Pondering about why we all can’t be rich…

November 28, 2008

(Copyright 2008)


By Tony Walther

“Why can’t everyone have money? Why does there have to be the rich and the poor?”

That is what my granddaughter asked her parents who were over for Thanksgiving.

I chimed in something, but it was not much more than her parents offered. We all told her something to the effect that if everyone had as much money as they wanted, money wouldn’t be worth anything.

And now that I think of it, that is about as good an answer as there could be.

It may well be what we are going through right now. With no-money-down houses that could be bought for nothing and then flipped and sold for a profit and with paying for everything with plastic cards rather than money earned, our economic system became some mutant form of capitalism that in effect tried to make everyone rich. It was as if money were virtually being distributed to everyone.

But then something pricked the inflated economic system with a pin and the air was sucked right out of it. All that money, measured in equity never paid for in the first place and inflated mortgage securities based on money that could not be collected, was worthless.

I suppose if we really did live in the fabled Land of Milk and Honey and there was an abundance of everything for everyone, money would not exist.

But reality is that there is not enough of everything to go around in this world and in some cases even if there is a sufficient number of a certain type of thing people want, human nature being what it is, someone will want more than everyone else. So in order to allocate all the stuff we use money. But, I guess to make sure that money has value, it isn’t just distributed evenly. We have to offer something of value to the holder of money in order to get some of that money.

Realize that I’m doing this all off the top of my head, but it occurs to me that Karl Marx and his friend Friedrich Engels thought a working man’s labor was the measure by which all things should be valued. Exactly how they thought one would determine that, I don’t know.

But capitalists see the working man’s labor as worth simply what it costs to get it, but the product that the working man makes is worth not what the working man put into it, but again, how much can be got for it. I realize not everyone actually makes something. Some supply a service, but it’s still effort, and the Marxists I suppose would attempt to put a value on that effort. So do capitalists, but again, the value is what can be had for the product or service, not necessarily what was put into it (although that will be used in part to justify an asking price).

The capitalist system seems to be the natural system. The Marxist system is, to say the least, contrived. I mean one caveman has a pile of rocks he has gathered to throw at dinosaurs and the other caveman wants some, so the first caveman says: “what are you willing to give me for some of my rocks?” The second caveman had an argument with his nagging, but good-looking wife this morning, so he says, “I’ll give you my wife.” Deal. The second caveman did not inquire how much effort went into gathering those rocks and figure on that basis how much the rocks were worth. Okay the quibblers, maybe the Marxists, and even the capitalists would say the second caveman may have considered that although he could gather other rocks himself, it was not worth his time and effort if he could simply buy them from caveman number one (something about opportunity cost?), but that in a way spoils my example – no wonder I’m not so hot at economics.

Some people are either made to be, content to be, or have to settle on being workers. They will be paid for their efforts, but not necessarily according to their efforts, but more likely according to how much they are willing or able to demand for their efforts.

On the other hand, some folks take money for work, but save some of that money back until they accumulate enough to make it work for them by putting it out at interest (letting others pay them for the cost of using it) or investing it into something with the plan that they will reap profits beyond what they have invested. That money they save back is capital, thus they are called capitalists.

Neither the pure capitalist system nor the pure Marxist or socialist systems seem to satisfy whole populations all at one time. So we have the phenomenon of socialist systems incorporating forms of the capitalist system (China and Vietnam as examples) and capitalist systems incorporating forms of the socialist system (Western Europe and the good old USA).

(And yes, for the record, I realize Marxism is a form of socialism and not synonymous with socialism.)

The purists of both ideologies will complain bitterly when their respective governments stray from the preferred system, and the rest of society seeks what offers them survival at the time.

All the foregoing was a gross oversimplification and perhaps not totally accurate, I’m sure, and was not meant to teach anyone anything. It was more thinking out loud.

The public schools really need to instruct the young (everyone) about the theory of economics and the real meaning of money.

Unfortunately, by watching some of the top brains on that subject these past many months, I’m not sure those supposedly in the know really understand much more than I have just written.

P.s. Again, capitalism seems to me the more natural system, and being as it is natural, it allows humans to live life as nature would lead them and not by the rules of authoritarianism that would set up an unnatural model that would inhibit personal freedom. The natural capitalist society, though, requires some rules for civilization and self protection. We’ve seen what happens with a lack of control. And we may find out what happens with too much control.