|Print | Back||October 20, 2015|
The Dismal ScienceWhy Economics Matter
by Adam Smith
There are days when I sit in my office at work and listen to the wonderful music of “Les Miserables.” Listening to the music or watching the movie (I have never read the book) can be a moving experience. I watch the revolutionaries and feel for their plight.
In France and most European countries during the 19th Century, riches were endowed on the few. The aristocracy controlled the land and wealth of the country. People inherited their wealth from their families. It was almost impossible for people to rise up the economic ladder and improve their lives.
When people do not see hope, then the possibility of radical revolutionary change grows.
A common thread running through many of the articles I have written has been to consistently mention the millions of people that still do not have a job since the 2008 recession or only have a part-time job, or have given up looking for a job. Many of us live and work in places that do not require us to see the effects of bad economic policy on the unemployed.
When we cannot see the true economic impact of unemployment, we do not realize that many of the economic policy changes that are proposed by politicians are only cosmetic or actually reduce the chance of these unemployed people from finding a job.
It is good to remember what the study of economics is all about. A town, city, province, state, or country produces a finite amount of goods to be consumed by the people. There is always a system that determines how those goods will be allocated. The analysis of how those goods are allocated is what we call economics.
For centuries, kings or governments had no idea, or really bad ideas, about how to make an economy grow. To them the size of the pie was static and the only thing left to decide was how it was going to be divided among the citizens. And the king or government did decide how much you were going eat, what would be your lodgings, and other details of the citizens’ very existence.
Then in the 18th Century there was a new idea. People would be free to determine their own fate. In France, where all the property continued to be controlled by a few, this meant the lower class was free to be worked to death and die young.
In the United States, however, it meant owning your own land that you could farm. You could start your own business and make money. In America, for one of the few times in history, there was going to be a middle class.
I am not talking about the very wealthy. There is always that 1-3% of the population that has fabulous wealth. But the masses could work, make enough money to feed a family and provide comfortable living conditions for their families. And anyone who really wanted to could join that group.
(I am obviously glossing over the slavery issue and the horrendous bigotry that kept African-Americans poor. But in today’s U.S., that last statement about everyone being able to join the middle-class is true.)
Economics matter because it dictates how people in a country are going to live. Not the top 3%, but all of the rest of us.
Bad economic policies at the end of the 1920s in the United States moved that great middle class towards communism. Roosevelt’s economic policies may have had a questionable positive impact on the economy, but his demonstrating that he actually cared about the unemployed stemmed the tide of communism and saved capitalism in the United States.
Where are we now in America?
The negative impact of the last recession has never been overcome. The ability to move up the economic ladder is much harder now than it has been for decades. Imagine you are someone that grows up poor; you sacrifice and work hard at school and somehow manage to graduate from college.
In the U.S. economy of today, there may or may not be a job for you when you graduate and you may end up going back to the place you started your journey. If this happens enough, the message gets out that there is no way for people to improve their life.
If the economic pie to be divided is really going to stay the same size, then the only way for someone to get more is to take it from someone else. Socialism starts to look attractive. It is not by accident that this election cycle has an admitted socialist contending for president and there are people that love him.
It is time for both sides of the political spectrum to put away their childish behavior and for once do something for the American experiment of freedom and pass legislation that will help the economy really grow. If the economy does not improve there are some harsh economic realities, like an increase in socialist policies and entitlement programs that will completely collapse the economy.
There is not another country — or all of them together — that can bail out the U.S. economy if the U.S. becomes another Greece. We are that big.
Economics matter. When people become desperate for hope, then radical measures are willingly accepted. Are we going to leave our posterity the opportunities that we had, or are we going to leave them a less-free country where the government dictates everything they do…and think?
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