Take 2 people in a closed economy…
A “rich guy” has $1,000 and the ”poor guy” has $0. The total in the closed system is $1,000.
Now, the wonderful merciful government steps in and ‘taxes’ $400 from the rich man and gives this money to the poor man.
Now what do we have? Still only $1,000 in the economy and 2 unmotivated people.
The rich man wonders why he should work so hard or take any business risk when it will just be taxed away from him.
The poor man thinks why should I work? They’ll stop giving me free money if I work.
Now take the same 2 people- and the evil rich man HIRES the poor man to build him a shed.
Now what do we have?
$600 left in the rich mans pocket plus $400 in the ‘poor’ mans pocket– PLUS WE HAVE A shed worth at least $400, – for a total of $1,400+ in this closed economy. And we have a poor man who is more skilled at shed-building than he was before he started. And we have two people who are eager to do this same thing over and over again and create more sheds and other stuff…
THATS CREATING WEALTH AND THAT IS HOW FREE ENTERPRISE CAPITALISM WORKS…
{ 22 comments… read them below or add one }
So spreading the wealth doesn’t work? We all have to work and wealth needs to be created? I think I will forward this to the white house.
You should blog in spanish to Rob!
My country would appreciate it!
Great explaination of what works…and what doesn’t! The white house is getting two emails today!
Jen Battaglino
Conquer Your Fear Here
That’s a very interesting way of looking at things, and, unusually for me, it’s a bit of financial info that I can actually get my head around!
Rae & Mark
Patio Gazebos HQ
Is this your version of “Give a man a fish, teach a man to fish”?
Sabrina Peterson, NASM CPT, CES
Corrective Exercise for Every Body
That is an excellent article. Now if we can only get a few politicians to listen…
Some rich people don’t worry about taxes, they understand the ‘system’ use their expenses wisely and have their focus on making more.
They also use their riches to empower the earth, help the poor & teach the whiner….. if he’ll listen.
Sandi Krakowski
http://www.arealchange.com/blog
Hi Survival Rob,
that excellent point about how in particular the system stealing from the rich to give to the poor guy actually DISincents him – hey man, I’ll earn LESS if I work – is SO true to form in how people actually think and how real people are incented, one way or another with the influence of human desires. If only our government understood that and would reinstigate human dignity instead of teaching stealing as a faux means for charity.
Happy Dating and Relationships,
April Braswell
Single Baby Boomer Dating Expert
This post sounds a little like an updated Aesop’s fable! Very nice!
Nice clear illustration.
But why is the rich man “evil”? If a person honestly makes money, uses it wisely, builds businesses, hires and gives work to people – thus enabling them to get the things they need, support their families, educate their children, provide for the elderly in their family, fund their own old age – how can that be “evil”?
Eileen
Are you making Social Media WORK for you?
I love this! Great job at making it easy for anyone to understand. Just giving people money doesn’t do good for the world.
Yours In Health!
Dr. Wendy M. Schauer, D.C., R.K.C.
Come Experience The Power of the Russian KettleBell Revolution at Kettlebell Olympia – Home of A Better Body With Bells!
Rob,
This is simple, direct, and to the point. Thank you for sharing this great illustration of Government Redistribution VS Capitalism.
Yours In Health!
G.E. Moon II
http://www.AbundantHealthCenter.com
Rob – You mean that in order to make wealth someone is going to have to actually do the work. That sounds like a great concept. Now if you could just convince people that “they” will benefit from it. People always want something for nothing and that includes your money also.
Thanks
Scott Sylvan Bell
http://WWW.crackedheatexchanger.com
What a great analogy of government wealth distribution and the effect it has on both people and the economy! Thank you!
Jandy
http://www.hotfreshstyles.com
It’s all about taking energy and creating wealth. Cash only supports the proccess – it never produces wealth in it’s own right. And that is why redistribution does not work. Investing money in wealth creation projects works. Spending money on redistribution just scatters money around.
But Rob, why does the rich man get to decide who he would pay the $400 to in order to get the shed built? Don’t we need government “leadership” to help us make sure we don’t pick a bad shed builder? In fact, maybe they should just build the sheds somewhere else and you can just buy it from the government directly? That would help pay for all those government workers that choose to take the same attitude as the guy sitting around waiting for his check without working anyway.
Zoinks that’s simple!
Shane
Resources For the Independent Film Maker
I knew I loved this Capitalism thing. But I would still like to be the rich man.
Don
http://donhillonline.com
Amen brother! Your simple example explains a significant principle. One that I hope / wish our current “leaders” would try to understand, as they pull our country more and more into debt… and plan on having those of us who work pay the bill! Looking forward to more of your perspectives.
Regards,
Karen Van Ness
http://bestbreathingexercises.wordpress.com
Lets get this right. First off the rich man is not taxed $400, through
various tax breaks he is probably paying about $200 dollers in taxes(especially if he is in the top 2%) and after his accountants are done he actually has paid maybe $150. $50 of that money goes to fight 2 wars, $75 for maintenance of infrastructure & other basic governmental functions and programs, $5 goes to clean up the gulf (or New Orleans after Katrina) or whatever catastrophie happens to be going on, $10 to
special intrest, earmarks and sweetheart deals for various senators and congressmen, $7.50 for foreign aid, maybe the other man sees $2.50 of that money in the form of unemployment benefits. He is unemployed because the textile factory job he had was shipped overseas.The rich guy that ran the company needed to make another 10 cents more per shirt. Now if he has been unemployed for over 100 weeks his benefits have run out so maybe he gets $1.25 in food stamps but because he is now living in his car the maillman can’t find him. He lost his house when the housing market crashed. The market crashed of course because some rich guy decided it was a smart idea to package a bunch of worthless mortgages together and sell them to other rich guys so they could make even more money. The credit card companies are after him because he maxed out his cards trying to keep his head above water. Of course the 26% intrest he was paying and the $75 late fees didn’t help. The repo man is looking for him and will probably find him because gas is $2.75 a gallon. He doesn’t feel very well, his heart is giving him trouble, the stress of living like this is wearing him down. Well at least we have universal healthcare………NOT.
Many people are paying 40% of their income in combined taxes. There aren’t many loopholes left like there were thirty years ago.
Most of the rest of your facts are irrelevant to the discussion of the topic at hand.
So you at least agree that the unemployed man would be better off with a job than a government handout?
Rob
Having grown up on welfare and still having a parent who is on welfare, I can assure you that the government discourages you from getting a job and intentionally or not encourages you to keep living off the government hand-outs.
Michael
The Success Secrets