America is the greatest richest and most humanitarian nation in world history. Never in history have so many earned so much and had so much to eat. The life expectancy in America has doubled since we won our independence.
In 2014, Americans earned so much money that they gave $358 billion to charity.
Where did all of this great wealth come from?
Did it mysteriously appear among us? Was it an accident? Or did our great wealth and prosperity emerge for a reason?
If we don’t understand how we got here, we are in danger of losing our way. If we continue to believe that a big government with its attendant debt is necessary to plan our economy then we risk losing everything.
How did America become great? Was it some master plan? Was there some genius who designed America’s success?
The answer is no . . . no . . . and hell no!
America’s greatness came from giving individuals the freedom to choose where they work, what they buy, and how much they save. America’s greatness came from our founders keeping government constrained and on a leash.
If we fail to understand how we arrived at our success, we risk squandering what has been the American miracle, the American juggernaut, the exceptional success that is, frankly unparalleled in history.
Adam Smith never set foot in America but he understood what was necessary for prosperity and success.
In the “Wealth of Nations,” Adam Smith gave words to an idea that would completely transform the world.
Smith understood that self-interest actually leads to coordination and specialization of workers to provide greater good for society. Smith wrote the famous lines, “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.”
Smith understood one profoundly true characteristic of man’s interaction with man: namely, that men and women each acting in their own self-interest create something bigger than themselves.
A collective good comes from individual’s striving for their own self-interest. Individuals all striving to fulfill only their own family’s needs ultimately produce goods, services, and prosperity beyond the imagination of any one person.
Leonard Read captures this miracle probably better than anyone. In his essay, “I, Pencil” Read informs us that no one person possesses either the knowledge, skill, or resources to make even something so simple as a pencil. And yet disparate people across continents all acting in their own self-interest all come together to not only create a pencil but a pencil for pennies.
To understand the miracle of millions of people all acting in their own self-interest creating an economy that feeds over 300 million people and has nearly $400 billion left to help others should be to understand that if we disrupt the individual from acting in his or her own self-interest, if we elect planners who will plan our health care, our internet, our banking that we risk destroying the miracle that made America great.
To maintain the miracle of American prosperity we must understand what Leonard Read eloquently put forth in “I, Pencil” and what Austrian economist Frederick Hayek made quite clear: no one individual or group of individuals can physically posses, analyze, or execute the knowledge that is possessed by the collective actions of millions of individuals interacting and transmitting instantaneous knowledge and pricing to each other.
Ironically, the interaction of millions of consumers in the marketplace leads to a collective knowledge that will always transcend the knowledge of the individual. No one planner can ever accumulate, decipher, and disseminate the nearly instantaneous knowledge of the marketplace. Nor should any planner or group of planners ever be given that power.
When the planners cast about with class arguments that freedom will only lead the rich getting richer, we must patiently explain what Joseph Schumpeter explained: that the miracle of capitalism is not that the Queen can buy silk stockings but that factory girls can. Or in today’s parlance, the miracle is not that millionaires can buy iPhones but that day laborers can.
By understanding that innovation initially commands a daunting price, it is capitalism and competition that drives that price down until even the least among the people can often own things such as a cell phone or a microwave or often, even a computer.
In the Cold War, the incredible engine of capitalism defeated the sputtering engine of socialism. Now a debt that equals our overall economy threatens us. Fortunately, capitalism and its system of wealth creation is amazingly resilient. America, so far, has survived a regulatory onslaught, overbearing taxation, and a sea of debt.
Let’s hope that we come to our senses before the vast regulatory and tax state stifles the engine that made us the richest and most humanitarian country in man’s history.
Feature Image: AFP/Getty Images
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