Leaving Holes Undug, Paper Unprinted by Jim Fedako

[Stephane Budge]

I had a busy weekend. I dug a hole, filled it in, and dug it out once
again. I shoveled my driveway and then threw the snow back so that I
could shovel it a second time. I vacuumed the carpet in our family
room, shook out a bag of Cheerio dust, and vacuumed the same as
before. Based on the prevailing view of political economy, I worked
and therefore eased our economic crisis.

Of course, I haven't been paid for my efforts, but I hear tell that
Obama will reward my labor in the near future. His paper payment,
though late, will be his way of paying me for a weekend of hard work.

But, is it true that labor alone is the key to fixing our economic
woes? Or, do we need to once again produce value based on consumer
preferences? Let's take a look.

When Obama pays me for my weekend of repetition, he will be papering
over nonsense. I produced nothing, so I have nothing of additional
value to bring to the market. In essence, Obama is simply funding a
winter planting of Lysenko wheat — he's printing dollars that will
reap nothing save bare fields and embarrassment, and if pushed to its
logical end, starvation.

Sometimes the easiest way to understand economic truths is to abstract
away from paper money. Consider a farmer's market where folks come
from afar to truck and barter. To simplify the explanation, let's
assume that this market is the only market for our contrived agrarian
society.

So farmers and others bring their wares in order to exchange them for
what they desire but cannot or do not produce. Would anyone suggest
that, in order to improve this society's standard of living, farmers
should spend their free time digging holes, only to fill them in
again? Of course, such a question is subject to the political views of
the day. Certainly, the local Nobel-laureate wannabe might suggest as
much, but the farmers would set pitchforks to britches and send this
village idiot on his way.

If, on the other hand, someone suggested that, in order to raise the
standard of living, farmers save real goods — their produce — to lend
to the local ironsmith so that he could produce better plows, the
farmers would set pitchforks to ground, lean on the handles and muse,
Seems that fellow's onto something.

After the roundabout process is lengthened and new plows brought to
market, the farmers would be able to trade for those plows and reap a
larger harvest. And it is the larger harvest — the larger supply —
that will ultimately lead to an increased demand and improved economic
conditions for all.

What if it became evident that our smithy was hopelessly unfit for the
task of creating an improved plow? All the invested wares are now
sunk, with losses all around. Would our farmers agree to continue
funding the hapless ironworker even though nothing of value would ever
come from his forge? Or, would the farmers cut off their investment,
forcing the smithy to take some other employment so that the forge and
iron works could end up in the hands of someone better suited for the
task? The questions are rhetorical and the answers obvious.

Next, let's assume that a true crisis hits our society: a late freeze
nips most of the early-planted crops. Would our farmers now chase down
the village idiot for advice? Would digging holes suddenly make sense?
Of course not. The farmers would either attempt a replant or look for
other means to produce foodstuff or value for their own survival and
trade.

What about a sudden change in preferences? Suppose farmers qua
consumers no longer desired (say) parsnips as before. In the short
run, farmers who grew parsnips would have to modify their exchange
ratios (i.e., lower their prices) in order to clear the market. In the
long run, those very same farmers would have to adjust future
production to meet demand, or suffer a loss. But no new holes need to
be dug.

When we add paper money back into our example, things get a little
cloudy. Money becomes the intermediate step in the process when a
farmer trades, say, wheat for corn. First, the farmer exchanges wheat
for money, and then he exchanges money for corn. Nevertheless, there
is no way for additional paper notes to bring more corn or wheat to
our market. Paper simply allows the market to be more efficient by
facilitating indirect exchanges. That is all paper can do; it can do
nothing else.

The blob in DC — regardless of party — wants us to believe that
digging holes and printing paper are better than saving wares and
improving plows. They want us to believe that only they — and their
printing presses — can improve the economy. Why?

The answer is simple: they produce nothing but paper and waste. They
are a drag on the economy. Truth told, in spite of their ever-present
lapel pins displaying the American flag, the DC folks are unable to
guide our economy any better than Kim Jong-il can guide the economy of
North Korea.

In order to bring our economy back on track, government needs to get
out of the way of entrepreneurs and capitalists. We need to leave
holes undug and paper unprinted