WEBVTT NOTE Wealth and Politics 1 00:00:00.000 --> 00:00:06.000 How Wealth Moves Under Political Pressure 2 00:00:06.000 --> 00:00:12.000 There are three types of wealth that should take our attention. 3 00:00:12.000 --> 00:00:17.000 One of these is customer wealth or consumer wealth, 4 00:00:17.000 --> 00:00:22.000 one is entrepreneurial or capital wealth, 5 00:00:22.000 --> 00:00:25.000 and one is political wealth. 6 00:00:25.000 --> 00:00:32.360 I'm particularly concerned with focusing now in this last category of wealth. Most people 7 00:00:32.360 --> 00:00:40.640 haven't given this area a great deal of thought. Political wealth is a special type of classification 8 00:00:40.640 --> 00:00:47.940 in the area of economics, and very few economists have given it the attention that it deserves. 9 00:00:47.940 --> 00:00:52.320 So I'd like to really focus in this area for a few minutes. 10 00:00:52.320 --> 00:01:00.040 Actually, wealth is something that we all require. The classification of wealth fundamentally 11 00:01:00.040 --> 00:01:06.140 relates to the things, the goods and services you and I want as customers or consumers by 12 00:01:06.140 --> 00:01:11.180 means of which we sustain our lives and obtain the satisfactions that we want. But there 13 00:01:11.180 --> 00:01:17.960 is this particular type of wealth called political wealth which arises as a result of the demands 14 00:01:17.960 --> 00:01:34.960 is made by politicians upon the market, and then the market, the entrepreneurial area, produces the type of wealth that politicians demand, and a very interesting phenomena develops in the market as a result. 15 00:01:34.960 --> 00:01:44.080 Now, let me take an example here to show what I mean. Let's suppose that we have automobile 16 00:01:44.080 --> 00:01:51.500 company which we will call the United Updyke Company. And the United Updyke Company makes 17 00:01:51.500 --> 00:01:59.080 a very popular automobile called the Updyke. It's a real upbeat vehicle and lots of people 18 00:01:59.080 --> 00:02:04.880 buy it and it has all of the modern gadgets for on the floor and spoilers and the works. 19 00:02:04.880 --> 00:02:12.960 Okay, now this is the Updike vehicle and people buy it and there is a firm making it, but 20 00:02:12.960 --> 00:02:20.720 now a politician, a major politician, goes to the manufacturer of the Updike vehicle 21 00:02:20.720 --> 00:02:29.040 and says, look, we are very definitely in need of a new type of tank and we'd like you 22 00:02:29.040 --> 00:02:33.720 to take your resources and help to develop a new type of tank and if you can come up 23 00:02:33.720 --> 00:02:38.660 up with it when there's a big fat lucrative government contract here for you and you can 24 00:02:38.660 --> 00:02:41.120 really make yourself a bundle. 25 00:02:41.120 --> 00:02:50.700 So now the manufacturer of the Updike vehicle pulls some of his research and other facilities 26 00:02:50.700 --> 00:02:55.560 out of the production and the improvement of the Updike vehicle and he begins concentrating 27 00:02:55.560 --> 00:03:01.780 on the creation of a new tank because this would be a tremendous feather in his cap if 28 00:03:01.780 --> 00:03:03.380 he can get that contract. 29 00:03:03.380 --> 00:03:09.100 He knows that the government man has gone to a number of other vehicle manufacturers 30 00:03:09.100 --> 00:03:13.380 and that there's nothing for sure that says he's going to get the contract, whoever gets 31 00:03:13.380 --> 00:03:17.160 it has a real chance to make a lot of money. 32 00:03:17.160 --> 00:03:23.780 So he does a lot of research, he develops a new type of vehicle that he thinks will 33 00:03:23.780 --> 00:03:30.900 be a winner, and when he has it ready, why then he approaches the politician from whom 34 00:03:30.900 --> 00:03:36.180 And he got the information in the first place, and he says, I have made a new tank. 35 00:03:36.180 --> 00:03:38.760 And this tank is absolutely fantastic. 36 00:03:38.760 --> 00:03:43.640 It will kill more people and destroy more property in less time than any other tank 37 00:03:43.640 --> 00:03:45.380 in existence. 