Some thinking of my own.

Thursday, January 23, 2014

Creating Wealth

Income comes from a spectrum of activities. On one end, people work and produce value that the rest of the people need or want. Before they worked, the value didn't exist. After their work has been done, the value is there for others to enjoy in exchange for some retribution. That would be the case of a baker baking bread, or a programmer creating a game.
On the other end, income can be achieved by taking other people’s product, a slice of the cake when it passes between two agents of the economy. No real value is created in the process, either than the artificial facilitation of the transfer. This facilitation usually includes two steps: the impediment of value creation, and the partial elimination of this impediment, in exchange for retribution. That would be the case of an insurance agent, who will facilitate the baker to insure his business after laws have been passed to force bakers to get insurance, and after insurance regulations dictated by insurance companies have become so intricate that insurance became a profession as complicated to learn as medicine.
As the complexity of human activities increases, more and more people get their income closer to the second end of the spectrum, forcing the producers to work longer hours to supply things and services for everybody. This is true everywhere in the world, and it has nothing to do with the political system. In capitalist countries the second hand of the spectrum is owned by the financial sector, while in socialist countries it’s the domain of bureaucrats. What’s surprising, enraging, catastrophic, is that societies glorify the unproductive. Not only they are better paid for “non-impairment” of production, but they are perceived as belonging to a better class. Production is taxed, disrespected, discouraged. I think here lays the key to the big depression that started in 2008 and the western world is struggling to get out from.

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