Wealth creation: The story of the chair
Our story begins with a pile of sticks. Not a particularly exceptional pile, one that was created like thousands around the country from yard debris. While most of us see an obstacle to leisure, something that will need to be disposed of by burning or dumping in a landfill, some kindling at best or some pulp for the paper mill worth a few pennies; our hero sees more. You see our hero is one of those rare individuals that can derive potential out of thin air. Our hero has the God given talent, initiative and foresight to create something of value from the seemingly worthless.
Our hero used the pile of twigs to build a chair. Not just any chair but a comfortable rustic chair that was placed on the front porch inviting those in need of a respite. It was not that our hero was a braggart or showoff, it was just the type and style of chair that lent itself to outdoor living.
The chair attracted quite a bit of interest. Offer after offer was proffered until one day the offer was too good to pass up. Our hero reluctantly parted ways with his creation counting the proceeds as he watched his chair disappear down the road.
Missing the chair, and the interest it generated, inspired our hero to build another chair. That chair quickly found a new home as did all subsequent chairs that he created. You see, the word had spread about these unique chairs and potential buyers were lining up at his door. Trying to keep up with the interest and demand was consuming all of our hero’s time. It became difficult to find time to eat and sleep.
As the construction of each chair was labor intensive, our hero realized he would never be able to keep up, and thus have a chair for himself much less the time to use it, if he did not find a way to hasten the manufacturing process. So our hero decided to invest the proceeds from the previous sales to buy equipment that would enable two chairs to be produced in the time it had previously taken to build one. Much to his surprise he still could not make enough chairs to keep the chair buying public happy.
This led our hero to the conclusion that he needed to rethink his business model.
He had equipment that he was only using a small percentage of the time. If he hired someone to help him, perhaps they could make enough chairs to keep at bay those with chair envy. With a little cyphering our hero determined that he could hire up to 10 employees, potentially making 20 chairs per week, thus maximizing the productive capacity of his new equipment. So he began to hire the extra help.
As time went on our hero expanded his business, built a factory, created an entire line of furniture that he shipped all over the world. He was finally able to pass the day-to-day operations of the business on to his employees and enjoy sitting on one of his creations.
So what is the moral, or should I say morals, of this story?
Our hero was able to create something of greater value out of something of lesser value, this is known as wealth creation. This story is an analogy of what happens in virtually every successful business across the nation. They create something out of nothing and that something reveals itself as profits. Those profits provide the capital needed to fuel the economy and our perpetually improving standard of living.
As you now know the history of this business, you realize that it was our hero that created this successful endeavor, not the government as some politicians would lead you to believe. Thus, the government has virtually no claim to the profits earned and cannot legitimately pilfer funds from our hero beyond those that return “just compensation” as the Constitution requires.
Had the government taken from our hero the profits generated by those first few chairs in the name of wealth redistribution, correcting income inequality, leveling the economic playing field; our hero never would have been able, or had the incentive, to acquire equipment, hire employees, and build a successful business.
Had this business never been started, all the subsequent wealth created by this venture would be nonexistent. Not to mention the economic activity spread throughout the community by the employee’s wages, services and peripheral goods required by the business.
The question that comes to mind at this point is how much of the profit derived from our hero’s ingenuity and hard work does our hero owe his fellow man? Should that not be of his own free will to determine? Our hero realizes there are legitimate roles the government plays that require taxes to support, those things the individual cannot provide for themselves (nation defense, police and fire, a court system, some infrastructure, etc.). But the redistribution of wealth, under the guise of fairness, should not be the role of any government in a free society. Charity should be voluntary, not by force else its legality and morality become questionable.
Rich people don’t bury their money in the back yard or stuff their mattresses and sleep on it. They invest their money in ventures they believe will be successful and profitable. These ventures produce the goods and services that make our lives better. These ventures produce the economic activity that creates jobs and wealth. By stripping (taxing) investors of their ability to begin and expand the creation of wealth, is the government not slamming the door of economic opportunity in the face of all of us?
If the government was forced back into only providing those services granted by the enumerated powers of the Constitution, image the economic activity that would spring forth. Every dollar that goes to the government to provide illegitimate services is a dollar that cannot be used in the private sector to create a job. So the next time you hear a politician claim income inequality is the “defining challenge of our time”, as Barack Obama did, you are free to play the B.S. card because they are only using class warfare to enhance their electoral prospects.
Area resident Jack Loesch is a longtime teacher at the University of Akron. Read his website at www.TorchnFork.info. He may be reached at: TorchNFork@frontier.com