38 00:03:45.380 --> 00:03:50.040 And the politician says, well, gee, that's wonderful, but I'm no authority in this area. 39 00:03:50.040 --> 00:03:53.520 Let me bring in the generals, and they're the ones that understand killing. 40 00:03:53.520 --> 00:03:56.300 So let's get them out to test your tank. 41 00:03:56.300 --> 00:04:00.040 So the tank is wheeled into the yard and out come the generals, and they say, let's go 42 00:04:00.040 --> 00:04:05.440 to Work with it. And it is put through its paces. And as a result of that demonstration, 43 00:04:05.440 --> 00:04:11.080 the generals become convinced that this tank will live up to the manufacturer's claims 44 00:04:11.080 --> 00:04:16.120 for it. It will kill more people and destroy more property than any other like vehicle 45 00:04:16.120 --> 00:04:21.260 in the world. And the generals say, we've got to have 5,000 of those at once. So now 46 00:04:21.260 --> 00:04:27.960 what does the updyte company do? Well, it doesn't make as many updyte cars anymore. 47 00:04:27.960 --> 00:04:34.740 It makes up diked tanks. And the tanks come rolling off the assembly line, of course. 48 00:04:34.740 --> 00:04:41.700 Now here is an interesting thing. How does the politician pay for the tank? Well, the 49 00:04:41.700 --> 00:04:47.780 politician, you see, is in a little different position than the customer. Now when a customer 50 00:04:47.780 --> 00:04:55.020 wants to buy something, he goes to work to get paid in money so that he can spend the 51 00:04:55.020 --> 00:04:57.700 the money to buy what he wants. 52 00:04:57.700 --> 00:05:04.020 But when the politician wants to buy something, he presumes that he's already working. 53 00:05:04.020 --> 00:05:06.700 He doesn't have to get a job to produce anything. 54 00:05:06.700 --> 00:05:12.940 He is already fully occupied, and he presumes that occupation is a job. 55 00:05:12.940 --> 00:05:18.300 He's fully occupied in dreaming up ways of impeding human activity. 56 00:05:18.300 --> 00:05:21.420 So he hasn't got any spare time, and that's certainly true. 57 00:05:21.420 --> 00:05:26.980 Many politicians work very long hours, that is to say, they are occupied many long hours. 58 00:05:26.980 --> 00:05:29.100 So he hasn't the time to do it. 59 00:05:29.100 --> 00:05:34.140 So when it comes for him to get his hands on some money, he only has one way of doing 60 00:05:34.140 --> 00:05:35.140 it. 61 00:05:35.140 --> 00:05:38.140 He turns around and he uses a device called taxation. 62 00:05:38.140 --> 00:05:42.980 He goes out to the customer area and he taxes customers. 63 00:05:42.980 --> 00:05:44.640 That is not his customers. 64 00:05:44.640 --> 00:05:48.940 These are customers of the businessmen, or consumers we could call. 65 00:05:48.940 --> 00:05:54.140 He taxes consumers to get the money that he wants, and then he goes over and he taxes 66 00:05:54.140 --> 00:05:59.340 the producers to get what he wants. And when he has enough taxes in his hands, then he 67 00:05:59.340 --> 00:06:05.640 can pay for what the producers produce. So now you have a situation in which a kind of 68 00:06:05.640 --> 00:06:12.940 economic imbalance begins to appear. Until you have a political column, the column of 69 00:06:12.940 --> 00:06:17.460 wealth which we could call entrepreneurial, this is where things are produced and goods 70 00:06:17.460 --> 00:06:22.140 and Services Provided, and the column we can call the consumer column, they will tend to 71 00:06:22.140 --> 00:06:26.940 come into balance, because the consumer will demand certain things from the producer, the 72 00:06:26.940 --> 00:06:32.420 producer will have to demand certain things from the consumer, and to exchange these at 73 00:06:32.420 --> 00:06:38.940 all, you have money, and the money is exchanged equitably, each one getting probably less 74 00:06:38.940 --> 00:06:44.700 than he wants, but enough so that he can facilitate his own satisfactions, and that's the way 75 00:06:44.700 --> 00:06:45.700 it works. 76 00:06:45.700 --> 00:06:52.380 I have this third column of wealth, the political column, and this is a non-productive column. 