Green Room

The Makers of Money

posted at 2:31 am on November 27, 2009 by

A businessman of my acquaintance once interrupted a conversation about economic cycles to proclaim, “Good times, bad times, it doesn’t matter. I always make money.” His company had the balance sheet to back up this claim, and as the old saying goes, it ain’t boasting if you can do it. I’ve often reflected on that conversation over the years, because it helped me to understand something important about the struggle between the public and private sectors.

Every nation has a mixture of rich people, poor people, and some form of middle class. There is some degree of circulation between these economic groups. A poor worker might earn enough to advance into the lower middle class, while a middle-class professional could become rich… or suffer a reversal of fortune that leaves him in poverty. This basic situation exists under every form of government, from free-market capitalism to fascist dictatorships. What changes under different systems is the composition of the upper class, and the size of the lower and middle classes.

Collectivists sell their politics with a promise of “equality,” generally understood by their audience as a promise to redistribute the wealth of the rich to improve the lives of the poor… but this is a lie. The upper class in a communist, fascist, or socialist government is fantastically wealthy. Most of the “redistribution” comes at the expense of the middle class, which shrinks as the lower class grows. Every form of collectivist government, including twenty-first century American socialism, declares war on the middle class, or tries to lure them into submission with promises of benefits.

The middle class provides most of the funding for Big Government, and feels the pinch of high taxes more than rich people, who can often find ways to avoid them. A ten percent loss of income hits people struggling to make car payments much harder than it hits millionaires. The middle class inevitably grows tired of being milked for funding, responds quickly to economic downturns that compromise its lifestyle, and has enough voting power to destroy political parties.

Socialists love to posture as enemies of the rich, but in truth, the upper class is not usually a big obstacle to their plans. They are happy to cooperate willingly, if they see advantages to gaining the favor of a command economy. They can profit from government policies that hurt smaller competitors much more than they hurt the biggest of the big dogs, or restrict access to markets where they already dominate.

The rich often find themselves rewarded with official power under a collectivist government, smoothy transitioning from respected businessmen into honored members of the ruling Party, or government consultants. Sometimes the upper class finds the thrill of power, and the indulgence of their ego, well worth a few million lost in the rusty gears of a contracting statist economy. If worst comes to worst, the collectivists know that the rich are a small group with little voting power, easily overwhelmed at the polls by an aroused population.

The desperately poor are generally reliable supporters of socialist politics. Someone who pays no taxes will understandably tend to support endless expansion of government benefits. Eventually, members of the working poor may come to realize their own prospects suffer when too much economic damage is sustained by those who employ them. It follows that high rates of long-term unemployment will generally increase the size of the dependency class, which produces more political rewards for statists who promise hefty government benefits… and extracting resources from the economy to pay for those benefits causes the economy to contract further, producing more unemployment.  Unemployment is a malignant tumor.

Who are the rich? With a few trust-fund, sports, and Hollywood exceptions, the rich are people like that businessman of my acquaintance: they always make money. It has been said that if you gathered all the money in America into a single pot, then divided it evenly between every citizen, in a few years the same people would be rich and poor again. No matter how limited or activist the government might be, the same people tend to end up at the top. The most dramatic changes occur in the middle and lower classes… the people who don’t always make money. They can’t evade higher taxes, or turn draconian government regulations to their advantage. They depend on economic growth to produce jobs for them, or create the conditions necessary for them to launch profitable small businesses.

Collectivist politicians have much to gain by increasing the size of the dependency class. The fundamental political purpose of State-controlled health care is to transform much of the middle class into the lower class. The economic damage from spending trillions of dollars on a monstrous new government program in the middle of a recession is a feature, not a bug. A middle class dependent on the benevolence of the State for its health care will become less troublesome, less independent, and less able to begin the climb into the upper class through small business formation. Fewer small businesses means fewer working poor rising into the middle class.

To liberals who are not politicians, but involved citizens who sincerely care about their less fortunate neighbors, I would say that the temptation to redistribute from the rich to the poor is the tragic pursuit of a mirage. You will never draw real blood from the makers of money, and even if you could, it would never be enough to purchase “social justice.”  Redistribution always slides from the middle class to the poor… and the result is, inevitably, more poverty plus a smaller middle class. Look at how the stock market fluctuates under the current Administration, while unemployment remains high. The markets can adjust and recover, because they are filled with people who always find ways to make money. When circumstances force those people to employ strategies that do not promote job growth and capital formation, the livelihood of the middle class suffers, and the ambitions of the working poor drop dead.

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It has been said that if you gathered all the money in America into a single pot, then divided it evenly between every citizen, in a few years the same people would be rich and poor again. No matter how limited or activist the government might be, the same people tend to end up at the top.

