Government is Horrible at Divvying Resources

Resources are limited, this is true. Even when creating wealth, such as growing a garden, it requires the resources of land, water, and sun. It does not follow, however, that the state is necessary to divvy up these resources appropriately. To put it another way, there is no evidence to suggest force is the best way to decide where resources will go.

I bring this up because I’ve heard people say we need a government because land, water, oil, etc. are all to some degree scarce resources, meaning they are limited. But why on earth would anyone think the government will be a proper arbiter or these resources?

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Just look at oil. This is a scarce resource, that many people want and need for industry. Are the governments of the world doing a good job splitting that resource? No, they spend more money fighting wars over oil than the actual oil is worth, and that is before we even place a value on human life lost! The only reason governments can spend more wealth obtaining a resource than it is worth, is because the wealth they spend is forcefully taken by them in the form of taxes!

[Fun Fact: there is enough habitable land on Earth for every person alive to own over two acres.]

A company that needs to turn a profit on the other hand, could not spend more obtaining the resource than it is worth. They cannot spend $1 billion mining gold if the amount of gold they mine can only be sold for half a billion dollars. But governments spend far more on wars to obtain land and oil than the total amount of production that said land or oil could sustain.

So if no one was allowed to rob us, including government, then these issues would have to be solved in a mutually beneficial way. In order to obtain oil, we would have to pay the price asked, or go elsewhere. Elsewhere would include solar, wind, hydro, and other forms of creating electricity. The government has helped keep us in the stone age of fossil fuel because they rob us to obtain the oil, then rob us to subsidize the oil, and keep the shelf price of it low enough so that we don’t bother seriously looking into alternative fuels.

But if we were not robbed by the government, that wealth would stay in our hands, and we would be able to spend that wealth in peaceful ways that create more wealth. Instead, government spends it on murder and destruction.

And somehow people still think government is the best arbiter of limited resources? They just don’t know any better alternatives. That is why they should read my fiction novel Anarchy in New England, in order to explore a world where coercion is never okay, and mutual benefit has monumentally raised the standard of living.

The Natural Resources Wealth Myth

sowell_thomas_biophotoThomas Sowell is great at eradicating widely believed myths by providing facts which contradict the prevailing beliefs, which he does in regards to economics in his book Economic Facts and Fallacies. I hear some people speak as if it is a fact that the more natural resources a country has, the richer that country is. But a simple examination of the facts will prove this is not true, unless looking at one particular segment of any such population. It is true that Saudi Princes are ridiculously rich from their country’s oil, yet the vast majority of average Saudi’s live in poverty. So abundance of natural resources ensures no such abundant distribution among the population.

The world’s largest producer of natural gas (Russia) is not even among the top 70 nations of the world in real income per capita. Neither is the world’s largest producer of rubber (Thailand) or zinc (China). The world’s largest producers of gold (South Africa) and copper (Chile) are 69th and 70th , respectively, in real income per capita. The value of natural resources per capita in Uruguay and Venezuela is several times what it is in Japan or Switzerland but the real per capita income in Japan and Switzerland is about double that of Uruguay and several times that of Venezuela (Sowell, 212).

Some of the countries with the most and richest natural resources are the poorest. Venezuela can hardly acquire toilet paper, despite having several times the amount of natural resources per person when compared to Switzerland. Switzerland, in case you were wondering, has plenty of toilet paper—as well as electronics, guns, vacation homes, watches, chocolate etcetera.

So who could guess what the difference is between these countries who cannot translate their natural resources into societal wealth, and the countries who can build up national riches, without any such natural commodities? Well we don’t have to guess, we can figure it out, since knowledge and reason are some of the most precious resources of all.

Geographic accessibility to the advances of the rest of the world seems to have had more effect on economic development than the possession of rich natural resources. Knowledge is, after all, what makes something a natural resource. The cave man lived amid the same physical resources we have today—and had them in greater abundance—but they were not natural resources in any economically meaningful sense until human beings acquired the knowledge to use them and the cultures to organize their use (Sowell, 212).

But even so, while some countries have long been situated to reap the economic benefits of trade, they remained poor even into relatively modern history. Japan and Singapore were both backwards and poor economically only one hundred  or fewer years ago, yet are today two of the most prosperous places on earth. What allows people to use their resources, and to use their knowledge is protection from plunder of the fruits of their labor. Some governments protect their citizens from thieves, and some government do the thieving. The freest market possible while existing in a stable region is what creates the most wealth for a country, per capita.

In countries most restrictive in economics underground black markets form in order to better serve the needs of the population. These are to avoid red tape and regulatory costs of the government, but include their own costs which limit how much economic advancement can be achieved. In underground markets wealth cannot be transferred as easily to fund large and long term projects—and less collateral exists to retrieve value from a failed investment.

The bottom line is that people need to be able to take advantage of the knowledge and resources available—resources alone are not enough to create wealth. Confiscatory policies of currently third world governments (which have not always been third world countries) show this misunderstanding, and prove this dynamic, since some with the most oil also have the most poverty, and others with no resources have booming economies.

But law and order are necessary for economic development, which is why there is a bell curve when it comes to how conducive to economic prosperity powerful governments are. To the extent that the government is powerful enough to prevent major loss of life, loss of production, and destruction or pillaging of materials and goods, it promotes economic advancement. When that government uses its power to itself confiscate too much of the production and labor of a country, or to do so in a way that cannot be planned for in advance by individuals and businesses (Obamacare), economics will suffer, stalling or reversing advancements.

There is no question as to whether our government is powerful enough to keep this region stable enough for economics—if that power is properly directed. Our biggest problem right now is preventing that power from being used to plunder the wealth the people of our country have created.