Wealth Creation


By CARL J. SCHRAMM:

Trump should set a goal: fix the business climate so a million Americans a year can start companies. . . .

More people have joined the ranks of the chronically unemployed, slipping into poverty at alarming rates as their skills decay and dependency on public assistance grows. Considering population growth, America needs at least 325,000 new jobs every month to stanch the growing numbers of discouraged workers. . . Merely bringing back factories from overseas will not solve this problem. Technology has made every factory more productive. Fewer workers make more goods no matter where they’re located. At the same time, fewer U.S. businesses are being started. . . .

New firms are the country’s principal generator of new jobs. Data from the Kauffman Foundation suggest companies less than five years old create more than 80% of new jobs every year. . . .

This absence accounts for an estimated seven to 10 million jobs that, had they existed, could have provided employment for every one of the nation’s discouraged workers. Simply put, the U.S. will never reach full employment without more startups. . . .

First, increase economic growth. More businesses start when GDP expands at 4% rather than 2%. Existing businesses look for new markets, often turning to young companies for innovative ideas. . . .

Mr. Trump should also focus less on Silicon Valley, which already receives disproportionate attention from Washington. . . .

Government must also widen the scope of innovation by stepping back and letting the market find the future. By promoting trendy ideas and subsidizing politically favored companies, government dampens diversity in creative business ideas. Why start an electric-car company when the federal government already has picked the winner?

The new president must also make it possible for local banks to get back in the business of financing startups. For 200 years, community lenders were the principal source of capital for startups. The application of complex Dodd-Frank provisions has led community banks to finance fewer and fewer promising businesses—despite their unique knowledge of local markets. . . .

Mr. Trump can also reverse regulatory sprawl and cut government-imposed requirements that add to every entrepreneurs’ costs and risks. Anti-growth policies like ObamaCare and minimum-wage increases make hiring workers prohibitively expensive. Municipal regulation is particularly onerous. Cities commonly use sanitation and building codes to protect incumbent businesses. Uber cannot operate in many cities because officials have chosen to protect local taxi cartels, denying their citizens the innovative efficiencies of the shared economy.

With these policies in mind, President Trump should set another goal: that his administration will create an environment that enables one million Americans to start companies every year.

 

Here

Is, in a word, government.

All the passionate talk about the personalities and potential crimes of the presidential candidates has obscured debate about what the federal government actually does. Both Trump and Clinton promise to spend us to oblivion taking care of various collectivist groups: vets, seniors, farmers, military contractors, teachers, etc.

But that spending (and inevitable taxing) serves one overriding purpose: to make the people in Washington D.C. ever richer and more powerful. Its a bipartisan bonanza. Yes, the money will trickle down to those constituents I listed above. But the politicians, lobbyists, regulators, and other government employees take their cut first. All that money requires programs and administration. Who does that? Why the people who work in government. And what is the result?

Kevin Williamson explains. I tease you with this: “But Washington builds no iPhones. It doesn’t really build much of anything, and it doesn’t create any wealth — it just takes it.

Here.

Pols and regulators should butt-the-hell out of corporate mergers and other actions that disrupt the status-quo. See Democrat primary loser and hypocrite for supporting corporate shill Hillary Clinton Bernie Sanders for example. Trump also said he opposes it.

Employees of the merging firms must figure out how best to serve their customers and shareholders.

Remember folks, firms have to work within the current regulatory and legal framework. If gov’t wants to do something useful it should deregulate telecom and scrap net neutrality. Those constrictions led the decision-makers in this deal to view a merger as a way to drive growth.

The interventionist fear is based on outdated definition of monopoly. Standard Oil’s so-called “monopoly” lowered kerosene prices “from 58 to 26 cents from 1865 to 1870. Competitors disliked the company’s business practices, but consumers liked the lower prices.” https://en.wikipedia.org/wiki/Standard_Oil.

Yet, some politicians and activists want to stop this merger because they are simply afraid of change.

You can let firms experiment and innovate to figure out how to serve customers and grow, or you can let politicians protect the status quo and continue with 1% GDP.

 

Global economic freedom increased slightly in this year’s report to 6.85. Hong Kong and Singapore retain the top two positions with a score of 9.03 and 8.71 out of 10, respectively. The rest of this year’s top scores are New Zealand, 8.35; Switzerland, 8.25; Canada, Georgia, Ireland, Mauritius, and the United Arab Emirates at 7.98; and Australia and the United Kingdom at 7.93.

The United States, once considered a bastion of economic freedom, ranks 16th for a second consecutive year with a score of 7.75. Due to a weakening rule of law, increasing regulation, and the ramifications of wars on terrorism and drugs, the United States has seen its economic freedom score plummet in recent years, compared to 2000 when it ranked second globally.

Here.

 

Stanford-trained economist John Hussman on the economy’s persistent weakness:

Instead, the true wealth of a nation is embodied in its capacity to produce, as measured by the stock of real investment (productive capital, stored resources, infrastructure, knowledge) it has accumulated as a result of prior saving.

. . .

One of the hallmarks of the bubble period since the late-1990’s is that the growth rate of real U.S. gross domestic investment has slowed to less than one-quarter of the rate it enjoyed in the preceding half-century.

. . .

Over the past 16 years, U.S. real gross domestic investment has crawled at a growth rate of just 1.0% annually, compared with a growth rate of 4.6% annually over the preceding half-century. There’s your trouble.

 

. . . The path forward:

Simply put, the only thing QE really does is to distort the financial side of the economy, enabling and encouraging yield-seeking speculation and massive sectoral imbalances that we observe as wealth disparities and bizarrely distorted securities markets. The proper course of economic policy is to expand productive investment at every level of the economy through the action of Congress (including infrastructure investment, corporate investment tax incentives, workforce development credits, and other measures ideally tied to the creation of new jobs). The Federal Reserve is not a source of prosperity. It is the single most dangerous and unregulated risk factor in the U.S. economy. We should have learned that during the yield-seeking mortgage bubble and the collapse that followed. We have not, so we now face the equivalent prospect again.

Here.

DEIRDRE N. MCCLOSKEY:

Why are we so rich? . . .

Actually, the “we” of comparative enrichment includes most countries nowadays, with sad exceptions. . . .

What caused it? The usual explanations follow ideology. . . .

Deirdre has other ideas:

The capital became productive because of ideas for betterment—ideas enacted by a country carpenter or a boy telegrapher or a teenage Seattle computer whiz. As Matt Ridley put it in his book “The Rational Optimist” (2010), what happened over the past two centuries is that “ideas started having sex.” . . .

Why did ideas so suddenly start having sex, there and then? . . .

The answer, in a word, is “liberty.” Liberated people, it turns out, are ingenious. Slaves, serfs, subordinated women, people frozen in a hierarchy of lords or bureaucrats are not.

Yes, liberty. Read the whole thing.

Belgian Vincent Callebaut has a designed an underwater skyscraper. These “oceanscrapers” would house up to 20,000 people; reduce our carbon footprint on the planet; and wouldn’t require fossil fuels, because they’d produce their own energy and heat.

Pictures here.

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