Gilder formula for wealth is threefold: upper mobility caused by individual's willing to work harder than the upper class they support; second, the willingness to support a family - the nucleus of society; and third, have faith in God, capitalism, and self.
Marriage provides stability to the economy. The destructive, agressive, hostile behaviors of young unmarried men are substituted for cooperative behavior. The man provides the financial security and benefits of work for the women, the women provides the nurturing and family continuity through children. The inviability of the patriach stresses the man's role is to provide financal resources for his family. The first move to decrease poverty is to increase the role of the man in his family. In a monogamous marriage the man disciplines his sexuality and extends it into the future through the womb of the woman. The woman gives him access to his children, and he gives her the product of his labor, otherwise disspated into temporary pleasures. Work becomes the first principle for overcoming poverty. In Glider's book, "Sexual Sucide" in parts of Western Europe, a couple could not marry until the man had demonstrated his ability to provide for an independant household. Glider writes, "Sexual energies were directly tied to economic growth, and since a strong sanctions were imposed on premartial sex, population growth was directly tied to economic productivity."
The additional cost of child care and taxes for double incomes gives not real income advantage over a single earner for a family. The conclusion is the double income family does not provide more economic stability or real purchasing power than the single breadwinner family. Married men are the greatest source of productivity in society. Productivity will decrease, if progressive taxes or inflaction threaten the high wages of married men. As families break down due to taxes and welfare, moral constraints breakdown, income becomes fragment and not reported to the IRS. The result is less accumulative acquistion of tax money. Large tax cuts are needed to strengthen families.
The rich families rarely find themselves getting richer. They are often replaced with by more successful families of the lower echelon. The more liquid wealth is, the closer it is to money, the less likely it is to grow fast, and the more vulnerable it is to changing money supplies. The less liquid an asset the more likely it will produce a large gain or lose. The least liquid and most promising is to own a business. If the company goes public the owners make a paper fortune. The risk is these paper millionares incur hugh debts and often go into bankruptcy. In the booming years of the 1970s, some 90 percent of the gross incomes of millionaires came from businesses, partnerships, and stocks; with losses being 40 percent as large as gains.
The 1980s reflected a period of economic stagnation with productivity coming to a halt and savings plummeting below 4 percent. The upper class - the source of most investment, fled to unproductive tax shelters and hoards of gold, real estate, and speculation. Inflation hit the hardest against savers and investors. Inflation portrayed rising cost of home ownership, diminishing value of the dollar, increased interest rates by the banks to adjust for thedevaluation of the dollar, exaggerated Consumer Price index, hugh amounts of oil money flowing to the middle east. Inflation marginally helps the rich and hurts the poor.
Heavy taxes inhibit the rich from investing. High taxes raise the rate of return an investment must obtain. Much of the damage of taxes may be mitigated through tax cuts. Tax credits for Research and Development will aid in the anti-inflationary efforts. The United States gets 11 percent of its revenues through business profits and capital gains. Abolition of the capital gains tax for stocks, would correct the bias for housing. Between 1963 and 1978 the Japanese savings rate increased from 16 percent to 23 percent and the tax burden falling about the same percent. As a result Japan experienced more rapid increases in productivity than the U.S.
The effects of proposition 13, in Californa was to reduce property taxes by 30 percent. California's Consumer Price Index (CPI) was a full percent below the national average. Personal income increase 40 percent, employment grew by 400,000 jobs, and $1 billion dollars was added to the state's surplus account. The only economist perdict such a result was Arthur Laffer. As a result the middle class taxes must support the poor. The only relief from taxes for the middle class will come from cutting taxes for the rich.
The rich are the individuals responsible for job creation. The primary role of the rich is to invest. Government role is to entice the rich to invest by creating attract economic favorable environments for the rich. The rich must be lured from the security and laziness of capital preservation and acquistion. Capital is not wealth.
The poor often resent the rich and hold them responsible for their state of poverty. The problem is not real discrimination but an attitude endemic to affluent society: wealth can be taken for grant rather than produced by toil and thrift, faults are created by the malevolent faults of others, competition and struggle are equal to good intentions. Among doctroral scientist and engineers, blacks earned slightly more than whites. The continued problems of blacks do not reside in the upper echelons. The problems of black poverty occur when AFDC is more competitive than work. Single mother head of households are the way of life for over 50 percent of black children in poverty. EEOC may be more harmful to black in the long run. The equal opportunity campaign favors female credentials over male agressiveness, and establishing class of poor in place of credentials the rich can provide throught competitiveness, hard work, and the drive to get ahead.
The rich are interested in preserving their money. If luxury items or securities are more safe than investment the rich will allocate money to these channels rather than investment. Wealth diminshes throughout an entire economy as an ever-increasing number of people choose to spend their money on gold or other sumps of wealth. A rising price means there is a increase of buyer or demands over sellers. The problem compounds are seller spend it on relatively non-productive objects - land, art, historic buildings, or durable luxury items. The result is a decline in the amount of productive capital.
Gilder encourages support for the Laffer curve, stating that lower capital gain taxes would increase the total taxable revenue. The left seems skeptical about lowering taxes and their effect being increased tax revenue. Interestingly in the 1980s, the top 1 percent pay 20 percent of the taxes, the top 25 percent pay 75 percent of the taxes. The liberals seem determined to inhibit productivity from strongest tax contributors by increasing their tax burdens. The Laffer curve suggested as taxes decreased to a point, more tax revenue would generate, giving the organizations benefiting more taxable income.