“Doctor” Zero, That was easily the most stupid thing that you ever wrote in this place.

According to that theory, all immigrants to America will never make it, and there is no single immigrant from Africa, India or China who can hope to make a decent living. No student on a scholarship will ever make it, and those who believe they’re on the right track will fail in a few years. And according to that theory, there are no masses of money kids in any college, no stupid celebrities in the top 10 flicks of the year, no Kennedy-like clans, but in general just decent businessmen who’ve always worked hard for what they got.

Dude, you really need to get out more.

Niko on November 27, 2009 at 8:29 AM

Niko on November 27, 2009 at 8:29 AM

The point of that saying, which did not originate with me, is that wealth is not primarily a matter of good luck, as leftist theory maintains. Most of the rich and poor did not get that way by standing in the right place at the right time, to be struck by lightning bolts of riches or poverty. Their aptitudes, skills, and life choices have more to do with than random chance, although there are exceptions, of course. I went out of my way to mention stupid celebrities and Kennedy-like clans in the sentence immediately before the one you took exception to. Maybe you should stay in more, and work on reading for comprehension.

This has no logical connection to the ability of immigrants to make a decent living. Quite the opposite. The immigrant who becomes a neurologist or stock broker is one of those people who would be rich again, a decade later, if you seized and redistributed all the money in the country.

The point behind suggesting the same people would slide into the upper and lower income brackets, if you started them with exactly even amounts of funding, is the reverse of what you seem to have gleaned from it. People’s actions have more to do with their economic destiny than random chance, which can certainly be a factor – but over the long run, and considering a population of millions, luck is not the primary factor. Given this truth, the best way to improve the lives of both middle class and poor is to create opportunities for them to exploit, and accumulate the overall societal wealth necessary to care for those who become indigent through no fault of their own. Leftist “economics” are a suicidal quest to restrict action, in a futile attempt to control chance.

Doctor Zero on November 27, 2009 at 9:24 AM

You’re right about redistribution of all the money returning to the same people’s hands in a very short time. If people have a hard time understanding that, they should think about a poker game. Winners don’t necessarily have the best cards, they just know how to play the game better.

Our capitalistic system of free enterprise encourages those, immigrants or native born, who have the ability and the audacity to reach the top. It all comes down to the individual freedom.

Margaret Thatcher said socialists are defeated when they run out of other people’s money with which to buy votes. I hope we can stop the fools we have running things before the damage they do is irreparable.

erp on November 27, 2009 at 10:06 AM

Good post. I made a somewhat similar to point to a liberal who said to me that the reason a lot of conservatives were fighting Obama’s policies is because his policies were inflationary, and us conservatives (being all rich you know) stood to lose a lot of money. But that isn’t what happens, because the rich can usually act to protect themselves from inflation. The very poor, who have more debt than cash, would benefit from inflation. It’s members of the middle class, who have small savings but can pay their bills, but live mostly check-to-check, who are hurt the most.

kc8ukw on November 27, 2009 at 10:29 AM

It’s a shame Doc you had to respond to that first poster, but such is the illogic of the liberal mind. Great post and one that really highlights why common sense policies are so needed today. Our only protection from the Marxist onslaught on our lives is our large middle class. It is almost like a huge buffer keeping us from being completely walloped by these leftist policies. The left is now left with devising ways to “collapse our system,” Great Depression style. We need policies that continue to expand the middle class. I agree with you Doc, that this administration is using unemployment to try to increase their political clout, but thanks to the Tea Party movement and others, it has had the opposite effect and now its seems this administration will be forced to address the jobs issue or face I predict the biggest electoral defeat in modern American history next year. Speaking of things to be thankful for, I am thankful for a large and proud middle class that protects us domestically from the leftist agenda coming full circle.

milemarker2020 on November 27, 2009 at 10:50 AM

Doctor Zero, I can always rely on your writings for common sense. I would email this to all my liberal friends right now if I thought they would actually read it.

I think liberals have a hard time thinking things through practically and logically. I see it with my friends who have a “four legs good, two legs bad” mentality. In their minds, “rich people are greedy”, “poor people are victims”, and “government is the saviour”. One problem is that they see themselves as neutral, that in a redistributive society wealth will flow from rich to poor and that they, the middle class, will remain unchanged and unaffected. Until socialist policies start to negatively impact them they will not begin to challenge their own views.

CityFish on November 27, 2009 at 11:56 AM

It’s always been known that there is money to be made when a society is on the way up and on the way down. The trick is to be one of those making the money either way.

Kissmygrits on November 27, 2009 at 12:58 PM

“Doctor” Zero, That was easily the most stupid thing that you ever wrote in this place.

