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Governments Do Not Create Wealth

Wealth & Poverty: A New Edition for the 21st Century

Even if it wished to, the government could not capture America’s wealth from its one percent of the one percent. As Marxist despots and tribal socialists from Cuba to Greece have discovered to their huge disappointment, governments can neither create wealth nor effectively redistribute it, they can only expropriate it and watch it dissipate. Under capitalism, wealth is less a stock of goods than a flow of ideas and information, the defining characteristic of which is surprise. Schumpeter propounded the basic rule when he declared capitalism “a form of change” that “never can be stationary.” The landscape of capitalism may seem solid and settled and something that can be seized; but capitalism is really a noosphere, a mindscape, as empty in proportion to the nuggets at its nucleus as the solar system in proportion to the size of the sun.

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1 reply to this post
  1. Even to my economically unsophisticated mind this doesn’t ring true. Governments certainly have other perfectly legitimate options for being involved in the economic activity within their sphere of influence. To say that taxation is the only kind of economic activity in which governments can engage is a unimaginative and truncated viewpoint. The free market is a human construct. Governments set the ground rules within which economic activity takes place: rules of property, ownership, corporations, contracts, credit and bankruptcy, All of these are rightly established and enforced by governments. And the types of rules largely determine the effectiveness and the efficiency of the economy and how wealth (and the ideas that create it) flow within a society. Good rules makes for prosperity for the whole society. Bad rules create unbalanced and unhealthy concentrations of wealth, and therefore power.

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