Savings occur as people find they have more from their market exchanges that when they started. If the money is gold, the savings will be gold. Savings can be wheat or rice stored up, but as a medium of exchange, money is the most likely form of savings and the most facile to apply to an entrepreneurial opportunity.
A very common error is to start a business with debt, especially with some sort of "interest" attached. In essence you begin your enterprise working for someone else besides your customers. Wealth is built on savings, not debt.
Savings are drawn on to finance entrepreneurship, which inherently expands choices, that is to say the division of labor producing goods and services. The entrepreneur advances the eternal free market function of innovation in goods and services, innovation that results in the unique, rough, pricey and plodding, coming and going; market iteration ever improves items until the conservators "steal the idea," and apply their economies of scale to the innovation, resulting in more, better cheaper faster of the innovative good or service. Ultimately, through the market and the concomitant division of labor, access to goods and services is made universal. The market, when relatively free, lowers the price of computing and widens the access to the point where the market puts more power than was available to NASA to put a man on the moon in your hands today, the iPad, $500. If we had as free a market in medicine, then cancer cure, at $87.50.
There is the original sense of "wealth," ie, weal, commonweal, commonwealth, before the bad guys hijacked the term. Wealth is not how much gold you have stacked up, wealth is access to goods and services. Progress is when prices fall, to the point where everyone has access to the good or service, like the cell phone and service plan that goes with it.
This is not a world in which we "live simply, in order that others may simply live" but a world in which we live fully, because everyone is free to contribute.
What inhibits this market is the monopoly on violence behind the cartels, rules, regulations, subsidies and unnatural initiatives and the attendant misallocation or resources and malinvestment.
The way out of our economic mess is freedom. But we first need to understand where we want to go.
Thursday, July 28, 2011
Savings and Wealth
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2 comments:
Amen!
-- Pax
Clearly many good businesses were built on debt, Walmart for one. Have more businesses failed because of debt than succeeded in spite of? Who knows? With businesses that require much startup capital, and where the genesis of the business is with the specialist and not the businessman it will rarely happen that the specialist could save for 10 years to finance the biz. Knowing this, angel investors and vcs trawl computer science labs at college, two give one example. Sure, many startup that took money would've been better off to self finance, but it doesn't prove anything about the wisdom of accepting investment.
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