If we told a patient who was afflicted with a life threatening lung infection: “Breath very deeply and very fast, and you will be cured!” The patient might feel better for a few hours as the added oxygen entered his blood stream and went to his brain. But, he would soon die as the bacteria killed the cells of his lung and he suffocated.
Similarly, the government tells a country riddled with joblessness, failing businesses and collapsing real estate values: “Look, I’m going to instill hundreds of billions of dollars into your banks! I am printing them right now! When you get this money your economy will revive and everyone will feel better!”
As the newly printed money enters the financial segment of the economy, bankers begin to smile, stock markets rise and there is an overwhelming feeling of euphoria!
“Oh, the government did it!” people will cry. “They did it! The economy is saved!”
But, as sales continue to fall, jobs continue to disappear and debts grow higher and higher, the public soon realizes that its economic future is heading downwards towards what economists call a “Great Depression.”
Printing money and distributing that money to banks is obviously not a solution to a failing economy. In fact, it is an illusion and a lie on the part of government. Throughout history it has never worked, and it will not work today.
In order to understand why instilling “newly printed money” into an economy will not work, we must understand the vital functions of an economy as we understand the vital functions of a human being upon which economies are modeled.
When an economy or a human being is functioning well we can see that all the people in the economy and all the cells in the human body are alive and performing their duties easily
The people in an economy are employed and receiving adequate compensation for their work and the cells in the body are doing their job and these cells are receiving all the oxygen and nutrition that they need.
It is extremely important to realize that ALL the cells and ALL the people must be compensated adequately in order for them to function normally.
If cells do not receive nutrition or oxygen they quickly die. When cells die the organ that they support weakens. If that organ is vital, such as the heart, liver or kidneys, the patient might die.
In an economy, if a group of workers in a vital sector, do not receive adequate compensation, although they do not die like human cells, they do create social unrest through crime, disorder and emigration to other lands.
We can instantly see that adequate nutrition is required for all cells and adequate compensation is required for all humans in an economy.
WHAT CAUSES UNEQUAL COMPENSATION?
In humans and in societies there is a tendency by the brain or by the government to favor one organ or one group over all others. We see it readily in sick patients who present with obesity, heart disease, liver disease or lung disease.
Their brain has told them to overeat or to under-exercise or to drink large quantities of alcohol or smoke cigarettes constantly. Now, they are sick and there is no way to make them young and healthy ever again.
In a society the analogous functioning of the brain is the functioning of the government.
As the brain decides to over-eat the government decides to reward one group in society better than all other groups.
The government does this easily! It takes the money of the workers and delivers it directly into the pockets of its friends and supporters.
Soon, a healthy society with well paid workers and administrators becomes an unhealthy society with a grossly unequal distribution of wealth.
This is quite analogous to a morbidly obese patient.
Both the morbidly obese patient and the society with a morbidly unequal distribution of wealth will quickly die.
WE SEE IT EVERYWHERE
We are seeing this happen today across the world. The countries in North Africa and the Middle East had a severe inequality of wealth for decades. The people in all these countries have revolted and destroyed their governments.
In the United States and in Europe there has been a movement to a gross inequality of wealth. It is well known that what were formerly healthy economies with large middle classes have turned into sick economies with all the wealth centered in an elite and very small upper class whilst the working class has descended into an immense conglomeration of inadequately compensated and under-employed workers.
No amount of “Fiscal Stimulus” will change this picture. In fact, this act by the governments of Europe and the USA will only exacerbate this societal illness as the disparity between the rich and the poor enlarges. The money distributed by the American and European governments is not going to the people. It is going directly to the wealthy.
The stimulus money is funneled directly to banks whose directors increase their own salaries and lend the money to their friends who are also wealthy.
WHAT ARE GOVERNMENTS?
Governments can not cure their societies by injecting large sums of money into their financial systems. Governments, by their very nature, are an extension of the wealthy elite upper class.
Any examination of governments anywhere in the world reveals that the members of the government are individually wealthy and that all the people connected to the government are wealthy.
The few countries in the world which are healthy have very small governments with very limited powers. The people in these countries are healthy both physically and economically.
As examples, we can look at Norway, Switzerland and Singapore. All the small European countries are healthy, except those dominated by large neighbors with large governments.
Since the major function of government is the re-distribution of wealth, from the earners to non-earners, only those governments that are not controlled by the wealthy elite function to the betterment of their population.
This is quite analogous to patients who use their earnings to buy large quantities of alcohol, tobacco or drugs.
Governments and their ruling elite upper class are the cause of social disease.
Although governments, like brains, are necessary for a society to function, only governments intricately embedded with their population produce healthy societies. This is not the case, except in a minority of countries, across the world today.
It is the inequality of wealth which is the major cause of social illness.
This has been seen by all major social thinkers throughout the ages. Every major and minor economist believes there is a solution for the inequality of wealth.
Unfortunately, these thinkers, like Marx, recommended strong governments as a panacea for the problem of wealth inequality.
During the Great Depression of the 1930’s John Keynes authored a book which advised fiscal stimulation. Fiscal stimulation was tried in the Great Depression and failed. Today it is being tried again. So far, it has failed.
The best treatment for wealth inequality is Small Government controlled directly by an educated population. In general, this means a small country.
Unfortunately, because the population of the world is so large, large countries are common. These countries must have large governments. Like obese people, they have a tendency to become sick.
With extremely rare exceptions, there is no real cure for obesity. Also, with rare exceptions, there is no real cure for large governments.