Niko on November 27, 2009 at 8:29 AM

Niko, quit being a knee-biting jerk. You owe Doc Zero an apology, NOW.

gryphon202 on November 27, 2009 at 1:34 PM

gryphon202 on November 27, 2009 at 1:34 PM

Agreed.

GT on November 27, 2009 at 2:22 PM

Some years ago, I was having a discussion with an immigrant. He told me that if you can’t make it in the USA through work and the great opportunities it has, you can’t make it anywhere in the world.

Sapwolf on November 27, 2009 at 2:30 PM

I thought WFB Jr. passed away last year.
-
Or is Zero channeling?
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In any case, brilliant.
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The short course:
Produce more than you consume and grow rich.
Consume more than you produce and stay poor.

esblowfeld on November 27, 2009 at 2:32 PM

Maybe the WSJ should run this as an op-ed so that the drive bys might get a clue. Oh I know they wouldn’t know a clue if it hit them in the face.
Thanks Doc.

tim c on November 27, 2009 at 2:41 PM

This has no logical connection to the ability of immigrants to make a decent living. Quite the opposite. The immigrant who becomes a neurologist or stock broker is one of those people who would be rich again, a decade later, if you seized and redistributed all the money in the country.

A look back on the timeline of the theoretical cycle of riches to rags to riches would show that many immigrants were people who, at one time in their country of origin, had means and property, but had it ‘redistributed’ (confiscated) by a corrupt government. Because they possess HUMAN CAPITAL, i.e. an education and/or a drive to succeed, they are able to rebuild their lives, fortunes, and sacred honor because America held out the opportunity to do so. Having said that, there are many who came here with nothing but pocket change (and that’s all their family’s ever had) and have succeeded fabulously, and conversely, there are those who were ‘to the manor born’ and became wastelings (or is it wastrels?). Human capital makes all the difference, and you don’t get that from a bank or a government.
I believe your statement holds up, Doc.

sawbuck on November 27, 2009 at 2:48 PM

I think liberals have a hard time thinking things through practically and logically. I see it with my friends who have a “four legs good, two legs bad” mentality. In their minds, “rich people are greedy”, “poor people are victims”, and “government is the saviour”. One problem is that they see themselves as neutral, that in a redistributive society wealth will flow from rich to poor and that they, the middle class, will remain unchanged and unaffected. Until socialist policies start to negatively impact them they will not begin to challenge their own views.

CityFish on November 27, 2009 at 11:56 AM

There is a large difference between calling something a means, and calling it a savior. Finding government, at some level, capable of reversing some of the unequal opportunities afforded to the poorest cannot be equated with a view that holds government as a ‘savior’.

ernesto on November 27, 2009 at 2:56 PM

‘Social Justice’ is equivalent to ‘Social Engineering’ and the ‘good intentions’ of liberals always results in the law of unintended consequences. Always.

Great post Doc…

Seven Percent Solution on November 27, 2009 at 3:02 PM

‘Social Justice’ is equivalent to ‘Social Engineering’ and the ‘good intentions’ of liberals always results in the law of unintended consequences. Always.

Great post Doc…

Seven Percent Solution on November 27, 2009 at 3:02 PM

How can only the good intentioned policies of liberals result in bringing about unfavorable unintended consequences?

ernesto on November 27, 2009 at 3:05 PM

How can only the good intentioned policies of liberals result in bringing about unfavorable unintended consequences?

ernesto on November 27, 2009 at 3:05 PM

I’ll take this one:

Modern liberalism s built on a premise that human beings don’t work the way history and experience says they actually work.

Welfare would work if only people wouldn’t treat a safety net as their own personal hammock. Socialized medicine would work only if those who produce health care and medical products didn’t need to make a profit. International peace would work if only everybody was rational and played by the rules.

This is the cause of the unintended consequences.

Sekhmet on November 27, 2009 at 3:23 PM

Look at how the stock market fluctuates under the current Administration, while unemployment remains high. The markets can adjust and recover, because they are filled with people who always find ways to make money.

Yeah, I believe Matt Taibbi said it better. Government captured by a Vampire Squid, sticking its blood funnel into any hole that smells like money. Please don’t describe the high frequency traders flipping zero interest dollars as any sort of meritocracy in action.

rhodeymark on November 27, 2009 at 3:29 PM

Dr. Z’s right, of course but, really, tell us something we don’t know.

rcl on November 27, 2009 at 3:43 PM

This is the cause of the unintended consequences.

