THE PERSPECTIVE THAT NO ONE SEEMS TO UNDERSTAND

The Perspective That No One Seems to Understand

What direction should this country take??The Washington political apparatus has not been functioning with any tangible valuable output for about a decade.?There are no “visionaries”, no “oracles” and no “inspired leaders” that are guiding the thoughts of the American people.?So the mass population floats intellectually adrift in a meaningless sea of information, with segments clinging to splintered parts of fractured party platforms.

Collectivism or Capitalism??Why isn’t one or the other a clear choice for the American people??I think that both of these ideas are too big and complicated to be embraced by people who really just want to focus on their own life…and hope that the government is not going to negatively impact their lives.?Regardless of apathy or ignorance, many of these folks will vote for a party option.?Making the “right choice” will be more happenstance than good judgment.?

If these folks choose right, that positive outcome may not become clear even over the next 4 years because the economy is likely to continue its lackluster performance.?If they get it wrong, the current marginal economic situation will take an additional negative downturn putting the economy in a precarious position, without precedence and with no currently knowable result.

I would like to propose that we all begin to look at our economic climate through the lens of “value creation”.?Incremental positive “value creation” only comes from concerted human effort.?There are good and bad random acts of nature.?I knowingly disregard these effects because they are, by definition, not controllable.

A simple postulation:?“The sum total of all value creation is the source of all prosperity and subsequently, becomes the aggregate standard of living.?So, logically, we should all choose to foster systems that optimize and maximize value creation.?Said another way, we want to spend the least amount of energy to produce the greatest results so that all of us can collectively be better off.?“A rising tide lifts all boats”.

For all of us to understand the “leverage” needed to optimize and maximize value creation, we need to understand two categories of humans that create value. ?This analysis is purposely simplistic so that the underlying point can be easily understood.

1.??????We need a group of people dedicated to preventing some human beings from physically harming other human beings.?This group needs to have policies and procedures that equitably rule this system so that it can’t be abused by any factions.?The value creation of this group is the sum total of what it costs society to support this system.?In other words, the sum total of all salaries, energy consumption, disposable supplies and capital investment.?We will call this group of people, “Government Contributors” (GC).

2.??????Everyone else, I will put into a capitalistic system.?They are on their own to find ways to “create value”.?Presumably, the more value they create, the higher they will be compensated by those that want to purchase that this value.?An individual with “undifferentiated value” is going to be compensated at the lowest level.?At the other extreme, an individual that creates a “value system” (called a business) is going to be able to hire others to work in that system and are now creating “leveraged value”, whereby they are being compensated for the idea to create a system and for their expertise in managing the system. We are going to call this group, “Private Enterprise Contributors” (PEC).

If we spend $1,000 on Government Contributors, the economic effect is to produce an additional $2,000 of salaries for the resulting supporting services.

By contrast, if you spend $1,000 on a Private Enterprise Contributor that creates a business system that produces a product, the economic effect is to produce $3,500 of salaries to support this system.?This result flows from a combination of efficiencies within the business, the required supply chain to produce the goods and the various resources required for distribution.?

Granted every society needs a baseline of services that can only be provided by a government entity, e.g. the military, local police, etc.

However, beyond the most rudimentary, safety related, government services, a society will maximize their collective standard of living by directing all other resources to Private Enterprise Contributors. In other words, leaving the money in the hands of taxpayers/consumers.

When a society has optimized and maximized the standard of living, individuals can voluntarily redirect some of their gains to support less fortunate individuals.?In addition, government can be judiciously expanded to help the truly indigent.

The tragedy that our society is currently facing is the redistribution of resources to those who are not “creating value” but are simply sucking up resources.?People will be motivated to create value if that is what is required for them to live comfortably.?“Necessity is the Mother of Invention”.?

If we direct resources to unnecessary, redundant, inefficient or ineffective government activities, then we reduce the GNP, raise unemployment and reduce tax revenues by withdrawing resources from the most productive segment of our society.

Individualism, born out of this country’s pioneering roots, is what makes the United States unique in the world. The, so called, “collectivist thinking” is not about the power of working as a team, but about “what can I get without contributing anything”.?Those in power that are pedaling this mantra with their class warfare rhetoric are trying to buy an extension of personal power by giving candy to children.

In a rich society like ours, citizens should be creating value in pursuit a good standard of living.?Besides the material gains, there is the psychological reward of making a contribution to society.?Human society, like other systems of nature, should operate in a fashion that allows it to continue to evolve to an ever-increasing, more effective and rewarding condition.?There will be some “creative destruction” along the path.?This may be bad for those directly affected, but is good society as a whole.