‘Invisible Hand’ of Capitalism Creates Prosperity

Have you ever heard of the federal Department of Gasoline Stations in Washington, DC?

Actually it does not exist but if the Democrat party had its way there would be such an agency. It would have thousands of useless employees and its sole duty would be to determine the number and location of gasoline stations needed to serve the public across America. Because the socialists would claim that gasoline is critical and thus we cannot trust it to the private sector…

Yet there obviously is no need for such an agency because there are hundreds of thousands of gasoline stations across America but nobody ordered that they be built. They were built by companies and by individuals to serve the public as those companies and individuals have seen economically fit in their towns and cities.

In fact you will notice that you can almost always pull right up to a pump and get your gas. And all of these stations have appeared but long lines never have because of what Scottish economist Adam Smith (1723-1790) called ‘the invisible hand’ of capitalism. It means that the free market, acting through an unseen force of economic incentives, provides enough gas stations to serve the public and to stay in business by making a profit for their owners.

If the gasoline stations in your town had long lines somebody would invest their money in building a new station or several new stations to attract the waiting customers who would be eager for another place to buy gasoline. The owners of these new stations would see the opportunity to make a profit in the free market, and be guided by ‘the invisible hand’.

If there were too many gas stations in your town and some were idle much of the day they would close because they would be losing money. The market would adjust itself by the ’invisible hand’ until the supply of gas stations met the demand in the proper balance – neither too many nor too few.

Is the ‘invisible hand’ flawless or perfect? Of course not. Nothing that man does is perfect. But imagine the alternative – that a federal Department of Gasoline Stations was determining how many gas stations there should be, which would be the socialist ideal. What would America look like?

Well, there certainly would be some places with the right number of stations but there would be many other areas with too few gasoline stations and long lines and many other places with too many gas stations such that many pumps would be sitting unused for hours or days at a time. Because any time that the government gets involved in something like setting the number of gasoline stations the decisions get driven by politics, i.e., certain people would get the gasoline franchises, and they would manipulate the number of stations to get the highest profit. Or politicians would decide what gasoline stations get built and where, to benefit themselves and their friends. And then politicians would decide who gets the gasoline, leading to shortages one place and surpluses in another.

For instance the disastrous Obamacare website obviously was not designed by the company that designed the Amazon.com website which has millions of transactions a day, or the vastly more complex EBay website which even has a timed bidding system and works for tens of millions of users a week. The Obamacare site was designed by a company with an executive who was a college friend of Michelle Obama, i.e, through government corruption and cronyism. The federal spending on that website is reported at $678 million.

I would bet my last dollar that Amazon or EBay did not even spend 2% of that on their websites. Yet never have we heard about the Amazon site going down or failing just a few hundred users as the Obamacare site has. Because it is easy to build a website… unless the government is doing it.

Think about computers. Thirty years ago the average laptop that costs $500 today would have cost $50,000 and would have been the size of a refrigerator. Did the government decide to establish a federal Department of Computers to make sure that computers were provided to the public at the lowest cost?

No. It all happened through ‘the invisible hand’ of the free market where people like Steve Jobs of Apple, pursuing their own interests and using their own skills and advancing technology went on to design, manufacture and sell computers. This has benefitted of all of us who now can buy a new computer anytime even for as little as $200 at WalMart, and have all the latest software thanks to ‘the invisible hand’ of the free market. If the government had decided who would have computers they would cost $200,000 each and they would be the size of a trailer truck.

Now look at the Soviet Union, which was communist. In such places the communists claim that the free market is unfair and that the government must decide who gets what, that there should be no ‘invisible hand’. Thus the communists implemented such a government system by force and within a few years after the communist takeover the people in the Soviet Union were starving because the farms and the food distribution system had been taken over by the ‘caring’ government. Even up until the Soviet collapse in 1991 the citizens usually had to wait in long lines for things like bread and meat (i.e., long lines for basic supplies created by government intervention).

Before the communist takeover Russia had been a food exporter. Then the ‘government hand’ took that plenty away. So whenever you hear a liberal talk about someone “taking food out of the mouths of poor children” that liberal is talking about socialism.

It happens every time. That’s why the average per-capita income in free and capitalist South Korea is 16 times the income in communist North Korea. As South Korea prospers with one of the highest living standards in the world making some of the finest products anywhere at companies like Hyundai and Samsung, next-door North Korea is destitute and millions are starving. If the United States had a comparable living standard to North Korea we would each be living on about $3,500 a year.