Sekhmet on November 27, 2009 at 3:23 PM

And so any policy tinkering taken on by conservatives generates…no unintended consequences whatsoever?

ernesto on November 27, 2009 at 3:44 PM

And so any policy tinkering taken on by conservatives generates…no unintended consequences whatsoever?

ernesto on November 27, 2009 at 3:44 PM

Sure, but conservatives don’t tinker near as much as liberals.

jimmy2shoes on November 27, 2009 at 3:56 PM

Within two years, the average million-dollar-plus lottery winner is in the same or worse financial shape than what he was in before winning.

Liberals constantly harp about America’s “upper class.” As always, that’s an asinine assumption. During the Reagan years, there was a higher TURNOVER among the upper ten percent of America’s earners than at any other time in the past half-century. Individually, wealthy Americans would be fools to support conservatism if their only goal were to cement their position relative to the rest of society.

On the other hand, the modern welfare state has created a condition that never occurred before in American history. Liberalism has created a hereditary LOWER CLASS of citizenry. Among the bottom ten percent of America’s least-wealthy families, the majority are now third-generation poor – and they will soon become fourth-generation.

Even some of the craziest moonbats realize that collectivisation tends to destroy wealth. They simply don’t care, because it achieves the (to liberals) infinitely more important goal of also destroying social mobility. The people who support liberalism could not possibly care less about the creation of wealth; they are interested only in increasing their status relative to others. In terms of real wealth, of course, collectivisation causes the rich to get poorer, and the poor to stay that way. But that’s all fine and dandy to liberals; because to them the only thing that matters is that the powerful retain the only thing that liberals care about: their position in society.

logis on November 27, 2009 at 3:57 PM

Sure, but conservatives don’t tinker near as much as liberals.

jimmy2shoes on November 27, 2009 at 3:56 PM

Maybe not on the scale of the hard liberal great undertakings, but conservatives tinker plenty.

ernesto on November 27, 2009 at 4:13 PM

Jobs, jobs, jobs are all that matter.

The more job opportunities there are, the more people will be able to lift themselves out of poverty (welfare only keeps them in poverty).

When there are tons of jobs to be filled, people are able to demand and get better pay, better benefits and better working conditions. When we vilify success and promote anti-business policies, the jobs flow out of the country. When that happens, the unemployed become dependent on the gov’t and those who are lucky enough to have a job have to take whatever pay/work conditions they can get.

The more jobs we have, the more taxes will be collected to support legitimate gov’t programs for the truly needy (unfortunately we have too many wasteful gov’t programs that take money away from those who create jobs and give it to the politicians’ favorite special interest groups).

Actually, the best way to help the needy is through private charity, which operates much more efficiently that the gov’t. Americans have always given more to charity than any other country, but that will change as taxes get higher and higher and jobs become more scarce.

Tragically, well-meaning people have been brainwashed into believing that anything pro-business or for-profit is evil. They don’t realize that high taxes, over regulation, anti-business sentiment and pro-special interest policies (not to mention failed public schools) are driving away the one thing that actually helps middle class and poor people the most, jobs.

Remember, the gov’t is not the solution, the gov’t is the problem.

The real cause of the current crisis is gov’t intervention in the free market (Google: “Peter Schiff Why the Meltdown Should Have Surprised No One”).

Get the gov’t out of the way and let the free market create jobs and watch how quickly we get out of this mess.

Or increase gov’t intervention and watch how bad it gets.

That is the choice we face.

painesright on November 27, 2009 at 4:27 PM

Doctor Zero on November 27, 2009 at 9:24 AM

I know how to read, thanks.

I understood your point the very first time. You claim that wealth is a logical conclusion of specific circumstances, not of chance and congruence. You are still wrong.

In reality, one can easily observe that any individual in a free society with adequate education and ample opportunities can become a total moron, drug addict, or just fail. One can also observe that any individual who grew up in an oppressive society with poor education can escape such society by emigration, and still become a decent person – not because of the “years” between the two samples in time but due to simple chance, as in, walking down the street and meeting the one person who will change your life forever. However, as it happens such an individual could also emigrate an end up a total moron – or suicide bomber.

Now there might be a correlation between the opportunities a society allows an individual, and their chances to succeed in free enterprise. But there is no causality here. At any given point in time it’s up to the individual’s choices if and how to pursuit their desires. And some choices might, just might lead to success.

One need look no further than the current generation of college graduates, a product of the generation that produced the biggest advancements in technology, and see the failure unfolding. Millions of students pay vast amounts of money in phoney-baloney “gender studies” courses, “whiteness” studies, and waste their lives in social (code-word for anti-social) curriculums only to pursue a career in various hard-left Alternative Logic departments.

This is your “wealthy minds produce wealth” logic at work. In reality, no such things exist. A generation could produce the most brilliant minds of all mankind, and the next generation will squander all of it. Likewise, a many cultures in East Europe managed to rise from the ashes of the Communist Bloc and build productive, capitalistic societies. Where is your causality here?

