Does the Government Create Wealth?

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Is the government in the wealth creation business?

If so, how?

And, if not, does the government have a role in wealth creation?

If so, what is it?

I’d like to explore possible answers to these questions.  Are they going to be the right answers?  Not sure.

But, that’s ok, I believe it’s good to get a dialog going on such issues.  To clear the air.  To get on the road to clear thinking which usually leads to clear, purposeful and gainful decision making.  Which in turn, hopefully, leads to a better quality of life.

So, let’s begin.  Does the government create wealth?

Government ok

First, I want to state unequivocally, there’s nothing wrong with government. I think it’s great. In proper doses. And, with proper power checks.

But, as with any institution, government has limitations. Some things it does well; others not so well. Some things it’s meant to do; others it’s not.

Define Wealth

Before we go any futher, we probably need to get a definition for wealth.  What do we mean by wealth?

So, to keep the conversation going, I’ll volunteer a definition as follows:

Wealth:  The economic result of a a profitable enterprise.  The measuring stick:  Currency, dollars, money.  The more profit, the more wealth.

So, this is not a discussion of wealth in terms of happiness, security, safety, health and other other hard to quantify “wealth” measures.  We can discuss those in a later article … how’s that?

What is the source of government money?

Where does the government get all the money it hands out?

Is the government busily working day in and day out actively involved in profitable enterprise?

I don’t think so.

Then where?  Where does the money come from?

The “T” Word.

That’s right.  You got it.  Taxes.

The dreaded “T” word.  Dreaded if you’re on the paying end; not so bad if you’re on the receiving end I suppose.

The government is a big tax collecting machine.

Anything wrong with that?

Not really.  Apparently, the government has a charter to collect taxes.  And, they appear to be very good at it.  And, I’d like to believe the money is spent on gainful, purposeful, value adding endeavors.

Al Gore Would Approve

So, if the government gets its money from taxes, then the source of wealth must lie outside government.

Remember our definition of wealth?  Profitable enterprise.

Isn’t tax collection just people paying money into a community “basket?”

If I went around with a basket collecting money from people could I really say I was involved in profitable enterprise?  Or, would folks come up with a more colorful name for what I was doing?  A more appropriate name?

So, can we agree, collecting money probably falls outside the definition of profitable enterprise?

But, it sure generates a lot of revenue for the government.  You could say they’ve almost perfected the art of taxation.  But, is it wealth creation?

Hardly.

Saying the government creates wealth is like Al Gore saying he invented the internet. It looks good on the resume but it’s not true.

Does Government Have a Role?

So, does the government have a role in wealth creation?

I would suggest they do; a big one.

Although the government doesn’t create wealth, it plays a critical role in creating the economic conditions, environment, and system for promoting, growing and rewarding those who do.  The wealth creators.  The real source of wealth.

Maybe it’s for the best

So, the government doesn’t create wealth.  So what?  Is that really a bad thing?  Or is it a good thing; a positive?

Do you really want the government in charge of creating wealth?  Should it be on their “to do” list?

I don’t think so; for several reasons.

First, it shouldn’t be in their area of responsibility.

Remember, I said the government does some things well; others not so well?  And, some things it’s meant to do; others it’s not.

Well, I would suggest that “wealth creation” falls into the “not meant to do” category.

“And, why’s that?  I can hear you ask.

Which leads me to my second reason.

Is the government any good at wealth creation?  Are they any good at starting, operating and managing profitable enterprise?

Again, I don’t think so.

So, why put the government in charge of something they’re not good at; something outside their skill set; something they don’t do well?

Doesn’t make sense.

For an example of a government in the wealth creation business, take a look at the former Soviet Union.  From what I understand, they had a lot of government owned businesses; virtually all of them.  How did that work out?

What grade would you give the Soviet Union government on their wealth creation efforts?  Would it be a passing grade?  Or, would you flunk them?

Do you think any other government could do better job?

Or, should governments – all governments – just stay out of the wealth creation business?

Should governments stick to the facilitating wealth creation instead?

Stick to creating the economic environrment where wealth can grow?

Stick to creating a free enterprise system.  A system that promotes and rewards wealth creators?

Wealth Creators?  Who are they?

And, that leads to a very interesting question as follows:

Just who are these profit makers, these wealth creators?

That’s the subject of my follow-on article … Who are the Wealth Creators?

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  1. Great blog! I just added it to my favorites.

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