By: George Noga – February 1, 2014
Whenever I want to understand an economic issue, I use a didactic aide that never fails me. I reduce elusive concepts to their simplest form by assuming the world consists of a small island. For example, if I wish to understand the economic effects of labor unions, I think through the effect on the island before and after unions are created; who benefits and why; who suffers and why; and what is the net effect on wealth creation and/or destruction. I call this Island Economics. Following is the first lesson from island economics – it explains a powerful, yet simple, economic precept.
Many eons ago on a small as yet unnamed island, the denizens subsist as hunter-fisher-gatherers. They are unaware there may be other islands. There is no economy per se; people are divided into small families or clans, each of which functions as a putative economic unit. They coexist with other such units – sometimes peaceably, sometimes not. Their lives, short and brutish, are on a bare subsistence level, dependant on the fickle bounty of the sea, the exigencies of the hunt and the caprice of nature. They still are many generations removed from division of labor, having a medium of exchange or even agriculture and animal husbandry.
“The natural and normal condition of mankind is poverty.”
What economic lesson can we sophists of the twenty-first century learn from such primitive people? What, if anything, can they teach us? Surprisingly, they teach us an ineffaceable economic truth applicable across all time and space. Indeed, the lesson applies throughout the universe even on other planets wherever scient beings may exist. The lesson: it is universally true that the natural and normal condition of mankind is poverty.
There is no instance where any aboriginal population existed in a state other than poverty. Yes, some aboriginal populations were better off than others; any such distinctions however were due solely to the beneficence of nature and not to any form of economic activity.
Okay, so you already knew the normal condition of mankind is poverty. But, do you understand all the implications that flow from that axiom? It is clear from their behavior that many folks today do not fully understand that immutable truism. Progressives still prattle about poverty and ruminate about its root causes; we even have declared war on poverty. If everyone understood the natural state of man is poverty, there would be nothing more to discuss.
“The question we should be asking is:
What causes wealth and how can we bring it about?”
Those who futilely and unproductively seek to understand poverty are wasting their time. The question they should be asking is: What causes or creates wealth and how can we bring it about? Wealth is not a natural condition of man; indeed, it is rare throughout human history. Wealth creation must be studied, understood, fostered and replicated for progeny. Indeed, it is only by understanding wealth that poverty may be alleviated. Someone may assert that, for example, ignorance or lack of education creates poverty. This is a posteriori reasoning. People are born ignorant and uneducated. To better create wealth they need to become educated. Education creates wealth; ignorance does not create poverty.
The aboriginal inhabitants of our unnamed island did not even know wealth existed. If they had, they likely would have attributed their impoverished state to displeasure of the deities. Perhaps a few of them viscerally understood their poverty was a natural condition; but they would have held no clue about how to escape it via economic activity that resulted in wealth creation. This was a process that required mankind millennia to discern and about which our present grasp remains far more tenuous than it should.
Let’s review lesson number one, arguably the most basic lesson of economics. This prime lesson, compliments of our aboriginal island dwellers, is a valuable one not fully appreciated several millennia later. Poverty has no causes; it is the natural condition of mankind. We have known that for centuries. We also understand what causes wealth even though we are doing much today to destroy it – purely for ideological and political reasons.
“Poverty today continues because of obsience to false gods.”
Mankind will continue to advance economically only by shedding its shibboleths which we possess in abundance. Unlike our island denizens, we do not blame poverty on deities, animal spirits or natural phenomena. Oh no – we have progressed to where we assign fault based on ersatz science, modern mythology and political correctness. We now blame poverty on bogeymen like greed, multi-national corporations, western civilization, and capitalism.
Nothing causes poverty; it is our natural state. To escape poverty we must focus on what is required to create wealth. At the dawn of the twenty first century, we understand reasonably well how to create wealth but we fail to do so solely because of obseiance to false gods.