They say that if you role the dice you take what you get. Four out of five businesses fail so isn’t it just really hard to make money.
Isn’t it our responsibility to accept our failures. I’ve been asked many times to boil down free market capitalism to its simplest elements. No problem. Here’s the story of the little seagull and the mighty clam to help illustrate to the lay(wo)man why capitalism works and how.
With this story I answer the most important question from which all other aspects of the economy derive. Where does “Production” come from, how is it created? Long before we can evaluate something it has to come into existence. How does production occur in the first place?
The answer is free and voluntary exchange between self-interested parties or systems, hence the term “free market capitalism”. The free part is critical and anything that interferes with the exchange should be avoided. Even automatic reactions can occur so long as it’s free and natural.
One day there’s a young boy walking along a beach collecting clams for supper. He comes across a little seagull struggling to pull a mighty clam from the waters so he stops to observe. With each futile attempt, the boy notes the determination of the little bird who is too little to fly AND carry a clam to the rocks where it can drop and break open. He soon decides to throw the bird one of his smaller clams.
Gratefully, the bird grips the clam in its beak. Still unable to fly with his prize, however, instead it pulls back hard, dips under and flips the clam, which weighs more than it does, against a rock; breaking it open. It then gobbles up its reward. The boy is stunned. How did this little bird flip this heavy clam? Could a small man use such a technique to flip a large man? This unexpected knowledge is one of the “Products” of the free exchange and like almost all true product it can be developed upon for further production.
But what is its value? Years later, after further developing his wrestling skills as he had unexpectedly learned from his free exchange of goods for service with the little seagull, the young man finds himself walking alone in a strange village with strange ways. A large and menacing brute materializes from a shadow with a broken grin and murderous intent in his eyes.
The young man thinks back to the little seagull and when the robber lunges toward him, he grabs the shoulders, pulls down hard, dips under and flips him onto the unforgiving cobble stones. The villain is defeated, and the young man lives another day. Though surely the seagull is long dead, the product of that single exchange so many years ago continues to pay dividends. This is free market capitalism in a clam shell.
Now lets suppose we examine the roll of central planning when it interferes in the free market. Perhaps that fateful day includes a chain and a sign from the local beach council that reads “Do Not Feed The Birds” because they don’t like the effect of seagulls on their local tourism efforts. Perhaps the young boy listens to the sign and therefor doesn’t throw the little seagull the clam, the free exchange never occurs and he never discovers wrestling. Years later the local news paper runs a small almost unnoticed obituary of a young man brutally beaten to death in a strange village far from home.
Does the central planner know or care? Absolutely not. They can’t predict the benefits of a free exchange or control it so instead of embracing its free peer to peer benefit, they steal from past production and obstruct new exchanges they can’t broker; radically reducing the potential production that would otherwise naturally occur.
This is the effect of central banks and national economic planning. Easy money for an elite group at the expense of the rest. Notice how Canada’s GDP keeps going up, which we are constantly encouraged to fixate on by virtually all mainstream politicians and economists, and yet so does national and personal debt because our consumption consistently out paces our production. In-spite of all the so called experts that assure us they can manage things better than it would be without management we have growing debt, now 620 billion, record debt to income ratio ( that is Canadians owe an average $1.36 for every $1 earned), and almost no personal wealth or savings left from previous generations.
This might be fine for the money machine we call Canada and its global resource partners, but is it good for actual living breathing Canadians? Do our personal dreams matter to the state? I think not.
Next Up: Everyone Is Screaming Nobody Is Listening