Further, your claim that there exists a certain elite (funny how you went out of your way to omit that term altogether) immune to the zeitgeist speaks of the hubris and ignorance that befell large portions of the conservative base in the US, and it’s precisely the reason why such exclusive country club manners just won’t translate into electoral victories anymore.

To put it in terms that fellow commenters understand: a lot of wealthy people don’t make money in bad times because they are smart, but in spite of being dumb. Or, as a saying from Old Europe (look, I can do sayings, too) goes: the dumbest farmer has the biggest potatoes.

To put it yet in simpler terms: Sometimes there is no lesson – people just fail or succeed.

Niko on November 27, 2009 at 4:30 PM

By the way, I still marvel at the fact that just one year ago it became apparent that the top 10% of the American business elite, without doubt the most educated and sophisticated minds of our time (no sarcasm here, it’s just the best we got), ended up destroying trillions in wealth because they were just plain wrong. It’s beyond me how anyone could quote approvingly just one year later such rubbish as, “Good times, bad times, it doesn’t matter. I always make money.” No, they don’t. And most of the money they lost was not their money, but yours.

Niko on November 27, 2009 at 4:38 PM

There is a large difference between calling something a means, and calling it a savior. Finding government, at some level, capable of reversing some of the unequal opportunities afforded to the poorest cannot be equated with a view that holds government as a ’savior’.

ernesto on November 27, 2009 at 2:56 PM

You’re right, but the problem is that government rarely reverses those unequal opportunities. Eliminating discriminatory laws like Jim Crow does level the playing field, but robbing Peter to pay Paul does not.

Take the minimum wage. If that had any effect, then why isn’t it $25 per hour? At that rate, everyone who is poor would suddenly be middle class.

The unintended consequence is that the promise of government supplied social justice only distracts poor people from the only way to truly get it: hard work. Recently, we saw people in Detroit who literally thought they were going to get a big payout from “Obama’s stash.” These people had no idea where that money actually comes from, probably because they’ve never filled out anything but a 1040-EZ in their entire life.

Kafir on November 27, 2009 at 4:42 PM

Well said. Collectivism often rewards those that are already successful, also known as “too big to fail”. In a hybrid system like the one we’re in now, there’s a pretty big incentive for large firms to work with government, because the government can either reward you or punish you. Given the choice between competing against the government, or having the government give you truckloads of money, what would you lobby for? Ford is fighting against Uncle Sam AND GM now. When one of your opponents can literally take you over at the stroke of a pen, it’s hard to win.

Of course, the main problem of government involvement is that it reduces the overall production of the economy. So even the fabulously wealthy suffer, in absolute terms, because there is just less of everything. We’re seeing that now in energy production. Because it’s so hard to get clearance for a new refinery or new drilling, we have less domestic oil supply. Clearly if we had more oil, the price would be lower.

hawksruleva on November 27, 2009 at 4:52 PM

You’re right, but the problem is that government rarely reverses those unequal opportunities. Eliminating discriminatory laws like Jim Crow does level the playing field, but robbing Peter to pay Paul does not.

Kafir on November 27, 2009 at 4:42 PM

Unintended consequences strike at every turn, too. At one time, blacks hard a thriving community of their own. There were black hospitals, black high schools, black theaters, and black funeral homes. When desegregation hit, inevitably the black facilities were closed and merged with the white businesses. The net effect was that thousands of black business owners, administrators, educators, and doctors loss their positions and had to start over again.

Was segregation abhorrent? Absolutely. Did the government’s solution create unforeseen problems? Yup. Much of the black community has been transformed from a free-market system to a welfare system, which just happens to work well for the Progressives.

Look at “separate but equal” now, and think about how inner city schools compare to the suburban schools. Are blacks really getting a better education today?

hawksruleva on November 27, 2009 at 5:00 PM

It’s an error to believe that Progressives (the group you call liberals) want to improve the lot of the poor (or the sick, the elderly, the farmers, or any other ‘downtrodden’, ‘powerless’ group).

If they did, they would be the staunchest supporters of capitalism in the world. The evidence that socialism never will work is now so overwhelming that only simple lying (or deliberate self-delusion) can explain why a Progressive continues to favor it.

Of course, many will say they don’t support socialism, but ‘regulated’ capitalism. (I.e. technically, they are Fascists.) But, when you probe a bit, you find that the regulations they favor are so voluminous and so onerous – and the evidence that they are counterproductive so massive – that there is, in fact, no difference. Yet, they continue to advocate them. And, very successfully, too. The ‘defense of the underdog’ line is a gambit that never grows old.

