Dear Friends,
It seems to me, the term “economy” is too nebulous to really define anything effectively. It has so many parts that understanding it in any meaningful way eludes even the most astute thinker. If we break the term “economy,” into it’s macro constituent parts however, it makes the whole thing more manageable. The “economy” can be broken down into three macro segments. The Market economy, the Political Favor economy and the Underground economy. These macro terms can be further broken down into the micro with, the green economy, the oil market, and so on. The macro terms are easy and important to understand, to really comprehend what is being debated, when politicians make claims about the “economy.” Our very economies depend on it!
Most countries have all three “economies,” the market, political favor and the underground. The most wealthy have the market economy as the primary. Communist and some hard core socialist “economies” specifically outlaw the market portion of the total economy. They seek to have the political favor economy be the only one available, but an underground economy is brought into being anytime the Elite ban anything, that has an allure to the people. So even in the most hard core communist country, say North Korea with their three generation labor camps, (a crime against humanity if you ask me), There must exist at least two, the political favor and the underground economies.
The political favor economy is never called by name, so it may sound a bit tinny, but if you think about the concept… it is most apt. The political favor economy encompasses all government spending, and all capital expenditure, that is forced by regulation. The political favor economy produces nothing; it can only take what someone else has produced. If the producer is fortunate to have some measure of favor, he or she will be paid, (perhaps handsomely), lacking political favor, they might not be. The political favor economy is primarily directed at protecting the power, wealth and status of the political Elite.
The underground economy is well known and has been written about endlessly, sometimes glamorously, occasionally pilloried, but the underground economy is as organic as any, and as invasive as kudzu vine. It is born of regulation and negative examples. The more hypocritical the Elite as a group are, the more the underground economy will flourish. At the expense of generations of human beings, the underground economies of every nation, are nurtured by their Elite. As a result, as money is moved from the market economy to the political favor economy, some is drawn from the market into the underground economy as well, sometimes doubling the negative effect on the market.
The market economy has only been known since the seventeen hundreds, when Adam Smith wrote the Wealth of Nations, outlining the basic ideas of what a market economy is. The market economy is a dynamic, complex system, that efficiently gathers data about the wants and needs of the human race, with passive, adaptive built in mechanisms. The market then meets those needs, at the least cost to the environment, the people and in resources. The market economy is the source of all the luxury we surround ourselves with today. The vast improvements in efficiency, that have allowed so many people to remain idle, is in itself astounding, if it is given a moment’s thought.
All three of the macro economies I have mentioned meet someone’s self interest. The underground economy, meets the self interests of the drug lords, the crime bosses and the gangs, while the political favor economy, meets the self interests of those who have political favor, and lastly, the market economy, meets the needs of every segment of society, from the richest down to the very poorest, when it is actually employed. The biggest lie a politician can tell the poor, when there is almost no functioning market economy in that country, (the “economy” is dominated by the political favor economy) is, “It is capitalism that impoverished you.”
Politicians use the term “economy” as a way to blur what is really being talked about. When they call for “fairness,” they always seek to move more capital, the fuel for all the economies, from the market to the political favor economy. Since the underground economy is by it’s very definition, underground, it cannot be taxed as a source of revenue or regulated by, the political elite, and so has a inverse reaction to the effects of taxing and regulation. When regulation goes up, so does the underground economy’s fortunes, as the market economy’s fortunes are winnowed down. The political favor economy is called many things by the political elite. Both democrats and republicans prefer the political favor economy, to any other, so they seek to move as much of the workings of mankind into it as possible. So… when a politician speaks about the “economy,” keep the context in mind… which economy he or she is really talking about? If it is the political favor economy… he or she is trying to move capital from the market economy, (your pocket, regardless of their rhetoric), to the political favor economy.
Sincerely,
John Pepin
