The Six Killer Apps of Prosperity that the US Government is Destroying

Niall Ferguson recently did a TED Talk called "The Six Killer Apps of Prosperity".

It is worth your while to watch it as it brings up a number of interesting points.  More importantly, it does something that no one ever seems to think of nowadays: It looks at the past and tries to figure out not only what happened but what worked and what didn't.

We now have enough evidence of political and financial systems to be able to come up with some ideas on what works and what doesn't.  Yet, rarely is this analyzed by the public.

Niall tries to look back into history and see what created the most amount of wealth and freedom.  He says it boils down to the following six items:

1. Competition
2. Scientific Revolution
3. Property Rights
4. Modern Medicine
5. Consumer Society
6. The Work Ethic

You may agree or disagree with some of the points... but in general most rational people would say this is a fair list.

So, let's go through that list from the perspective of the current state of affairs in the United States, and most western nations, today.

1. COMPETITION

Nial makes the point here that this not only includes competition between free-market entities but also competition between political systems.  As he states, "Not only were there a hundred different political units in Europe in 1500 but within each of these units there was competition between corporations as well as sovereigns."  He goes on to state, "Nothing like this existed in China where there was one monolithic state covering a fifth of humanity."

This is an excellent point.  Competition between political systems is very healthy.  The founding of the US explicitly encouraged this by attempting to give the majority of the power to the States and not to the Federal Government.  This, of course, has been mostly erased over many decades as all the power has been taken over more and more by the US Government itself.  In fact, this process began 150 years ago with the US civil war when the south tried to secede but was brutally put down in its attempt.

Today, in the US, there is virtually no political competition and even corporate competition is constantly restrained or manipulated by regulations and subsidies.

2. SCIENTIFIC REVOLUTION

By "scientific revolution", Niall's simply means using evidence to form opinions and ideas and testing those opinions and ideas.  Today, in the US, the Government has become such a major player in the field of science that it has turned science itself, on its head.  As example, economics is still taught in the US from the Keynesian perspective - which has all but been debunked and proven to be wrong.  And other areas, including things like physics (as we denoted in our piece, "The Day Science Died"), have seen the Educational Industrial Complex completely skew it towards maintaining the status quo rather than doing real science.

Not to mention that the US Government outlaws truly revolutionary forms of science such as research on stem cells.  Of course, all this does is ensure the US falls further behind in the sciences.  And, as Peyton Manning showed, it just ensures the poor and middle class do not get access to scientific advances while the rich have the ability to jet off to countries for treatment.

3. PROPERTY RIGHTS

This is the reason the US is still hanging on somewhat.  It still has fairly reasonable property rights.  However, it should be made clear that people in the US do not own their houses.  They rent them from the government.  Try not paying your "property tax" and you will see who owns your house.  The same goes for businesses and other assets... try not paying all the license fees or your capital gains tax or dividend tax and you'll quickly find out who really owns your business or assets.

4. MODERN MEDICINE

Niall's point here is mainly about how advances in medicine in the last few hundred years doubled life expectancy due to things like antibiotics.  However, in today's "medical system", the system itself has as its main focus to keep people sick.  Rarely are the root cause of problems identified (which would almost always be diet or exercise related) but only the symptoms are treated... usually putting most people into a downward spiral where they become more and more dependent on toxic chemical medications that make them sicker and sicker.  Today, in the US, because of things like corn subsidies causing a massive increase in fructose corn syrup and a medical establishment beholden to the pharmaceutical companies who disallow natural, healthy medicines to be used, such as marijuana, most people are not only dependent on expensive pharmaceuticals but are all much sicker than they would have been without government involvement in the food and pharmaceutical industry.

5. CONSUMER SOCIETY

Aha, here you say, the US is doing very well!  But, no.  Niall's point is that in a society where everyone is a buddhist monk who does not desire material items the economy would be very small.  And, he is right.  It is healthy for an economy for people to desire things.  However, what has happened in the US, thanks to the criminal Federal Reserve banking cartel, interest rates are always kept artificially low leading people to stop saving and spend more... however, this does not lead to a prosperous economy.  An economy prospers when it produces more than it consumes.  This should be obvious to anyone except those who get PhDs from places like Princeton and Harvard.  The American society today believes it can become prosperous by consuming more than it produces... the effects show in the jobless rate and the poor economic conditions in the US today.

