One dollar’s journey

The market economy belongs to you. Politicians can meddle with your economy only if you let them.

Look at it this way. A dollar is a token that represents a portion of your labor. That token makes it easier for you to trade your labor for something else — an object someone else manufactures, or a service they provide to you.

Your dollar might pay a baker for some bread. Then his dollar could buy flour from a miller, who could then buy wheat from a farmer, who could buy fertilizer from a chemical plant, who could pay a chemist, who could pay his child to mow the lawn, who could buy a song for a dollar on iTunes, who could pay the music’s composer a dollar for every few copies sold.

If enough people liked the song, the composer could get rich, one dollar at a time — leading other people to get dollar envy. People with dollar envy band together to take other people’s dollars. They rationalize in their mind that it is for a good cause, and call those dollars taxes. Then they spend those tax dollars to earn more political power.

People who tax often use income inequality to rationalize taking other people’s money, as if the owner of many dollars is doing something unfair. It isn’t unfair because the rich person spends his dollar on products and services as fast as the baker. Whether a dollar is spent on necessities or luxury, others can compete to earn it. A dollar not spent immediately is still put to work —invested in businesses that create more goods or services for others, or banked to be borrowed for a small fee by others to buy a house or start a business. It does not matter what purpose to which the dollar is put. Any money not stuffed into a mattress, regardless of the owner, moves our economic engine forward.

Two things evolve over time. First, some who are rich get poorer, and some who are poor get richer — education does lift children out of poverty. Secondly, even if some rich get richer, the not-so-rich get richer, too. Overall, our economic engine has lifted the quality of life for more people than any other system in history.

Meanwhile, government tries to fix the game — to gather control of as many dollars as possible because those who decide how dollars are spent exercise power. In truth, you are the person best equipped to decide how to spend your dollar. Even if it had the best intentions, government tends to cause more problems than it solves. Creating more problems, government wants more government to deal with those problems, too. When Adam Smith wrote the book on economics, he didn’t trust corporations, unions, lobbyists, interest groups, governments, or anyone else. Smith knew that in an untrustworthy world, more competition was always better than less competition.

Government should be used sparingly, deftly, and narrowly focused. It has a limited purpose: Protect citizens from others and from each other, maintain courts, and minimally help people between jobs. Everything else is your business, because government doesn’t create jobs; people do. Adam Smith explained this 230 years ago.

It does not matter what makes politicians tick.

What matters is recognizing it will cost you if you let those politicians con you into thinking government is an answer that works better than the free market economy. Guard your dollar... or give it up.