77 00:06:52.380 --> 00:06:57.460 It doesn't produce anything, and curiously, it's not a consumptive column. 78 00:06:57.460 --> 00:07:02.660 Now, of course, the politician, personally, is a human being. 79 00:07:02.660 --> 00:07:06.540 Just like any other human being, he wants the same things. 80 00:07:06.540 --> 00:07:12.380 All of us as human beings, whatever else we may be, we come right back to our basic position 81 00:07:12.380 --> 00:07:13.580 as a consumer. 82 00:07:13.580 --> 00:07:18.780 A politician wants to have a nice car for himself to drive in, drive with, and he wants 83 00:07:18.780 --> 00:07:25.100 a house to live in, and he wants some nice clothes and good meals and all the rest of 84 00:07:25.100 --> 00:07:31.200 the things that you and I want. So he is distinctly human. And then of course the businessman is 85 00:07:31.200 --> 00:07:37.440 also a consumer. See, everybody is a consumer. So we all end up part of the time in that 86 00:07:37.440 --> 00:07:44.880 Central Column, where we have consumer wealth. But now, when the politician is acting not 87 00:07:44.880 --> 00:07:51.400 as a human being, but as a politician, where he's engaged in amassing and employing power, 88 00:07:51.400 --> 00:08:01.400 now at this point, he turns and extracts money from both of the other groups of people. That 89 00:08:01.400 --> 00:08:06.880 is, it's the same person. If it's a producer, he taxes him twice. He taxes him once as a 90 00:08:06.880 --> 00:08:28.880 And if it's just a consumer, well then he taxes a consumer even though the consumer at that moment isn't a producer. So the politician reaches out and extracts by force or the threat of force whatever monies he needs in order to buy the tanks, let us say, which he wants. 91 00:08:28.880 --> 00:08:36.340 So now you have something being taken out and moved over into an area where it will 92 00:08:36.340 --> 00:08:44.940 not serve a productive function and it will not serve a consumer function. As a matter 93 00:08:44.940 --> 00:08:50.680 of fact, once the tanks are produced, the best you can hope for is that they'll never 94 00:08:50.680 --> 00:08:57.540 be used. If they just sit there and rust, that's not as bad as what would happen if 95 00:08:57.540 --> 00:09:02.960 If you employ them, the minute you start employing them, they're designed to destroy property 96 00:09:02.960 --> 00:09:08.900 and people. So the more you use them, the worse it becomes. So what happens then is 97 00:09:08.900 --> 00:09:17.060 you get a column of wealth over in the political area that is absolute waste in that the best 98 00:09:17.060 --> 00:09:22.240 thing that can happen to it is that it isn't used, or the worst thing that can happen is 99 00:09:22.240 --> 00:09:26.800 It is used, and then it is not just wasteful, it is positively destructive. 100 00:09:26.800 --> 00:09:35.240 So this is what happens, your wealth accumulates in the three areas, the entrepreneurial area, 101 00:09:35.240 --> 00:09:40.060 the consumer area, or the political area, and it follows that as your column of wealth 102 00:09:40.060 --> 00:09:49.860 increases in the political area, then there will be less in the way of either entrepreneurial 103 00:09:49.860 --> 00:09:57.700 or Consumer Goods. Now in our economy, which is a very dynamic one, we are very wealthy in this 104 00:09:57.700 --> 00:10:05.140 country, we are not aware of the fact, and it is a fact, that we are operating in an economy of 105 00:10:05.140 --> 00:10:11.140 scarcity. We don't think we are, because we go to the stores and the stores are stockpiled with goods 106 00:10:11.140 --> 00:10:16.660 and we think, boy, we really have it. It's running out of every aperture in the country. It's really 107 00:10:16.660 --> 00:10:21.220 tremendous, see? And then we go and examine the prices on the goods, and we say, gee, 108 00:10:21.220 --> 00:10:25.620 I can't afford to buy that. Oh, I can't afford to buy that either. Gee, I can't afford to buy this 109 00:10:25.620 --> 00:10:34.340 other. So we have