6. THE WORK ETHIC

Here the US is still above many parts of the world although it has been losing against many parts of Asia.  But the entire structure of American society is so warped by government involvement that most of the "work" goes for naught.  With Government subsidized "education" it means that most Americans will spend 16-20 years in school - and in many cases learn next to nothing during that entire time - and then be encumbered by student loan debts and other debts, such as mortgages (which are mostly needed because the price of housing has been artificially inflated by the US Government's involvement in subsidizing interest rates and mortgage loans).  Just ask many of the young "99%ers" at the Occupy Wall Street rallies.  Many state (see many direct viewpoints here)  that they have "worked hard" and done "everything right" but they have no job, no assets and have overwhelming debt.  This is because the government's interventions led everyone down the wrong path.  There is no doubt many of them worked hard for many years but they were doing the wrong things.

Thanks to the internet, education is completely free today... a fact that won't help many who wasted 4-8 years and hundreds of thousands of dollars to get a piece of paper.

CONCLUSION

Milton Friedman once said, "If you put the federal government in charge of the Sahara Desert, in five years there would be a shortage of sand".  As can be seen above, in Niall's 6 "killer apps of prosperity" the government's involvement has either ruined or is in the process of ruining each of them.

Now, in reaction to the collapse of the US, many people have taken to the streets in the "Occupy Wall Street" protests.  However, many of them are asking for MORE government involvement in the economy and the lives of Americans as a solution.

Sadly, thanks to 12-16 years of government funded or regulated education they cannot see that the solution many are rallying for is the cause of most of their problems today.

Comments

[Laurence Hunt]

Jeff, Not sure about an inflated housing price, at least not relative to everything else. I just bought a new (to me) home-office last year, vintage renovated 1926 building. The purchase cost is easily $200,000 BELOW the construction cost. Now I'm writing from NW Ontario, where kids graduate from high school and buy a house (though we will become one of the centres of the next decade's mining boom). So do you mean that we pay too much for materials and labour? Because used housing is still one heck of a bargain compared to building it yourself!

[Jeff Berwick]

Hi Laurence, I was referring to the US home market for at least the last 20 years until a few years ago

[mava]

What makes me roll my eyes is when folks state that they have done everything "right" and yet, they are in debt, for instance.

Where did they get the idea, that there should be some kind of guarantee that if they do everything right, then they will be fine? Who is supposed to be the guarantor? "The government"? That would mean that I, for instance, is implicitly responsible for them "doing alright", even though I have never promised any such thing to anyone. But, because the government is going to try and calm them down, I am sure it will try to make me liable.

I find this idea disgusting in the root of it.

As for homes, here in kali, homes are made of total junk. Basically, the homes are what was described to me in the childrens book about three piglets. They are made of drywall, untreated 2x4 sticks, and stucco. All junk. And for this junk, people are paying hundreds of thousands of dollars? I say this is way overpriced.

And consider too, that you're simply renting the house, with an option for market value, not ever owning it. My mother owns real estate abroad. If she stops paying utilities, she can still own it as long as she wishes - no taxes involved as the place is paid for. Try that in US. Even if you pay down all the debt, new debt is automatically generated trhough taxes to the government. This means there is no ownership, as true owner does not pay any taxes. What is you decide to stop working and your home is your castle, where you can the roof over your head with minimum or no expense? Taxes will make you homeless.

Many tell me, that the land vs. "improvements" breakdown not withstanding, the bulk of this cost comes from land. Really? No one owns the land either. Try to dig for something and you will quickly find out who is the real land owner. It is the same entity as before, - the government.

With that said, I think that whoever pays this money to "own" a house in US, must recognize that he is not an owner but a speculating renter, and hopefully, he is correct in his arbitrage estimation. Otherwise, he is simply out of his mind.

[Jeff Berwick]

Hi Mava, good point about these 99ers saying they have "done everything right"... as though there is a guarantee that if you go to college you will live a prosperous life. I just wrote about this a few moments in todays blog here: http://www.dollarvigilante.com/blog/2011/10/13/the-education-trap.html

[steve]

We got here because of non-regulation of greedy and corrupt banks. Without regulation, greed motivates people to exploit others. A major point Ferguson neglects is that societies succeed when they have growing natural resources to power their societies;the more available energy, the more successful the society. The world's oil production has declined steadily for the past decade, at least, foretelling a declining future for contemporary societies.

