Stone Pigs

undeniable underlying truths

The Secret of Our Success

Posted By on February 1, 2009

It’s been over 500 years since Christopher Columbus sailed across the Atlantic Ocean and discovered the “New World.” No disrespect to the more primitive nations that were already here, or to the Vikings who were also ahead of their European counterparts in global geography, but it was Columbus’ discovery that sparked the global change and progress that brought us to where we are today. This is why we do more to celebrate Columbus Day than Leif Ericson Day (October 9th in some states).

So let’s take a look at the discovery itself as well as the events afterward, for they are instructive. Columbus’ objective in 1492, at the behest of Spain’s Queen Isabella, was to open a new, and presumably quicker, trade route to India. What they found was another continent in the way. Not much happened after that for a really long time. Surely there was more exploration and several attempts to build permanent outposts, but Jamestown, the first English colony to succeed after at least 18 failures elsewhere, wasn’t established until the passage of 5 generations, more than 100 years, in 1607. It was another 13 years before the Pilgrims landed at Plymouth Rock. Still, this was nothing more than a remote and impoverished outpost.

However, by the time the Colonies established themselves as the United States of America another 170 years later, a vibrant society was established here that could not be ignored. Over the next few decades, the Southern states had become one of the wealthiest “nations” on earth. That is an amazing feat (thanks in no small part to cheap slave labor).

So why did it take more than 100 years for colonies to begin putting down roots in the New World after Columbus made his so-called discovery? Simple: there was no one here to trade with. Spain was looking for a cheaper trade route to India, not to bring more goods in, but to sell Spanish goods to India. The Spanish, and most of the rest of Europe, fully understood that prosperity came from the growth of an economic engine, and that growth was dependent upon sales to markets in other nations. This is the same as the common understanding that it does little good for a family to buy the lemonade from their own child’s stand (other than to simply transfer the wealth). Exports are what drives rising wealth.

It wasn’t until European industrialists realized the potential value in using the New World for collection of raw materials that more meaningful colonization efforts took place. What the early settlers gave up in return for their religious freedom was their labor and agreements to supply their benefactors with resources from the land. This, in turn, brought great wealth to European countries such as England, Spain, France, and Portugal and spurred further colonization in North America as well as other parts of the world.

As the Colonies began to develop their own identity, it became more clear that they were being used and stripped of their inherent wealth. And when satisfactory agreements on taxation and the distribution of wealth could not be worked out diplomatically, war ensued and America was born.

American business went on to exploit the vast natural resources here and continue to build more and more wealth. The vast productive farm lands of the South produced cotton, tobacco, and other cash crops that translated into great wealth of its own. Timber lands produced lumber for a world seeking to build more sturdy structures. Iron, copper, and other ores were dug up and smelted to produce usable metals and materials for export.

America found it was good, very good, at bringing desirable things to the global market.

In 1939, when World War II broke out in Europe, the U.S. started cranking up our production engine again so as to provide materials for our allies. In 1941 when we entered the war in earnest, we cranked things up even more and began exporting at greater heights. In addition to the machines for war itself, we exported the oil to run those machines, the fabric to clothe armies, the food to feed hungry soldiers and people whose farm land lay idle, etc.  It is not just a coincidence that this brought about an immediate end to a decade long economic downturn known as the Great Depression (it’s also not lost on most people that all the government’s machinations prior to this served only to prolong the economic pain in the first place).

The great economic lesson to be learned from history is that the wealth of nations has its roots in trade and exports in particular. This is a lesson that most Americans have learned well. Wealth, even on an individual basis, comes from producing desirable things and selling them to a willing market.

When that process is reversed, and you become a net buyer i.e. someone who buys more things than they sell, wealth is generally lost. On a national scale, when there is a net trade deficit and the amount of imports exceeds the amount of exports, it is the net importer that loses.  This is the situation that has described the United States for too many years.   We’ve sat idly by in front of our imported televisions, brought to us in trucks fueled by imported oil, wearing imported clothing, and watched our wealth slowly slip away.

The key to understand here is not that importing goods from other countries is bad. No, the bad thing is simply not exporting at least an equal amount in return.

So here we find ourselves in the America of 2009 and in the midst of what we’re told is perhaps the worst economic downturn since the Great Depression (or since 1982, or the early ’70’s, or …) and many people are wondering what to do. The answer is really very clear, and very simple: produce more things that the rest of the world wants.

Our governments, from federal on down to local, need to let loose the forces of productivity and simply get out of the way. They need to remove any restrictions on free trade that arise. And they need to hire more accountants to keep track of the rising wealth of our nation (and the resulting flow of income to the U.S. Treasury)

What about housing and banking? Housing will take care of itself and so will banking. By ramping up productivity, employment will rise and more people will be able to stay in their homes. Banks will come back from the brink of failure with fewer bad loans and higher deposits.

I know I’ve made this plan sound so simple, but it really is. This is a very basic concept of economics and the generation of wealth that has been known and understood for centuries. It has been demonstrated time and again.

Unfortunately this doesn’t appear to the be approach being taken by Congress or President Obama. Congress is attempting to enact more restrictions on businesses and even go so far as to tell them what to produce and how to produce it. Congress, composed of more than its fair share of lawyers and precious few economists, seems bent on taking money out of the private sector, where it could be used to fund new production of goods that could be exported, and redistribute it themselves in the most inefficient manners they can find. In short, Congress seems to be buying our own lemonade and spilling a good bit of it on the sidewalk. The President, for his part, seems to be just as ill informed with talk of implementing new restrictions on international trade and the ill-advised “buy American” provisions in his bloated budget proposals.  Again, he’s advocating buying our own lemonade.  These ideas will do nothing to solve problems and will only serve to provide a greater head wind into which the productive members of our society must attempt to sail.

With the philosophies of the Democrats, Columbus would never have been able to navigate into the trade winds and would have been blown right back to the shores of Europe. It’s time for my fellow men to stand up and right this ship before it’s wrecked on the rocks to the sounds of the siren’s song.


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