the illusion of having plenty because it's there in the store, but it isn't in 110 00:10:34.340 --> 00:10:40.820 our house because we can't afford to put it there. Now, what you really have then is an operation of 111 00:10:40.820 --> 00:10:47.140 of Scarcity, but you don't know that it's scarce. You are simply deceived into thinking 112 00:10:47.140 --> 00:10:53.220 that you operate in an economy of plenty because you have the evidence of it, and yet you don't 113 00:10:53.220 --> 00:10:59.220 get to use it yourself. The reason you can't afford to use it is because of the increased 114 00:10:59.220 --> 00:11:05.780 prices that continue to appear on all of the goods that are offered for sale, and the reason 115 00:11:05.780 --> 00:11:11.820 for the Increased Prices. Certainly one of the basic reasons is that the politician continues 116 00:11:11.820 --> 00:11:17.680 to demand these taxes, and the taxes have to be paid for somewhere, so the more the 117 00:11:17.680 --> 00:11:23.860 taxes are, the higher the prices go. That's what pushes prices up. It's one of the reasons 118 00:11:23.860 --> 00:11:31.200 why prices rise, one of the major reasons. So here's what happens. The consumer would 119 00:11:31.200 --> 00:12:01.200 He would like to own a brand-new updyke. Remember, that's my pet vehicle here. He would like to own a brand-new updyke. He used to be able to buy one of these updykes for about $1,500. But now he goes down to the market to buy his new updyke, and the price is $3,000. He could afford to buy it if it cost $1,500, but now it costs $3,000. And he can't get one. It's simply priced out of his reach. So he doesn't like this, and he begins 120 00:12:01.200 --> 00:12:02.200 to Grumble 121 00:12:02.200 --> 00:12:09.400 Now, back in the earlier days, before our column of political wealth got so big, when 122 00:12:09.400 --> 00:12:17.600 a consumer was dissatisfied, he grumbled, but the fellow he told about it was the entrepreneur. 123 00:12:17.600 --> 00:12:21.620 He went back to the businessman and he said, look, if you can't produce something better 124 00:12:21.620 --> 00:12:27.500 than this or cheaper, I'm not going to buy it. And so the immediate communication occurred 125 00:12:27.500 --> 00:12:30.660 between the consumer and the producer. 126 00:12:30.660 --> 00:12:33.260 But now that isn't what happens so much. 127 00:12:33.260 --> 00:12:38.320 Today when the consumer is disgruntled and unhappy, and primarily because prices are 128 00:12:38.320 --> 00:12:42.480 too high, he turns and calls on the politician. 129 00:12:42.480 --> 00:12:46.700 He goes over to the politician and he says, doggone it, Mr. Politician, I want to buy 130 00:12:46.700 --> 00:12:48.740 a new up dike. 131 00:12:48.740 --> 00:12:51.140 Ten years ago I could have afforded it. 132 00:12:51.140 --> 00:13:02.140 I'm ready to buy one, if it's priced at $1,500, but I can't pay $3,000, and that's what these guys are charging me. Isn't there something you can do? 133 00:13:02.140 --> 00:13:16.140 Well, now when the politician gets enough complaints like this from his constituents, he begins to realize, you know, if my customers get, if my, not customers, but if my constituents get unhappy with me, they might retire me. 134 00:13:16.140 --> 00:13:17.140 Company. 135 00:13:17.140 --> 00:13:19.140 So I better not let that happen. 136 00:13:19.140 --> 00:13:23.880 So now he goes over and calls on the updike company and he gets the manager on the carpet 137 00:13:23.880 --> 00:13:28.460 and he says, how come you're charging so much for your updikes? 138 00:13:28.460 --> 00:13:32.940 And the manager of the updike company says, gee, I'm glad you came. 139 00:13:32.940 --> 00:13:35.120 I want you to check our books. 140 00:13:35.120 --> 00:13:38.320 You know that we are providing your tanks. 141 00:13:38.320 --> 00:13:43.180 And that has soaked up 60% of our productive capacity. 142 00:13:43.180 --> 00:13:45.340 We are now working three shifts. 143 00:13:45.340 --> 00:13:48.620 We've got a bigger layout than we've ever had before. 