The only ‘invisible hand’ in North Korea is the genocidal hand of the communist government which decides who gets what, who lives and who dies, and who suffers in a brutal concentration camp.

The Chevy Volt is the electric car that was manufactured not because the public wanted it or because ‘the invisible hand’ of the free market suggested it but because environmentalists demanded that Chevy make it. Because Chevy had been bailed out by the government and so was subject to pressure from people friendly with Obama, like the environmentalists.

Well, the Volt has largely disappeared from the market. Oh, sure, they have sold about 40,000 of them in three years, thanks to a huge government subsidy. And they have been purchased mostly by companies that are friendly with Obama or by government agencies or by rich liberals who own them just for show. But in the open American marketplace virtually nobody wants the Volt. Indeed ‘the invisible hand’ said “No!”

Now look at another place where the ‘invisible hand’ is missing – in our public school system in America. Everything is run from by government control and not by the market. It truly is a monopoly, this time by the government and not the private sector, and it shows that monopolies can indeed be a disaster for the consumer.

Anytime that the public-school monopoly is challenged with charter schools or private schools or school vouchers, the monopolists – largely teacher unions in the affected areas – do everything in their power to stop them. In New York City, for instance, the radical new mayor even is going to cut the indirect city funding for charter schools even though they are producing vastly better results than the average public school.

Do we have efficient public education, like an advanced computer at $500? No, we have the equivalent of a $200,000 computer the size of a tractor trailer truck. The public schools in America are expensive, inefficient, are teaching many of the wrong things for the purpose of political expediency, and are producing generally lousy results because the ‘invisible hand’ has been replaced by the government hand. It does not serve the people; it serves the government and the teacher unions.

Now here is one other bit of information about Obamacare.

Since most of us have no idea how Obamacare is supposed to work, here is a copy-and-paste from a website called Bantecbpo.com. It explains how this new law is intended to work, although we know it never will. Nonetheless it gives you a summary, all in a few sentences. And remember that this is boiled down from more than 2,000 pages of legislation(!)

The ACA will consist of:
• Basic benefits package defined by the federal government
• Increased Medicare payroll tax on upper income earners
• Penalty for employers (with 50+ employees) who do not offer healthcare
• If an employer doesn’t offer insurance, people will be able to buy it directly in the Health Insurance Marketplace.
• Tax credits to small business – by 2014, 50 percent of the employer’s contributions.
• The Medical Loss Ratio. At least 85 percent of all premium dollars collected by insurance companies for large employer plans must be spent on healthcare services. For plans sold to individuals and small employers, at least 80 percent of the premium must be spent on benefits.
• Eliminating annual limits on insurance coverage for new plans and existing group plans.
• No out-of-pocket for many preventive services. All new plans must cover certain preventive services such as mammograms and colonoscopies without charging a deductible, co-pay or coinsurance.
• Children up to age 26 can stay on their parent’s health insurance plan.
• No denial of coverage due to a pre-existing condition.
• Insurance companies cannot limit the coverage someone receives over his or her lifetime.
• Expand who will be eligible for Medicaid. States will receive 100 percent federal funding for the first three years, phasing to 90 percent federal funding in subsequent years.
• The law provides consumers with a way to appeal coverage determinations or claims to their insurance company.
• Tax credits for middle-low income uninsured. These individuals may also qualify for reduced copayments, co-insurance, and deductibles.
• The Individual Mandate. People who are not already covered or fully subsidized will be required to purchase coverage or face a penalty – with some eligible to receive subsidies towards private insurance premiums.

OK, so now if we could just get the Obamacare website going we could see if this thing works. But don’t hold your breath. Obamacare is never going to work anyway. It is classic socialism. It works perfectly on paper and fails in the real world.

Notice that one killer sentence – “Insurance companies cannot limit the coverage someone receives over his or her lifetime.” This in itself is going to destroy the health-care system and the private insurance industry. Because let’s imagine that someone has a genetically bad heart. That person can get unlimited millions in health care over his/her lifetime under Obamacare. And while we all want the best for every person, this is simply going to have the effect of devoting more and more money to the very sick few, while leaving less and less in health dollars for the many. Or elderly people will linger for years in hospital beds and nursing homes while younger people cannot afford health care. This sentence alone is the Obamacare disaster in a nutshell, never mind the 1,000 other disasters. This is what you get when ‘the invisible hand’ is pushed aside in favor of government.

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