JDPerren on November 27, 2009 at 5:04 PM

Yes.

Niko on November 27, 2009 at 5:05 PM

(That was a response to, “Are blacks really getting a better education today?”)

Niko on November 27, 2009 at 5:06 PM

To put it yet in simpler terms: Sometimes there is no lesson – people just fail or succeed.

Niko on November 27, 2009 at 4:30 PM

Failure and success aren’t primarily driven by luck. They’re driven, as Doc said, by the presence or absence of effort.

A look at any successful person shows that they put in hours at their chosen profession. Miraculous production is how socialists see the world, but the truth is clear- outcomes are based on inputs.

People don’t “just fail or succeed”. They work or don’t work. You can tell an unsuccessful person by the number of reasons they give for their failure. “I couldn’t get a loan”. “There was too much competition”. “They chose somebody else.”

Whereever a person fails, there is someone else succeeding, because they put in the work. Did they get ahead based on who they knew? Then they succeeded based on their effort at networking. Did the government give them a grant? Then they wrote a good grant proposal. Do they work their staff harder? They found better employees.

hawksruleva on November 27, 2009 at 5:18 PM

The main issue at hand, Dr. Zero is how do we stop this freight train speeding into the brick wall of Statism?

Agreed there are some at the top who will always make money, no matter the political system – Clearly those people have no morals.
Such people should be smart enough to know what their complicity in such a system does to the rest of society, but they don’t care.

I have to believe that there are others at the top who do care what kind of society they live in and what they will pass on to their children and grandchildren instead of just of the bottom line.

Chainsaw56 on November 27, 2009 at 5:25 PM

A Dream Deferred: 50 years after Brown v. Board of Education

“We have never made good on the promise of equal opportunity in public education,” said Kati Haycock, director of the Education Trust, upon releasing the reports. “The fact is, we have organized our educational system in this country so that we take children who have less to begin with and then turn around and give them less in school, too. Indeed, we give these children less of all of the things that both research and experience tell us make a difference.”

Instead of a system where the black community gradually built more and more good schools for their kids, we’ve adopted a system where communities give up responsibility, and then complain about the resulting failures. Charter schools could fix this problem, if Democrats didn’t block them on behalf of the teachers’ unions.

hawksruleva on November 27, 2009 at 5:25 PM

Agreed there are some at the top who will always make money, no matter the political system – Clearly those people have no morals.

Chainsaw56 on November 27, 2009 at 5:25 PM

The natural incentive for all people everywhere is to seek profit. It’s not a lack of morals that drives this impulse. The problem isn’t that people seek wealth. It’s that government interference gives people ways to seek wealth illicitly.

Prohibition is a great example. People made bathtub whiskey that killed people. Mobsters killed each other and tipped the cops off to their competition. What allowed all of this wickedness? Prohibition itself, of course. Without a free market, the public was forced to rely on a black market, and had to make decisions with very little information. Nowadays, bathtub whiskey is rare, because liquor companies compete to provide the highest quality product at the most reasonable prices.

The mortgage mess was not caused by evil profit-takers. It was caused by government interference. Companies were FORCED to make bad loans, and created derivatives in an effort to reduce their risk. Fannie and Freddie rewarded people who made risky loans. Massive amounts of government meddling didn’t just stop the crisis, it practically guaranteed the crisis.

hawksruleva on November 27, 2009 at 5:33 PM

Niko my friend, you are on the cusp of understanding. Two of your very own sentences back to back display your point of confusion. You wrote,

Now there might be a correlation between the opportunities a society allows an individual, and their chances to succeed in free enterprise. But there is no causality here. At any given point in time it’s up to the individual’s choices if and how to pursuit their desires. And some choices might, just might lead to success.

.
CHOICES matter! Yet you state there is no causality and then blithely cancel that pronouncement in the next sentence by writing “it’s up to the individual’s choices”!
.
You seem unable to see the very element of truth you state.
.
The menu of choices as presented by society are a factor in success, however even with limited choices the entree is selected by the individual.

Metanis on November 27, 2009 at 5:38 PM

Niko, here’s another link for you.

Meanwhile, standardized test scores indicate the gaps in educational achievement between the races are growing wider — leaving black as well as white liberals with rising doubts that “the enormous hopes invested in this decision” will come to fruition, said Patterson.

hawksruleva on November 27, 2009 at 5:41 PM

The menu of choices as presented by society are a factor in success, however even with limited choices the entree is selected by the individual.