[Jeff Berwick]

Completely incorrect Steve. Is that what you really believe? Do you believe that without a violent boss that we'd all just rob and steal from each other? What a dark world you must live in. As for "growing energy" powering society, how do you explain Venezuela, Nigeria and many others who are quite poor despite massive oil reserves? Read and learn, my friend. You have been brainwashed.

[Philip Lewis]

I essentially agree with all six of Niall Ferguson's points / apps. The USA can be redirected (positively) if, and when, we alter incentives for the "financial industry" (we reward them for abusing us), increase interest rates (current total disconnect), dispose of the Tax Code (999 may work, or FairTax), unleash medical research, encourage the production of goods (not consumption) ... as discussed, the USA has inverted reality and is now being punished.

OWS: Politicians will eventually regret encouraging some of "this" ... White House and Congress should be the target, not lower Manhattan. Basically, these are misdirected, bored souls who want to get laid and smoke reefer.

[John]

What about cooperation? How can Niall Ferguson miss this point? It
supposed to be No. One.

In modern science it is a empirical proven fact that cooperation plays a
mayor role in a successful evolution which he is, by the way, personally
a part of and, so to say, a finished product of. Successful
organizational structures rely on cooperative behavior, no matter what
level and circumstances.

Every so called expert theory missing this point is incomplete and
therefore unreliable and needs to be dismissed. No need to analyze
further. It's a waste of time.

Actually the current situation in the USA is a perfect example of
cooperative behavior as the prime source of success.

Instead of beating the shit out of each other (competition) they
(Oligarch elite) decided to cooperate and beating the shit out of us.
And that they do very successful as you can see and feel personally day
by day.

Unless people like Naill getting the point by now they will never
understand the name of the game. I will spare me further elaboration
because I have slightly more advanced thinking to do.

[mava]

Jeff, I was thinking about this TED presentation for a few days already, and found it not only incorrect, but also deceptive. Allow me to present why.

He lists 6 "apps":

1. Competition
2. Scientific Revolution
3. Property Rights
4. Modern Medicine
5. Consumer Society
6. The Work Ethic

Going through them, I find only one, property rights, being true, but even that one needs qualification.

What he does, is he looks at a car and tells us that it works, because it has seats, lights, and windshield.
All of these are derivatives from more fundamental things, such (approximately) as:
Thermo-dynamic conversion
Dynamo-Electric conversion
Mechanical technology
Manufacturing tools, etc.

In this way, his thesis is incorrect.

He lists things that can be present in despotic regime, all of them. I think, he does it intentionally, to provide a justification for economy management without naming this beneficiary.

True killer apps, as I am sure you must know as any follower of austrian economics are:

1. Property Rights.
These must be property rights, based on scarcity principle, which means that for instance:
- Government cannot own what it did not purchased on free market
- Intellectual Property is not property
- Land property must be full and complete, with mining rights and aerospace rights.
- No eminent domain in current sense, but only as originally envisioned (to prevent intentional sabotage of private projects, such as where I want to build a pipeline, and you buy thin strips of connected properties specifically to cut me off, and where E.D. is used to exempt one tiny segment of your purchase to allow my project and to frustrate your sabotage)
2. Honest Money (note how he did not mention this, very clever)
3. Freedom to do anything that doesn't hurt someone else
4. Freedom of movement (no passports, citizenships, customs, border only signifies jurisdiction of proper government)
5. Government doing ONLY what is necessary to make sure no one violently imposes his will upon others (this means government gets to ensure contracts are held in compliance with terms voluntarily agreed upon, even if it is a contract where someone sold himself into slavery).
6. No one individual, nor any group can vote or otherwise exercise control over property they don't personally own.

The former 6, will automatically arise out of these 6.

Also, on consumerist society. This may or may not arise, and I do not believe it is necessary at all.
For, as far as monks are concerned, they have everything they need, which is the whole point of proper economy - satisfaction of existing needs, and not the satisfaction of some kind of artificially built goals.

Thank you.