France, The Euro and Beyond

I have been fascinated by the impact of some of the recent events which have rocked the world economy. Of course the first is the reaction by the Greeks to their failed socialist economy which can only be described as denial. The denial being that socialism is a viable governmental form when the costs outstrip the revenues. Their solution is to blame the Germans, blame capitalism, blame the banks, blame anyone and everyone except that person they see in the mirror. So they threw out the government and their austerity program and are now happily returning to their old ways without any idea whatsoever of how to pay for anything. Like all socialists they seem to believe that the “government” will pay for everything by taxing the rich. Of course all of the rich in Greece left a long time ago and when they joined the Euro-zone they gave up their control of their currency, this was a small point which they ignored in their haste to expand their Club Med life style. Now we see the same plan developing in France – that is a total denial that socialism doesn’t work. The French refuse to sacrifice anything to austerity. They feel they are being exploited by being expected to work more than a 35 hour work week and to retire at 62 rather than 60. They know that capitalism is evil and socialism guarantees that the government will always be there for them. Of course they are a little vague regarding where the government gets the money to pay for their benefits other than from the “rich” meaning companies because any individual with any substantial income has already moved his assets out of the country. Furthermore, the socialist government has made it so difficult to lay anyone off that no business will hire new employees. Instead any new jobs are being sent offshore where it is easier to control the staffing. The current thinking in France is that socialism provides for everyone assuring everyone an equitable share of the wealth. Anyone who doesn’t grasp the benefits of socialism must be selfish and greedy, and this brings us to the Euro. Money is an abstraction whose only value is what we collectively give it and the ability of the issuing government to ensure that value, so the dollar, the pound, the yen, and other currencies are monetary instruments guaranteed by their governments but not so the Euro. The Euro is an artificial currency with no specific government guaranteeing it and no specific European government can print new Euros – hence the problems in Greece, Italy, Portugal, and throughout most of the Euro-zone to a greater or lesser extent. The Euro Zone is dominated by socialist governments whose consistent policies have been oriented toward maximum employment with the least amount of work and the most generous benefits. However, the party is ending because none of the Euro-zone countries can sustain these benefits based on their revenues which mean they must be reduced. These austerity programs are not popular but if they are not implemented the Euro-zone can collapse France is the most recent country to refuse to accept these austerity driven reductions in benefits. France was one of the driving forces behind the creation of the Euro-zone thinking that they would be the dominant force. This turned out to be a gross miscalculation because their socialist policies focus on employment and not on productivity. . The unintended result ironically has been higher unemployment as companies refuse to hire new people unless forced to. The wages are inflated relative to the output so these companies look overseas for growth which results in a double strike at home—higher unemployment means less tax revenue and higher unemployment costs. The government expands as new government jobs are created and with these jobs comes greater bureaucracy and with that bureaucracy comes lower productivity and an incentive for employers and investors to move overseas. Today the Greeks are voting to decide whether to continue their Club Med economy or to adopt some measures that would keep them in the Euro-zone. Either way the party has ended because the piper must be paid. A return to the Drachma will certainly cause rampant inflation which will create serious problems but staying with the Euro will force serious austerity measures which will effectively demonstrate that socialism cannot be sustained over the long term. Will the French get the message? Will the socialists in Europe get the message? Only time will tell.

Is Wealth Zero Sum

The postulation that wealth is zero sum, meaning that whatever wealth I have has been gained at the expense of others, in effect total global wealth is finite but is inequitably distributed. This argument rests on the assumption that wealth cannot be created and wealth can be defined and quantified. I submit that this is a fallacious argument.

First wealth can be defined in many ways such as the value of knowledge, a great many friends, honors, respect, or many other abstractions where the “wealth” is self determined or determined arbitrarily by others. This type of wealth is not finite and can be both created and destroyed. Therefore, for any meaningful argument wealth must be defined in terms of tangible goods such as gold, money, art, land, etc. But the postulation is that wealth is zero sum meaning that it is finite when it is obvious that the world’s available wealth today is far greater than it was a hundred years ago. But the professor / philosopher avoids this inconsistency by stating that his zero sum argument only applies to the moment and cannot be viewed in any historical context. But this refutes his argument that wealth cannot be created because global wealth has increased and he acknowledges this. This reduces his argument to the total global wealth is finite at any given moment, which is true at that moment, but in the next moment new wealth can be created e.g. a gold strike, oil strike, new invention, etc. The professor / philosopher acknowledges this but then moves to the more abstract view of wealth common to those who argue that wealth can only be gained at the expense of others – hence that wealth is finite.


The argument then becomes increasingly doctrinaire as he attacks – without noting – capitalism. He argues as follows:

“Material wealth obviously originated in the creation/origin of the universe (that is where the stuff comes from). Once we had the earth and people, people could start acquiring material goods like land and resources. These resources can be made more valuable by the addition of labor, thus creating wealth. They can also be made more valuable by other means, such as creating scarcity and controlling pricing. These material goods can be acquired in various ways, fair and foul. The classic method is, of course, conquest.”

How this argument supports a zero sum conclusion is beyond me because it demonstrates how wealth can be created and shared yielding a wealthier population overall. The actual argument appears to be the inequity of some people being wealthier than others based on the assumption that unethical and even illegal means were used to accumulate that wealth. He leaves no room for wealth accumulation via fair means. But his argument has ceased being the creation of wealth but instead has shifted to the sharing of wealth.
At this point the argument shifts to the abstraction of money “the pieces of paper” whose value is commonly agreed to but his real argument doesn’t appear to be the creation of wealth but how that wealth is created.
“Monetary wealth is obviously a social construct: we made up the financial game and the “creation” of wealth depends on the sort of game being played at any given time. For example, some folks “created” wealth by clever repackaging of toxic assets. Other people “create” wealth by working and investing their money (which is supposed to give them more money). In many ways, this is “fictional” wealth in that we are literally just making this stuff up and its value depends entirely on how far we are willing to all play make-believe. Yes, I play the game-it is a convenient way to handle exchanges in some ways. But, I always remember that it is just a game we are playing (I work, I get some paper, I hand the paper to someone and they give me an apple).”
The point being made here is a little fuzzy to me because everyone knows that paper money is an abstraction whose value is set by common agreement and backed by the government. The creation of wealth followed the same rules when commerce depended entirely on gold and silver currency. It appears that he is simply opposed to how wealth is created and how it is inequitably distributed. But he concludes his argument that wealth is finite by arguing that currency (paper) is finite because printing more doesn’t create wealth but results in inflation. That is true but then at a stroke he reduces wealth to how much money you have and since that is finite wealth is finite and zero sum. That is ridiculous of course because tangible wealth can be created in many ways and the currency is simply a method of measuring the wealth created.
In my opinion this entire argument illogical and rests on false assumptions. And when the argument is reduced to its core it appears that it is anti-capitalism and the unequal distribution of wealth.


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