This is a companion post to my offering of last week declaring victory in America’s war against poverty. If you missed that post, it is available on Substack and on my website: www.mllg.us. The above headline notwithstanding, poverty has no root cause; it is the natural condition of mankind. We begin in paleolithic times.
The Natural Condition of Mankind
At the dawn of civilization our ancestors subsisted as hunters-fishers-gatherers. There was no economy per se. People were divided into small families or clans, each of which functioned as a putative economic unit. They coexisted with other such units, mostly peaceably, sometimes not. Their lives, short and brutish, were on a bare subsistence level - wholly dependent on the fickle bounty of the sea, the exigencies of the hunt and the caprice of nature.
What economic lessons can we sophists of the twenty-first century glean from such primitive people? What, if anything, can they teach us? Surprisingly, they teach us an ineffaceable economic truth applicable across all time and space, i.e. the natural and normal condition of mankind is poverty. There is no known instance where any aboriginal population existed in any state other than poverty.
Most people understand the natural condition of man is poverty, but fail to grasp its implications. Progressives prattle about the root causes of poverty and even have declared war against it. America has spent $25 trillion since it declared war on poverty in 1964. In 60 years of that war, poverty has not been reduced one whit.
Those who consternate about the causes of poverty are wasting their time. They are asking the wrong question. The question we should be asking is: what causes wealth and how can we bring it about. Wealth is not a natural condition of mankind and is rare throughout the sweep of human history. Wealth creation must be understood and fostered. It is only by understanding wealth that poverty can be alleviated.
Progressives assert that, for example, lack of education creates poverty. This is a posteriori reasoning. People are born uneducated. To create wealth they need to become educated. Education creates wealth; ignorance does not create poverty.
What Causes Wealth?
Harken back to our paleolithic fishermen ancestors. They struggled to spear enough fish to survive, until a nascent capitalist thought of a net. Since capital did not yet exist anywhere to finance the construction of this fisherman’s net, he had no choice but to create his own. He worked every waking hour for months accumulating enough extra fish (his capital) to allow him the time to construct his net.
The net worked as planned and our budding capitalist now generated a surplus of fish to trade for other goods - in the process giving birth to the division of labor. His capital investment made him wealthier than the others in his clan - but it also made everyone else better off. He now generated capital which could be used by other entrepreneurs in his clan to increase the prosperity and well being of everyone.
Capitalism Creates Prosperity and Eliminates Poverty
What worked for our capitalist paleolithic fisherman is the same thing that worked for the capitalists who founded Wal-Mart, Amazon, Tesla, Apple and Microsoft. They have become immensely wealthy, but in the process they have enriched all our lives and increased our productivity. Not one of these successes was created by government or socialism. Who has done more to benefit the common man - Henry Ford, Steve Jobs and Sam Walton - or any king, president or commissar?
Capitalism has created a cornucopia of wealth unprecedented in human history. Extreme poverty worldwide is nearly eliminated and every metric of human well being is improving. Average folks live better than monarchs a few decades ago. Luxuries a short time ago are selling for ridiculously cheap prices at Wal-Mart and Costco.
To continue to improve the lives of everyone and to end poverty, we must shed our shibboleths. Unlike our stone age ancestors, we do not blame poverty on deities, animal spirits or the position of stars. Today, progressives and the media blame poverty on bogeymen like greed, multi-national corporations, western civilization, capitalism, fossil fuels, racism, free trade and lack of diversity, equity and inclusion.
In the twenty-first century we understand how to create wealth and eliminate poverty, but we fail to do so because of obeisance to the false gods of progressivism.
"Education creates wealth;" FALSE
Education teaches one how to learn and make available (marketable) skills to those who are the wealth creators.
Working with a true entrepreneur in 1990, we determined that real wealth is created only by manufacturing. All else follows from a dependence upon the monies/capital created by the IDEAS and visions of entrepreneurs and the resulting manufacturing processes bringing their vision to fruition. Back in the day, I reviewed several years of Forbes Magazine's wealthiest. Of those who were not inheritors of someone else's fortune, 80+% did not have any formal education past high school. Most of them were just too busy laboring to achieve their vision, and making money, to bother with "higher education". If they needed certain skills, they adapted or hired people who had accumulated those skills either through "hard-knocks" or schooling.
