Two Timeless Economic Truths From Wealth of Nations

Adam Smith in Wealth of Nations made significant points about labor and money that we desperately need to remember today.

First, Smith differentiated between labor that produces a good or commodity of some sort versus labor that does not. He said that an economy is in trouble when it relies more on "unproductive" (meaning not producing goods) versus productive labor. Productive labor creates tools, refrigerators, software, anything of value that can be sold in the market place, sometimes more than once. Unproductive labor includes lawyers, doctors, bureaucrats, domestic servants, and others. It is not that he has no respect for their work, but his point is that once that work is done, it disappears into thin air and cannot be resold in the marketplace. There is a place for these laborers, but your economy should not rely too heavily upon them or it risks having a bad foundation.

Federal environmental policies, union contracts, and other issues have created a significant competitive disadvantage for this country when it comes to expanding what Smith would call the "productive" labor force. He would argue that this puts our economy in peril.

Second, Smith argues about assets and money. If your economy has most economic assets tied up in capital, it has a strong foundation. Capital is money in your savings account, CDs, stocks, etc. Capital is improvements you make on your home or business to increase its value. An economy based upon spending is weak and vulnerable. We have relied way too heavily on the consumer sector for way too long as an economic jolt. In the past few years, public spending has increased considerably with an eye towards stimulating the economy. Adam Smith explains that an economy cannot thrive on spending. Public spending is even worse because it confiscates capital.

So according to Adam Smith we are headed in the wrong direction. It will take a fundamental shift in policy and prioities to get us back on track. Do we have the courage to set things right again?

The Great Myth of the Capitalist Rape of West Virginia

The Democratic Party has gotten a great deal of mileage out of a myth.

West Virginians have a predisposition, due to their brand of Democratic thinking dating back to Andrew Jackson, to mistrust both Big Government and Big Business. They generally vote for whichever ideology seems least threatening to their liberties at the time. Republican opposition to Big Government makes sense nationally while Democratic opposition to Big Business helps Democrats locally.

Democrats in West Virginia look back to history to build their case against those that support capitalism. They cite corporate manipulations of law and culture to purchase millions of acres of land for timber, railroads, and coal, leaving the people with a pittance as a result. THIS, they say, proves the evil of capitalism!

Not so fast. All capitalists are businessmen, but not all businessmen are capitalists. Ronald Lewis, former West Virginia University professor and dean of regional economic historians, wrote in Transforming the Appalachian Countryside that many businessmen involved in industrial and extractive industries sought out the prestide of state sanction for their operations. In the 1870s and 80s Democratic party leaders such as Henry Gassaway Davis and Johnson Camden dominated the business and political affairs of the state.

A famous economist wrote harshly about the business monopolies assisted by the state, talking about "the mean rapacity, the monopolizing spirit of merchants and manufacturers, who neither are, nor ought to be, the rulers of mankind." Was this Karl Marx? No. Frederick Engels? No. Some other vile Communist? No. This was Adam Smith, the first articulator of capitalism, who warned against the alliance of business and government.

Once again we have met the enemy and it is government. All West Virginians have to do is look back in their history, read Wealth of Nations and understand that the problems that occured had nothing to do with the capitalism that Democrats and Michael Moore attack. It has to do with lurking mercantilism, the alliance of some businessmen with the power of government. Build the same kind of wall between capital and business that the ACLU wants between church and state. That would have prevented so many of the economic ills faced now and a hundred years ago.

Mercantilism Is Almost Here

The government is out of control.

This week, the president fired the CEO of General Motors.

Everyone outside of the looniest lefty ought to cringe when the federal government starts hiring and firing private sector employees.

The reasoning given was that the bailout money could only go forward with fresh leadership. Even the Democratic governor of Michigan expressed outrage over this unprecedented move. Almost ignored was the forced merger of Chrysler with Fiat.

Government money gives the government the right to interfere with a private corporation? Maybe so. However, it means that said corporation will be saddled with bad economic decisions made for political reasons. Is it more cost effective to put a new plant in right to work Tennessee or union oriented Pennsylvania? The Democratic powers that be will insist on helping their allies. And since they have so much invested in GM, they would by necessity have to discriminate aaint independent Ford.

Mercantilism means that the government is not a referee, but a player in the economy. As a player, it has interests to defend. Those independent of the government get shut out and honest competition dwindles.

Mercantilism was one of the reasons why America broke free of Britain. We wanted a fair economic system where competition was not rigged. In 1776, Adam Smith called it capitalism. Barack Obama's "change" is leading us full circle back to the bad old days of mercantilism.

Should the affluent be allowed to rule the Middle Class?

Should the affluent be allowed to rule the Middle Class? I think we all subscribe to the notion that all men are created equal and would answer that question with a resounding; NO, the affluent should not be allowed to rule any class.

The founding fathers certainly felt this way when they wrote "We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness."

Those also sought to secure property rights. One of the original drafts of the Declaration stated in their list of grievances that the King incited the citizens with the allurements of forfeiture & confiscation of our property. The founding fathers in the Bill of Rights added the protection of the 5th Amendment in the states, "nor shall private property be taken for public use, without just compensation" and the 14th Amendment further defines the protection with "nor shall any state deprive any person of life, liberty, or property, without due process of law."

Let's face it our property rights are what separate us from the 3rd world countries. Property rights are the foundation of our economy. Without solid property rights business cannot operate. In his book, The Communist Manifesto, Karl Marx stated, "The theory of the Communists may be summed up in the single sentence: Abolition of private property."

The founding fathers were heavily influenced by the writings of Adam Smith. In his book, The Wealth of Nations he wrote, "Civil government, so far as it is instituted for the security of property, is in reality instituted for the defense of the rich against the poor, or of those who have some property against those who have none at all."

In Mineral County the Rich are on the offensive against not only the poor but the Middle Class. The evidence is piling up if you choose to look.

In the October 19th, 2007 issue of the News Tribune and article entitled "Zoning could be part of the Mineral Co. Plan" it states, " areas around Keyser and Fort Ashby need to be zoned, but places like Lakewood did not." Interesting comment about the Mineral County plan. Consider that the areas around Keyser and Fort Ashby are predominately middle class neighborhoods. According to the real estate website Trulia the average home price in the Keyser area is $182,522. This past year the Mineral County Planning Commission approved two building permits for $2 million, both of these homes are located in Lakewood.

On October 30th the Clean Up Mineral County Committee disbanded after handing a proposal for an ordinance to cover buildings that were abandon or had structural defects to the Planning Commission.

There are two interesting facts about this meeting. The first is; prior to this meeting the Clean Up Mineral County Committee had met the 4th Thursday of every month, but the final meeting was moved to the 5th Tuesday causing a schedule conflict for many property owner rights advocates. The second is; most of the protections for the Middle Class, Low Income, and Disabled home owners were removed from the proposed ordinance at this final meeting.

Had the meeting been held on its proper night, most likely the protections for the Middle Class, Low Income, and Disabled would not have been removed. The people that didn't want anybody but the rich to have their rights protected, simply would not have had the votes. No explanation for why the meeting date was moved was ever given, but the move worked to disadvantage of most Mineral County's citizens.

It is easy to see if you look at what is happening in the county that the wealthiest of the county are trying to impose their will on the rest of the population of the county. Adam Smith warned about his over 200 years ago. We are seeing ideas being put forth that will have an adverse effect on the middle class, low income, and disabled while having little to no effect on the richest citizens of the county.

Like the Declaration of Independence says; all men are created equal and if we do not act as equal partners in government, then we will only serve as surf's of the wealthy on our own land.

• Reference Link April 2, 2007 Post