No Longer Operating Under The Original Intent

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Posted: Sep 28, 2020 10:03 AM
No Longer Operating Under The Original Intent

Source: National Archives via AP

In essence we are no longer operating under the Original Intent of the founding of this country. Since subtracting wealth from the top and adding it to a lower level is mathematically a zero net gain, the economy does not grow. However, in actual practice, this results in a net loss. Since part of the State, the bureaucracy, consumes a portion of the wealth when it is forcibly taken and then administratively redistributed, states end up with less capital than when they started. There is also further loss when wealth creators – particularly the higher level – lose significant incentive to create wealth or move their wealth into prospects which the statist cannot reach. Simply stated: American Exceptionalism is dis-incentivized and quite often smashed altogether. All levels of wealth lose and are diminished under these conditions.[1]

The lower level of wealth has a hard limit of zero. Meanwhile, the upper level of wealth is nearly unlimited. Therefore, unless people suffer from envy – one of the seven deadly sins and a violation of the 10th Commandment – we should not be jealous of those who increase their economic worth when achieved under the law. When citizens of the United States increase in wealth, they do so by increasing the overall economy, not from taking the wealth of another. This increases the potential for more prosperity for all. In fact, since 1994 the Gini coefficient[2] has not changed. Though it varied slightly during this nearly 20 year period, the Gini coefficient for individuals increased from 0.510 in 2011 to 0.512 in 1994.[3]

The essence of this increase in wealth (capital) is productivity. The “lean [business model] creates the most wealthy strategy of anything I have ever seen.”[4] America has been the most productive civilization in the history of the world. From just 1947 to 2007, the percent of Americans employed in manufacturing has decreased from approximately 33 percent in 1947 down to approximately 10 percent in 2007 while manufacturing output has remained at around 14 to15 percent of the total GDP for the 60 year period.[5] This translates into a very significant productivity increase which directly creates wealth for all levels of wealth in America. “It is often said that the American manufacturing sector is in decline, but in fact manufacturing is declining in terms of employment, not in terms of output or its share of the economy.”[6]

[1] Ayn Rand’s book Atlas Shrugged is the story of this phenomenon.

[2] The Gini coefficient (also referred to as the Gini index or Gini ratio) is used as a measure of statistical dispersion of income inequality.   It was developed by the Italian statistician Corrado Gini and published in his 1912 paper, Variabilità e mutabilità (Variability and Mutability).  A Gini coefficient of 0 means perfect equality while a Gini coefficient of 1 equals complete inequality.  See the U.S. Census Bureau’s website (http://www.census.gov/) for numerous studies and analysis of Gini coefficient in the United States.

[3] Political Calculations, September 26, 2012, “Visualizing Income Inequality Since 1994,” Townhall.com, [http://finance.townhall.com/columnists/politicalcalculations/2012/09/26/visualizing_income_inequality_since_1994/page/full/].

[4] Arthur Byrne, September 7, 2012, phone conversation.  Art Byrne is the former CEO of the Wiremold Company, which was one of the best examples of a lean enterprise in the United States.  Art lead the transformation of Wiremold with stunning results.  See Bob Emiliani with David Stec, Lawrence Grasso and James Stodder, 2003, Better Thinking, Better Results: Using the Power of Lean as a Total Solution, (Kensington, CT: The Center for Lean Business management).

[5] Peter Wehner and Robert P. Beschel, Jr., Spring 2012, “How to Think about Inequality,” National Affairs, Number 11, p. 100, Figure: Real Manufacturing Output and Employment.

[6] Peter Wehner and Robert P. Beschel, Jr., Spring 2012, “How to Think about Inequality,” National Affairs, Number 11, p. 100.