Your own example proves the point. The person who envisioned a different way to catch fish didn't come up with the IDEA because he/she was educated. The IDEA came from a desire to create a way to be more efficient in the catching of fish to better provide for him/herself and his/her family/clan. Wealth was created from the gathering of fibers (or whatever) and, after much trial and error, fashioning a device that trapped/harvested a number of fish at one time (as opposed to catching one at a time). Efficiency.
Once the process was "perfected", and word got out that there was "a better way", a demand for his/her nets was created, the barter system (popular at the time) took over, and he/she became "wealthy". A couple hours of gathering by the clan and a couple hours of connecting the materials might well have had a "market value" of a ewe (4 hours of labor for one ewe and maybe 12 hours for a ram sounds pretty good when one could create maybe 3 nets a day) and a few ewes and a ram can generate a flock (creating an ancillary "business" generating more bartered goods) .
Since families/clans were pretty mobile in those days, when the "market demand" for nets in one area was "saturated", some of the clan remained there as sheepherders and the "net manufacturers", having taught their skills to extended family, moved on (with a couple ewes and a ram) to other communities where they created more "wealth" by making different nets to accommodate the needs of the new communities they visited until the whole market was saturated. When the net-family/clan came across a group that had made a "cart" to transport animal furs (or whatever), a trade was made - nets for carts. Now the net makers could settle and remain in more hospitable climes where net materials and grazing areas were more abundant. Any person with a cart could transport nets to areas where fish were the dominant product and return with fish, and other goods created by other's IDEAS like bows and arrowheads, etc.
Many other "businesses" came about as services or embellishments arising from the manufacture of nets and each created some manner of "profit/wealth" ultimately derived from nets.
"Wealth" is created everywhere, but all derives from an entrepreneurial IDEA and vision coupled with a determination to make that vision of the future come to pass.
Education then comes from the teaching and learning of ways to assist the IDEA-people who manufacture and thereby create wealth.
===================================
The "Root" cause of poverty came originally when some "persons", for whatever reason, were not given "intelligence" by their creator, nor were they given the opportunity by their oppressors, to use whatever talents they derived from older generations. For whatever reason not all humans are created with an equal amount of "intelligence/reasoning power". Some humans became an underclass while others became dominant intellectually and it has remained so till today.
In the case of the US, much poverty was created when people who did not speak the language and many who for whatever reason had a limited power of deduction were introduced into society. They existed by becoming common laborers (slaves), dependent upon their "masters", as were their offspring who, with some notable exceptions, were given little or no opportunity for intellectual advancement.
Lincoln's Emancipation Proclamation freed those persons. So the country was faced with what to do with a group of people who had language issues and few marketable skills. Some, with the determination to succeed sought out ways to educate their masses to give them marketable skills and even today we honor those people and revere their fortitude.
Fast forward to the Johnson Administration. In the South, politicians were still smarting from the loss of their "free" labor and Court decisions requiring the teaching of basic english and the 3 Rs in integrated schools. There were tens of thousands still with no marketable skills in communities mostly east of the Mississippi. So, Johnson's Administration generated "The Great Society" whereby great warehouses were built for these persons in major urban areas. These warehouses, like the 9th Ward in N. Orleans and Cabrini Greens in Chicago were financed with Tax Incentives for the wealthy (IRS Section 8) and concentrated this group where they could be better "controlled" by local authorities. (Note that many in the lower 9th Ward during Katrina were reluctant to leave by riding the waiting trains and busses to safety. Many of them walked to the Silverdome where they, when asked why they didn't leave, said they were there waiting for the Government to come and take care of them as it had all their lives.)
Fast forward to today. The Biden Administration has opened the floodgates at our southern border and millions of persons of unknown origin, background or talents are pouring into this country with no place to go and nothing to do to support themselves and/or their families. Sanctuary Cities have become Biden's human warehouses.
Do we know exactly who these people are and wherefrom they came?
Do they have marketable skills?
Do they have any financial means of support?
Do they speak and understand the English language?
Have they learned any of the 3 Rs?
All the answers are WE DON'T KNOW!! and WE DON'T CARE, as long as they manage to find someplace to squeeze into our economy and maybe, possibly, hopefully, eventually become self-sufficient and able to vote.
In the meantime, cities and states will be driven into bankruptcy because the costs to their citizens are onerous and "wealth creators" are fleeing with their capital to places where their IDEAS can be nurtured and their visions brought to fruition without being smothered by expensive regulations placed on them by ever-growing bureaucracies needed to control these masses of immigrants.
Biden's Greater Society! The newest "ROOT CAUSE" of Poverty.
My 2 Cents
Jim O'Donnell