come very close to a consensus that in rich countries there is a negative correlation between total government size and [economic] growth.”
If we want more we have to create more, and only the private sector can do so to any significant degree. Government is almost entirely dependent on the private sector to grow the pie. If we want more to redistribute to those in need government must allow the private sector to create more wealth—for everyone. If so enabled, the private sector will increase the wealth of countless middle and lower income households directly through the creation of jobs and higher wages, without the need for government to redistribute wealth. Moreover, there will be more wealth to redistribute to those truly in need.
The evidence reveals that the road to less poverty is through the private sector rather than government. Although it may seem counterintuitive, the direct approach of wealth redistribution ought to be pursued only as an adjunct to a greater policy of promoting economic freedom and wealth creation via limited government. Sadly, our nation is on the opposite path.