Metanis on November 27, 2009 at 5:38 PM

Well said. Choices always matter. Of course, progressives tell us not to judge others because of their choices. But we don’t have to. Life passes its own judgement. People who hide from the world by spending 10 years in college doom themselves to mountains of debt. People who choose not to work condemn themselves to poverty. Those who wait on the government to solve their problems are choosing to suffer while they wait in vain.

hawksruleva on November 27, 2009 at 5:44 PM

Hot Air Management:

I respectfully request that this, Doc Zero’s latest piece of brilliance, be promoted from the Green Room to an HA thread.

It sums up, succinctly, the economic debate that is at the heart of the strong division in our country that soon will be at tipping point.

Thank you for considering this request.

TXUS on November 27, 2009 at 6:56 PM

Metanis on November 27, 2009 at 5:38 PM

You run into the same fallacy as Doctor Zero.

Just because some individual is born into a free (as in political freedom), free-market, capitalistic society, it doesn’t follow that the person will succeed monetary-wise. Likewise, just because some individual was born into an oppressive society steered by nepotism etc, it doesn’t follow that said person couldn’t succeed when imigrating into the United States, for instance.

(For the record, in the first sentence you quote, nowhere did I write “choices”, so I don’t see how I’d be contradicting myself.)

Also, having a myriad of choices does NOT guarantee a certain outcome. Nor does good education etc. Just open any mainstream news site and read the stories.

You and a few others here seem to ignore certain Universal Truths(tm):

1. Life is not fair. Get used to it.
2. Not everyone wants to be a beautiful snowflake.
3. Not everything is a lesson. Sometimes you just fail.
4. When you succeed, chances are you were just in the right place at the right time.

Also, when extracting a behavioral pattern for use in an article, try substituting the term “because [positive attribute]” with “in spite of [negative attribute]“, as in, “My rich friends are rich because they are smart” might be phrased better with “My rich friends are rich in spite of their stupidity.”

I know that class envy resonates very poorly in the US. Perhaps that’s the reason why, after the top 10% of businessmen in the US destroyed trillions of YOUR wealth because of their hubris and stupidity, you still have trust in their eliteness. Like, “Ok, but it won’t happen again, because Doctor Zero wrote that in a span of a few years we’ll all be rich again because, after all, these people are very, very smart.”

Think about it.

Niko on November 27, 2009 at 7:29 PM

Oh, I forgot:

5. Just because life today is worse than yesterday, it doesn’t follow that tomorrow will be better.

Now I don’t want to sound boilerplate-pathetic, so let me give you a few examples:

Argentine was an immensely wealthy country 100 years ago. Really. Actually, it was like Paris or London at that time, but cleaner, they had more sunshine, and everyone had a chance to fulfill their wishes. In 100 years they managed to run down the country. How? By hubris.

30 years ago China was clearly a Third World basketcase. Today it’s the same totalitarian state as then, i.e. no political or economical freedom. Yet it’s a capitalistic country (people usually confuse these concepts), and a middle-class of some 50-100 million Chinese can afford a car, a micro-wave oven, and a tv set. How? By oppression.

Israel was founded in a barren wasteland, and the first generation to build up the country spoke dozens of different languages, had vastly different concepts of what kind of society to build, and at the same time had to fight for survivial not only from the outside, being attacked in the political process by Israeli communists and Israeli Arabs. Yet the programming language that drives hotair.com was invented in Israel, the OS that runs on most commenters’ computers was designed in Israel, and the CPUs on most of your machines were designed at Intel Israel. So how did they achieve all of this? By hard work.

So what’s the pattern? There is none. No recipe for success. And such is life.

This is precisely what made the article by Doctor Zero so laughable. He set out to present the formula for saving or creating wealth. But its all in vain.

Niko on November 27, 2009 at 7:57 PM

To put it yet in simpler terms: Sometimes there is no lesson – people just fail or succeed.

Niko on November 27, 2009 at 4:30 PM

That statement alone convinced me that either you are being intentionally obtuse for the sake of argument, or you are literally quite unconsciously obtuse and incapable of seeing beyond your own simplistic perspective.

People don’t just fail or succeed. They fail or succeed for a reason. It is not possible to try a new business venture and have it fail or succeed for no reason. The new business owner will either have a real winner of a product or service and work long hard hours to market that in order to grow the business and make money; or conversely the new business owner will have chosen a product or service offered by too many others, and offering nothing new or unique to make the new business’s item stand out, but just offering the ordinary and readily available will add a burden and almost always doom the business venture to failure as competitors who have already established a niche and reputation in the available market will consistently outsell the new business due to customer loyalty and satisfaction.

And, of course, the new business owner will be challenged by the economic realities of funding the venture along with financially surviving the first five years, during which most new business ventures will either take off or fail miserably, often leading to bankruptcy. At least half of all new business ventures are started with completely inadequate funding, or plans for allowing for the drop in personal income which will occur until the new business has overcome the trial phase and actually becomes profitable enough to replace lost income from prior sources.

