Dear Friends,
It seems to me, once one accepts that Pareto was right, then the question shifts from how to get rid of poverty to what’s the best way to distribute wealth? If poverty can’t be eliminated, then we should seek to lift all boats, such that what is called wealth today is called poverty tomorrow. This is important if we agree that the lot of the downtrodden should be elevated. People have come up with a few ways to distribute wealth to varying degrees of success… in generating prosperity or poverty. There is the free market, central planning, and the blending of them. Central planning distributes a nation’s wealth by political favor while the free market distributes wealth by merit. Which system then creates the most prosperity for the most people?
Central planning and free enterprise map onto elitists as central planners, and populists as free marketeers. Historically, however, those who called themselves populists were actually central planners, who claimed they would centrally plan for the benefit of the workers, instead of themselves. They claimed to be angels manifested in human form… but for some reason they have turned out to be demons instead. Nevertheless, one could say the Soviet Union made an earnest attempt to make central planning work, especially between the 1960s and the fall of the Berlin Wall. I would further argue that the fact they didn’t slaughter swaths of their population when they lost power is a testament to their intent. The fact that the Soviet Union failed gracefully tells me they tried to make it work. It didn’t.
Looking back through history, I can’t find a single example of central planning yielding anything but poverty over the long term. In the short term, when there’s plenty to steal, the redistribution looks like wealth, but the added heat is nothing but a paper fire. The historical cycle that I have observed is that free markets build wealth and prosperity, then demagogues vilify those who are building things and getting wealthy for it, and offer to redistribute that wealth to the poor. The sales pitch is to eliminate poverty, and the result is poverty for all, but for politicians. From the French Revolution to Venezuela, central planning has a perfect track record of failure. If, however, wealth extraction is the goal, central planning has proven it’s worth.
History is also adamant that free markets produce wealth by the truckload. Karl Marx himself said as much. Individuals will work harder for their own self-interest than for the interests of another. This leads the self-interested worker to work harder, produce more, and generate more wealth than the worker toiling under a lash. Moreover, those whose labor is “owned” by another whether it be the State, or a Master, that person has zero incentive to increase his or her output. In fact, there is an incentive to lower output. Meanwhile, the individual working for themselves has constant incentive to increase productivity. This shows us that simple incentives align to lower output in a centrally planned economy, just as they align to increase productivity in free markets.
The Pareto distribution is a physical law. It applies across domains, categories, and explains the disparity of wealth. Such laws aren’t flexible to political will. So, no matter how earnest, honest, or ethical the central planner, they will fail at lifting people out of poverty, because you can’t fight nature. The best anyone can do is allow the free market to lift all boats. Then, in the future, while there will always be the “poor,” the lowest on the ladder could live the lives of today’s wealthy. Just as in the US, the poorest live better lives than the richest did a century ago. That’s the correct paradigm to aim for then. Not to plan poverty away, that’s impossible, but to grow it into wealth. At some point, what difference does a disparity in wealth make if the poorest live like kings?
Sincerely,
John Pepin
Limericks
Dear Friends,
Democrats would be wise to let Trump implode,
Alienating his friends and going off the road,
But I’d wager,
It’s not in their nature,
Because they live by an egotistic self-serving code.
Now listen here one and all,
Inflation is a terrible call,
Creeping poverty,
We can all agree,
You can count on RINOs to drop the ball.
Patel has lost our trust,
His lies are now a bust,
A deer in headlights stare,
As if he’s not really there,
And his reputation turns to dust.
Electricity water and people all,
Seek the easiest path to fall,
If AI will suffice,
We’ll seek its advice,
And atop a titan we could stand tall.
The self-serving so run the ____,
So radioactive that they ____,
Backstabbing things,
Or controlled by _______,
Thinking that they’re in the know.
Sincerely,
John Pepin