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    The Wealth Of Nations
    25 September 2007

    About the time of the American Revolution a work with this title was published by a learned Scotsman by the name of Adam Smith. It was itself a revolution as it started the then new science of economics. Adam Smith taught in essence that the wealth of nations is the result of its workers who further it as an incidental and unintended by-product of their efforts. It is not out of the kindness of the butcher, the baker and the candlestick maker that we obtain our necessities but out of their desire for profit. Greed, then, is the engine of wealth.

    So why is it that not all nations are wealthy? Certainly, greed is universal and work prevalent. One could argue that Adam Smith’s proposal is a necessary but not a sufficient requirement. Additional factors may be needed, such as natural resources, favorable climate, congenial neighbors or others unspecified. Natural resources certainly help – the oil rich Middle East is an egregious modern example but modern day Japan by contrast lacks any and prospers nonetheless. Arnold Toynbee postulated that a civilization needs the right challenge to prosper, a life too easy or one too challenging being detrimental. He pointed to life in the tropics as offering too little challenge and that in the Arctic as offering too much. The lack of congenial neighbors can certainly squash any prosperity. Prolonged warfare, as during the Thirty Year’s war in Europe, ensures misery even long after its cessation.

    Undoubtedly there are other factors involved. But there remain many countries whose inhabitants are and remain poor in spite of natural resources, favorable climate and relative peace. There must be a dominant additional requirement that supersedes all others in importance which, when present, can overcome many, if not all, adverse effects. That requirement is good government. For man’s greed works both ways. It prompts him to acquire wealth not only by creating it by working but also by robbing others. A society which allows robbery can never prosper, not because of the loss to the one robbed or to society but because a rational person will not work and produce when he can not be reasonably sure to enjoy the fruits of his labor. So the first sine qua non requirement is a government sufficiently powerful to enact and enforce laws protecting life, property and the sanctity of contracts.

    Morality is not the issue here: that robbery is immoral is irrelevant. What matters is that it destroys the fabric of society. Nor does it matter whether robbery is committed by private parties or by government. The effect on society is the same. And this is where the matter becomes complicated. For government is by its very nature and necessity in the robbery business. It produces no wealth but incurs costs which have to be covered by the producing sector. So we are in the prongs of a dilemma: the country can not function without government but that government is inherently counterproductive.

    This dilemma is what politics is all about. Government, having the power to make laws, can and does use this power to bring about conditions considered desirable but beyond the basic requirements . Depending on the country’s productivity, a wide range of non-productive and counter-productive measures can be taken without serious damage to the country’s well-being and even for its benefit, such as the reduction of discord among its citizens. But there is a limit and once it is exceeded a country can descend into misery and chaos with astounding rapidity. Examples are numerous and mostly of recent date for previously countries came to grief more usually by warfare and government used to be less obtrusive. Argentina was one of the first, a prosperous nation until Peron redistributed income and reduced incentives to produce. Seventy years later it is still trying to recover. Several countries in Africa never even attained a minimum of prosperity and Zimbabwe is an egregious example of a country where whatever prosperity there was turned into ruin in an incredibly short time when private property was redistributed. All the countries experimenting with communism had similar experiences. Venezuela is the latest example of a prosperous country being dragged into poverty by an overbearing government and only its petroleum is braking its descent.

    So there we have it: the wealth of nations depends on their inhabitants’ productivity provided their governments allow it. Natural resources help, but are not required. Peaceful neighbors are, but Israel is an example where even that is not an absolute requirement. Climate is largely unimportant but Toynbee’s conclusion may have validity.

    So now that we know what it takes we can make any country prosper! Right?

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