Capitalism is likened to gift giving. Economic growth occurs when the receivers of the gift value the gift more then the providers. The givers of the gift do not have a predetermined return. But more is expected of those supporters helping to produce the gifts. The giving of gifts is venturesome and experimental. Even the failures are not wasted. Eventually the failures accumulate into a new knowledge, the most crucial kind of capital, held by entrepreneurs and society at large. The individuals outputs can vastly vary and can not be predicted. Capitalism sponsers a creative community, radical shifts in values, and shifts in what is owned. Capitalism is reliant on individual creativity and courage, leadership and morality, intuition and faith. The man who shapes the future must live in doubt and thus thrive on faith.
The source of gifts of capitalism is the supply side of the economy. The philosophical axiom is one must give in order to get, supply in order to create demand. Real riches come from the power of production and supply. When demand is premitted to exceed supply, the economy appears sluggish and productivity drops.
Keynes thesis described in his book, "General Theory of Employment, Interest, and Money" interprets the level of output and employment responding to the rate of consumption. Keynes defined the chief role of government to maintain suitable levels of aggregate or total demand by fiscal and monetary policies. So politicians could control supply by changing demand. Demand became the focus of manipulation by burecrates and economist. Economics became hopeless engagled mess driven by the idea, "demand creates supply" or "take and you will be given unto."
Keynes made the individual investor the central figure in economics. Investment is dependant on "Changing views about the future." Keynes rejected all systems that saw the economy as a mechanism. At the center of the system was a skilled entrepreneur and the goal of policy was to cultivate his skills and ensure his inducement to invest.
Keynes joined forces with the monetarist to fight inflation and deflation. The forces pulled at the equation MV=PT (money x velocity = prices x transactions). The monetarist clung to money supply (MV) and the keynesians clung to (PT) aggregate demand. Supply side focused on the production of good, the unremitted creation of the basket of goods. No monetary policy can bind up real price once the consumer has lost confidence in the future. The biggest problem with the U.S economy is not inflation but declines in innovation and research. It is when productivity is flat that wealth is not being created. The monetarism forget what inflation does. Inflation is a tax, transferring a larger portion of income to the government. The tax is paid by holders of money and bonds as their values decline. If production becomes stagnate, taxes will take a deeper cut into the productivity of society. Controlling of the money supply became more difficult. In 1973, over 100 billion dollars was controlled by organizations other than banks. The Federal Reserves ability to control the money supply came into doubt.
Non-productive government spending, and public service jobs in quantities deter productive work. Non-productive spending, even when designed to to spur demand, actually reduces demand. This artifical stimulation like an addiction require larger injections of government spending to reach the same effect. This form of consumption without a market is a disquised form of consumption and will not stimulate the economy. Increased taxes for profitable enterprises, greater welfare benefits distributions, and more government spending deter and reduce demand. These force work to diminish demand by undermining production. The end game summaries rewards favoring work over leisure, investment over consumption, production over sumps of wealth, taxable or untaxable activity, and government can directly effect the expansion of real demand. Government spending must be cut whenever its yield is less than the private sector.
Socialism is the national insurance policy to shield from risk. What are those risks: health care, retirement, single families, and povety. Rather than benefit from a multiplicity of gifts and experiments, the greater economy absorbs much of the greater risk by remaining static. Socialism presumes that we already know most of what we need to know to accomplish our national goals.
The Welfare problem arises from men not willing to marry. As a result single mothers are forced to raise families without the financial benefits. The burdens of child care, distractions, single incomes, and less time to dedicate to the work invitability will keep single mothers in poverty. Poverty is more a state of mind more than an state of income. The break down of the institute of marriage produces many disruptive behaviors. Divorced men and women are more likely to drink, and suffer from physical and mental abuse.
Single unwed mothers would become the driving force necessitating increases in government welfare spending. Single mothers would experience lower incomes because of work distractions, child care costs, and the challenges of raising a family alone. The first sign that poverty is coming is moral decay increases. As morality breaks down, more single mothers are left to raise families. The government is expected to take care of these single income families. So the welfare system becomes a permenant source of relief rather than a temporary relief solution.
Gilder considers this economic state an emergency crisis. He wisely states, welfare should provide temporary relief to individuals in financial trouble not permenant relief. For most people welfare is a passing phase. Briefly moving into welfare and often times never returning. The economic reality is that as the recession continues welfare should be allowed to decline.
Racism is not does not adequately reason to explain disportionate wealth distribution for black men. He acknowledges that disportionally lower wages for women and black men are prevalent. Gilder believed the conclusions of the anti-discrimination drive will lead to demoralization, work-force withdrawal, family breakdown, and the decay of the spirit of work.
In short, Glider advocates businesses must have faith in the outcome of capitalism. "Equality, bureacratic rationality, sexual liberation, the pursuit of pleasure, all values of an advance society are inconsistent with the disciplines and investoments of economic and technical advance." The idea of economic futility, not capitalistic growth gives way to hedonism and sensuality. The concept of permenant poverty relies heavily on the perception of a deteriorating world. All creative thought is in a sense religious, initially a product of faith and belief. The creative process requires a plunges in the dark and unknown. The problems of today are the new frontieer of tommorow.