144 00:13:48.620 --> 00:13:50.380 We're doing our best to improve those tanks. 145 00:13:50.380 --> 00:13:54.780 Would you like to have us stop making the tanks and go back to making up dikes? 146 00:13:54.780 --> 00:13:58.220 And the politician says, my gosh, no, the tanks come first. 147 00:13:58.220 --> 00:14:00.260 Fine, says the up dike man. 148 00:14:00.260 --> 00:14:01.620 That's just what we're doing. 149 00:14:01.620 --> 00:14:03.380 We're providing the tanks. 150 00:14:03.380 --> 00:14:11.180 Now you take and realize that when we provide the tank, although you pay us for the tank, 151 00:14:11.180 --> 00:14:16.960 We are being taxed and I want you to see the fantastic numbers of thousands of dollar bills 152 00:14:16.960 --> 00:14:23.580 we send to you every year in taxes. It's part of that money, of course, that you use to 153 00:14:23.580 --> 00:14:30.180 buy our tanks when we make them. But everybody else is helping to pay this burden too. Sure, 154 00:14:30.180 --> 00:14:35.760 we're making a profit. Otherwise, we couldn't operate. But we're not making the profits 155 00:14:35.760 --> 00:14:41.360 that a lot of people suppose, because we're simply engaged in being taxed up to our eye 156 00:14:41.360 --> 00:14:48.760 teeth as it is. Well, says the politician, let's take a look at the books, and he does. 157 00:14:48.760 --> 00:14:54.680 And you can virtually anticipate that those books will be kept in compliance with every 158 00:14:54.680 --> 00:14:59.720 government regulation, the government auditors will go over it, and they'll have to hunt 159 00:14:59.720 --> 00:15:03.760 a long time to find a flaw. Once in a while, they'll find a flaw, and then there's a 160 00:15:03.760 --> 00:15:16.760 There's a lot of publicity about it, but most of the time they can't even find a flaw, and the rules are complicated and obtuse and confusing, and they bring in the best experts they've got, and the stuff is flawless. 161 00:15:16.760 --> 00:15:25.760 Here is a firm doing its best, working night and day to produce what the government wants, and the result is the customers are getting a raw deal. 162 00:15:25.760 --> 00:15:31.960 And so the Senator, or the politician, whoever he is, takes a look at this and he checks it out and he says, 163 00:15:31.960 --> 00:15:37.060 I'll be darned, there isn't anything we can do here. Keep up the good work, Mr. Uptight Maker. 164 00:15:37.060 --> 00:15:46.260 And he goes back and he continues to get the complaints from the consumers who are also voters. 165 00:15:46.260 --> 00:15:52.560 And he continues to become increasingly disturbed by it. 166 00:15:52.560 --> 00:15:59.440 Now there is another political action that begins to occur. When men in government begin 167 00:15:59.440 --> 00:16:05.200 to find that their demands upon the productive segment of the market, the entrepreneurial 168 00:16:05.200 --> 00:16:12.760 column, are diverting so many goods and services into their hands that the consumers are in 169 00:16:12.760 --> 00:16:20.480 a state of mutual and repeated unhappiness, and they're virtually perhaps on the brink 170 00:16:20.480 --> 00:16:28.560 of Rebellion, they just don't like it anymore, and they begin to evince this dissatisfaction. 171 00:16:28.560 --> 00:16:36.640 Now the politician comes up with another way of saving what he's got. He creates a whole 172 00:16:36.640 --> 00:16:45.640 new area of production that would come into our diagram here as a fourth column. This 173 00:16:45.640 --> 00:16:52.560 This would be a column of productivity arising between the entrepreneurial column and the 174 00:16:52.560 --> 00:17:01.120 column of consumer goods. It could be called government production. And this is precisely 175 00:17:01.120 --> 00:17:06.680 what has happened. It may come as a surprise to you to know that at the present time in 176 00:17:06.680 --> 00:17:15.960 In this country, there are more than 700 different kinds of goods and services provided by the 177 00:17:15.960 --> 00:17:22.640 government which are also provided in the market. I'm speaking of the federal government. 