Prosperity: A Mystery No Longer
“Don’t look back! Something (or somebody) might be gaining on you.” Leroy “Satchel” Paige, Hall of Fame baseball pitcher.
America exists in a competitive worldwide environment. Every country strives to achieve prosperity for itself, its citizens and its friends and allies. In may humble observations, I have come to a few defensible conclusions which, if tried, may lead to prosperity.
My observations began by studying why some countries boom while others go bust, why some States in America seem to grow more prosperous than others, why some people prosper and others languish in poverty. I admit my observations may not have been shared by all and may not in fact be valid. But, for me, they are worth sharing with my readers.
1. My first observation is that redistribution does not work. Envy of the successful and the rich is self-defeating. We should celebrate success and wealth as long as it was acquired fairly and within the law. We should emulate the methods of those who are successful. We should set high goals and continue to strive to achieve them. Successful people seem to never retire or relax. The most oppressing poison to achievement is for the government to take it away and redistribute the money to others. This is not to say that providing for the truly needy is not a government function which should be supported. It means that in certain venues, there has risen a culture of dependence whereby aid, food, government healthcare and government housing have greater value than earning them by work. As Margaret Thatcher once quipped, “Sooner or later, government runs out of other people’s money.”
2. A country which closes its financial markets to investment from other countries is depriving itself a massive store of wealth. The deterrence for foreign investment includes our tax rates, our regulation and our attitudes toward these investors. Why post a “Keep Out” sign with a 35% tax on profits? Why set compliance with conflicting regulations as more important than building a plant and hiring people who would work in them. I am thinking about the requirement to provide certain benefits or be fined or simply not permitted to do business here.
3. For a country to create a barrier to the immigration of talent which is needed by business or for an individual building a team to not seek out the best talent available is senseless. Immigration laws must be fair and fairly enforced. Somehow, it must restrict the “bad guys” and encourage the “good guys”. Somehow, both political parties should be able to benefit form such laws and no party should be able to take credit for the immigration laws. It is a fight which neither party can win and the country suffers while the issues remain unsolved.
4. Companies and people will always gravitate to regions of calm, law and order, stability and good government. This goes beyond taxes and regulation. Crime, street drugs, violence, property destruction and unlawful protests will cause a company to reject a location and never reconsider it again. It is the bottom of such a self-destructive cycle which leads to “ghost towns” in a modern age.
5. Leaders and individuals should attempt to identify their competitive advantage and attempt to promote and exploit that advantage. Why build an aluminum smelter next to an electric power generation plant? Because, smelting aluminum require massive amounts of electricity to run efficiently. Why build wind power plants in areas with persistent wind? Why build a fish processing plant in the middle of a desert? You get the idea. The United States should count its blessings in this regard as we are rich in natural resources, we have vast areas of crop and livestock production and a large population. However, our infrastructure has been allowed to deteriorate in some areas of the country. Some states have great turnpike roads and happen to be next to states with subpar Interstate Highways. Where would you rather locate if you had your druthers? The same is true for an individual. If you are 6’7” and can shoot a basketball through a hoop, you should try out for the Thunder. If you are adept at mathematics, you should pursue a career as an accountant or research scientist. If you have a steady hand, good eyes and are not afraid of blood, you should attempt to be a thoracic surgeon. Bottom line, know your competitive advantage and use it.
6. Government should strive to have a stable currency. An abnormally strong currency retards export and inflow of capital. A weak currency may help exports but leads to an outflow of capital. Stability is the prevue of the Central Banks and their primary instrument is the control of interest rates and inflation. Taxation plays a part and too rapid a change in taxation could lead to an unstable and unwanted fluctuation in the value of the dollar. For individuals, the idea is to have a stable net worth with a growing asset base along with a modest debt load.
7. Government should guarantee a workable legal system. A litigious society is on life support. The best example is the plight of the physician. Many a potential physician and many a practicing physician look at the cost of malpractice insurance and the outrageous malpractice awards as beyond the pale of common sense. The system must be fair to both parties and it seems weighted in favor of the plaintiffs in the current environment. Our healthcare system currently suffers from a lack of physicians willing to take on the risks of their practice.
I could go on, but I have used up all my allotted space. Maybe next time.