My 30 year career as a small business administrator and troubleshooter exposed me to every type of small business from Mom & Pop type ventures to small businesses with up to 100 employees. At this time only 5% of all of those businesses are still in business. The reasons the ones that failed did so were as numerous as there were failures. Too many were simply underfunded, and the business owners hadn’t realized the long term financial drain that would occur until the venture would have a chance to really take off (although if unique and new enough, successful establishment in a niche market was almost a guarantee…. for example Tim Leatherman’s “Leatherman Multitools”).

Then again, many failures were as a result of partnerships where success caused friction between the partners, and one inevitably became greedy and/or started to behave unethically and slacked off in the department of working hard to secure continued success. The partners would, under those circumstances, end the business venture, and whoever won the rights (or bought out the other partner) and established a new business with the products or services was typically the one on whose back the whole venture had been supported all along.

But there is NEVER ever a simple success or failure for the small businesses. The one that really blew my mind was when the wife of one of the partners, once the business was successful and their income beyond her wildest dreams, began a spending spree that lasted a year and put them in such deep debt that she called me one day to ask if there was any way that I could slip them $10,000 through the payroll accounting process (done via an outside service, but which I processed weekly and for which I signed the checks along with her husband). Oh she had her justifications and excuses, and after all it was only a small sum relatively speaking, and no one would notice it being gone if I did a weekly payroll deduction of a small amount to start paying it back….that sort of thing.

At that point we were talking embezzlement and illegal and unethical actions. Flat out “NO”, was not acceptable to her, and I had to take the problem to her husband who was a 50% stockholder. From that point on I was the worst witch in the world, and she was gunning for me. Did not make for a pleasant working environment for me after that considering how much time she hung out at the business weekly.

That business lasted two years after I left (becoming disabled from a serious autoimmune disease, had to retire early), and finally the ethical partner got a reality check and forced a dissolution of the corporation so he could continue on ‘solo’. But due to ongoing contracts it took another two years to wind down to where they could close the doors. I know what happened after that, but it’s not pertinent to this discussion.

Needless to say, because of good business plans, marketing, and financing, the successful ones grew and grew, employing many people over the years. The others simply folded, and people who worked hard along with the founding business owners trying to make a go of it eventually had to seek employment elsewhere.

So spare me your simplistic opinions, Niko, and go out and get some real life experiences before you really make a fool of yourself next time. There are always lessons to be learned from business ventures, and there are always reasons that business ventures succeed or fail.

KendraWilder on November 27, 2009 at 9:12 PM

Knowing I’m late to the thread, you’ve offered up some sort of “ultimate nihilism” philosophy:

You and a few others here seem to ignore certain Universal Truths(tm):

1. Life is not fair. Get used to it.
2. Not everyone wants to be a beautiful snowflake.
3. Not everything is a lesson. Sometimes you just fail.
4. When you succeed, chances are you were just in the right place at the right time.
5. Just because life today is worse than yesterday, it doesn’t follow that tomorrow will be better.

Niko on November 27, 2009 at 7:29 PM

So, here goes:

1. Life is not fair. Get used to it.

Conservatism doesn’t ask for, or require “fairness.” We ask for equality of opportunity (freedom) not equality of outcome (fairness.)

2. Not everyone wants to be a beautiful snowflake.

Conservatism posits that everyone should be as free as possible to be whatever they want to be; however, this doesn’t mean you can be an open flame among the beautiful snowflakes – you’re “freedom to be” can’t impinge on my “freedom to be.”

3. Not everything is a lesson. Sometimes you just fail.

Nope. There’s always a lesson – even if it’s some restatement of “shit happens.” Example: I knew a man whose primary business was being regulated out of being by the state. He changed the focus of his business (using the same primary skills he and his company had. A few years later, the new products were also “regulated away” by the state. The lesson; sometimes, bad things happen to good businesses.

4. When you succeed, chances are you were just in the right place at the right time.

Nonsense. You would have had to get up off the couch, and do the work, or invent the invention, or produce the product, that put you in the right place at the right time.

5. Just because life today is worse than yesterday, it doesn’t follow that tomorrow will be better.

Nor does it follow that life will be worse. Each day is what it is, although you can either make the day better, or worse, by your actions.

massrighty on November 28, 2009 at 6:01 PM

if you gathered all the money in America into a single pot, then divided it evenly…

Yet again, you are so correct Doc.

Another ‘Extreme Makeover: Home Edition’ Family Facing Foreclosure

Pole-Cat on December 1, 2009 at 6:53 PM