178 00:17:22.640 --> 00:17:30.400 The federal government is engaged in over 700 different kinds of businesses and enterprises 179 00:17:30.400 --> 00:17:37.720 Businesses and industries, which are also being conducted in the market. On top of that, 180 00:17:37.720 --> 00:17:45.240 your local, your state and local governments are engaged in some 200 other types of businesses 181 00:17:45.240 --> 00:17:55.200 which are also marketplace activities, such as, for example, parking lots, garages, cemeteries, 182 00:17:55.200 --> 00:18:06.200 golf courses, zoos, playgrounds, all of these are marketplace phenomenon, and all of these 183 00:18:06.200 --> 00:18:13.800 various governments are getting into and doing. Now, what does that mean? Well, what it means 184 00:18:13.800 --> 00:18:21.000 is this. The entrepreneur engaged in business activities and competing with other entrepreneurs 185 00:18:21.000 --> 00:18:26.760 who are doing much the same thing, now finds himself competing in another area. 186 00:18:26.760 --> 00:18:32.580 He now has to compete with his own government that could be doing the same thing he's doing 187 00:18:32.580 --> 00:18:36.500 or providing the same type of good or service that he's providing. 188 00:18:36.500 --> 00:18:38.400 But there is a difference. 189 00:18:38.400 --> 00:18:44.840 When he's competing with other entrepreneurs, he can compete with them on a relatively fair 190 00:18:44.840 --> 00:18:49.840 basis because they are faced with the same problems that face him. 191 00:18:49.840 --> 00:18:53.900 They have to finance their own activities. They have to keep an honest and open set of 192 00:18:53.900 --> 00:18:59.760 books. They have to pay the competitive wage, and they have to charge a competitive price. 193 00:18:59.760 --> 00:19:05.900 But when we get into government production, we have an action by the government in which 194 00:19:05.900 --> 00:19:12.820 – and this is a marvelous place to be if you want to be in business – in which the 195 00:19:12.820 --> 00:19:19.820 government can offer a good or service below the competing price, and in consequence operate 196 00:19:19.840 --> 00:19:39.840 Most government businesses do lose money, the Post Office being a very well-known and outstanding example of a business that was once a free market business in this country and is now a government monopoly, and of course it loses billions of dollars a year. 197 00:19:39.840 --> 00:19:45.760 Now, a businessman who is in the market can't do that. 198 00:19:45.760 --> 00:19:50.920 If he had one year like the post office has, he'd be out of business. 199 00:19:50.920 --> 00:19:58.640 But the post office can lose billions of dollars and then go back and tax its competition and 200 00:19:58.640 --> 00:20:03.020 tax its consumers to make up for its losses. 201 00:20:03.020 --> 00:20:05.280 And that's exactly what it does. 202 00:20:05.280 --> 00:20:09.400 So that is what begins to happen. 203 00:20:09.400 --> 00:20:15.440 Once you begin stockpiling political goods, you get the government then in the position 204 00:20:15.440 --> 00:20:23.160 of creating goods. It becomes the nation's major entrepreneur. Today, for instance, it 205 00:20:23.160 --> 00:20:29.200 is no surprise. I'm sure you are aware of this. The American government in its various 206 00:20:29.200 --> 00:20:35.120 manifestations is the largest landlord in the country. It is the largest insurance agency. 207 00:20:35.120 --> 00:20:40.760 is engaged in operating railroads. I mean owning and operating railroads, not just supervising, 208 00:20:40.760 --> 00:20:50.240 owning and operating railroads. It is putting in and manufacturing electricity. It is helping 209 00:20:50.240 --> 00:20:57.920 to run telephone lines. It is subsidizing and helping provide for recreational facilities. 210 00:20:57.920 --> 00:21:04.600 All of these things are originally in the private sector, but now they're all also in 211 00:21:04.600 --> 00:21:09.400 The Public Sector. The government is engaged, for example, in manufacturing rum. It is engaged 212 00:21:09.400 --> 00:21:17.760 in manufacturing women's corsets. It's manufacturing rigging for yachts. The list is almost endless. 213 00:21:17.760 --> 00:21:24.200 It has a vast number of things that it's doing in which actions it is competing with private 214 00:21:24.200 --> 00:21:29.980 people who are trying to do the same thing. And the government operations lose money traditionally 215 00:21:29.980 --> 00:21:37.060 Because they try to sell at a non-competitive price because the theory is that this would 216 00:21:37.060 --> 00:21:42.580 be bad, competition is kind of an unhappy thing, very few people like it, you know. 217 00:21:42.580 --> 00:21:46.940 And so they're trying to help the customer who's been complaining because prices are 218 00:21:46.940 --> 00:21:47.940 too high. 219 00:21:47.940 --> 00:21:48.940 So that's what they're doing. 220 00:21:48.940 --> 00:21:53.380 They're cutting down on the prices so the customer can get what he wants at a cheap price 221 00:21:53.380 --> 00:21:57.400 and so the government can provide it and then it loses money in so doing and then it turns 222 00:21:57.400 --> 00:22:01.680 turns around and taxes its competition and the very customer that thinks he saved money 223 00:22:01.680 --> 00:22:07.840 is now belatedly compelled to pay the difference between what he should have paid and what 224 00:22:07.840 --> 00:22:11.800 he did pay for the goods and services that the government provided. 225 00:22:11.800 --> 00:22:20.800 So this is the kind of distortion and dislocation that begins to emerge as government stockpiling 226 00:22:20.800 --> 00:22:26.920 of materiel and government wealth or political wealth begins to manifest. 227 00:22:26.920 --> 00:22:33.280 It follows, of course, that by far and away the most productive type of economy we could 228 00:22:33.280 --> 00:22:41.160 have would be one in which the first two columns of wealth are maximized. That is to say, we 229 00:22:41.160 --> 00:22:47.940 should have a situation in which the entrepreneur is free to produce without any inhibitors 230 00:22:47.940 --> 00:22:53.560 at all all of the goods and services that people could possibly want as people. And 231 00:22:53.560 --> 00:22:58.640 And the people would be in the position where they can work as hard as they want to, individually, 232 00:22:58.640 --> 00:23:02.040 to get what it is that's been produced. 233 00:23:02.040 --> 00:23:07.500 If there are no inhibitors in these areas, well obviously then you would tend to maximize 234 00:23:07.500 --> 00:23:12.380 both consumer satisfaction and entrepreneurial activity. 235 00:23:12.380 --> 00:23:15.840 And these things would tend to balance out. 236 00:23:15.840 --> 00:23:20.960 They would never be exactly even because market activities never do reach equilibrium. 237 00:23:20.960 --> 00:23:26.240 But they would tend toward equilibrium, and there would be a general maximization of human 238 00:23:26.240 --> 00:23:27.240 well-being. 239 00:23:27.240 --> 00:23:32.720 But every time you go into this third area and you begin to provide political goods, 240 00:23:32.720 --> 00:23:38.340 then a distortion occurs in the other two areas because the column of political goods 241 00:23:38.340 --> 00:23:42.360 is in itself a major inhibitor. 242 00:23:42.360 --> 00:23:49.880 By virtue of its existence, it inhibits, and the bigger it becomes, the more of an inhibiting 243 00:23:49.880 --> 00:23:59.880 So, you can keep that in mind when you think of human well-being and the accumulation of wealth. 244 00:23:59.880 --> 00:24:06.880 And here is, of course, the tragic characteristic. 245 00:24:06.880 --> 00:24:09.880 It goes to the entrepreneur, the businessman. 246 00:24:09.880 --> 00:24:15.880 At the beginning, you see, when governments are first started, they're very small, ineffective, 247 00:24:15.880 --> 00:24:24.120 and they're not really much of a worry to anyone but as they begin to grow the entrepreneur at first 248 00:24:24.120 --> 00:24:31.480 cannot tell the difference between a political customer and a market customer he presumes that 249 00:24:31.480 --> 00:24:39.960 they're the same he doesn't really wake up to the damage that the political column can do to the 250 00:24:39.960 --> 00:24:47.000 of the Economy until it becomes his competitor. As long as it's operating merely as a customer, 251 00:24:47.000 --> 00:24:53.240 he doesn't really worry about it. In fact, he sort of rejoices about it. Businessmen are 252 00:24:53.240 --> 00:25:00.640 among the first to stand in line, to compete, to get the government as a customer. But then, 253 00:25:00.640 --> 00:25:06.680 of course, when the government turns around and turns its hat around and can now be recognized 254 00:25:06.680 --> 00:25:13.640 And as a producer as well as a customer, that's the place where the businessman, the entrepreneur 255 00:25:13.640 --> 00:25:20.520 belatedly comes to his senses and says, Jiminy Christmas, there's a big difference between 256 00:25:20.520 --> 00:25:25.160 a government that is only a customer buying what I can produce and a government that is 257 00:25:25.160 --> 00:25:31.440 engaged in competing with me and underpricing me, which it can do because it can make up 258 00:25:31.440 --> 00:25:35.800 its losses through a method that I can't use. 259 00:25:35.800 --> 00:25:43.480 And there you have the State of the Union today. You have a situation that is increasingly 260 00:25:43.480 --> 00:25:51.800 distorted. And who pays the bill? Well, it's the consumer. And everybody in the world is 261 00:25:51.800 --> 00:25:58.120 a consumer, including the politician and the businessman. We're all consumers, and we 262 00:25:58.120 --> 00:26:03.680 all have to pay for this distortion. So that's the kind of thing that happens when we don't 263 00:26:03.680 --> 00:26:25.680 We don't correctly understand the nature of wealth, and we don't see that wealth is something that properly inheres to the well-being of human beings and to their satisfaction rather than to the well-being of politicians in their role in trying to dominate and control and inhibit human behavior. 264 00:26:25.680 --> 00:26:27.680 So that's something to keep in mind. 265 00:26:27.680 --> 00:26:35.680 Now, the next thing I want to take up is the subject of money, because I want it very clearly 266 00:26:35.680 --> 00:26:43.160 understood that money and wealth are different things. Wealth is an end product, something 267 00:26:43.160 --> 00:26:49.480 that we want because we believe that once we have it, it will lead directly into a satisfaction 268 00:26:49.480 --> 00:26:55.400 that we would like to obtain. Money, on the other hand, is a medium of exchange, a transfer 269 00:26:55.400 --> 00:27:03.380 are a device that we will be most satisfied with at the time we get rid of it, because 270 00:27:03.380 --> 00:27:09.540 when we get rid of it then we anticipate that we will get the satisfaction we want. So wealth 271 00:27:09.540 --> 00:27:17.540 satisfies us at the time we get it, and money satisfies us at the time we get rid of it. 272 00:27:17.540 --> 00:27:24.220 So obviously, these things are very, very different. Now, in the long history of working 273 00:27:24.220 --> 00:27:29.340 with Money. We've probably never come up with a perfect money, and we probably never 274 00:27:29.340 --> 00:27:35.660 will. But it is very important at the outset that we realize that money and wealth are 275 00:27:35.660 --> 00:27:43.540 different things, and that wealth is not an end product, with this possible minor exception. 276 00:27:43.540 --> 00:27:50.380 Men engaged in the money business as such, having stockpiles of savings that can be used 277 00:27:50.380 --> 00:27:57.300 for Investment Purposes, in a sense, have a productive tool. And in that classification 278 00:27:57.300 --> 00:28:04.500 exclusively, money does appear to be an entrepreneurial good rather than merely a medium of exchange. 279 00:28:04.500 --> 00:28:09.860 But with that exception, keep in mind that money is a medium of exchange and valuable 280 00:28:09.860 --> 00:28:16.220 most when we spend it. And wealth is not a medium of exchange, it is an end product that 281 00:28:16.220 --> 00:28:23.540 Thanks very much.