The Private-Sector Recovery

[a completely inoffensive name]

It's not really "tacking the issue of big government" when they are cutting teachers, firefighters and cops instead of bureaucratic jobs.

But's lets continue to point the finger that those wasteful teachers that are ruining our budgets.

[HoreTore]

There's a big misunderstanding going around; that the public sector spends, while the private sector creates wealth.

Which of course is just simple rubbish. It's the nature of the service/company which decides whether it spends or creates, not its ownership. A hospital spends money regardless of its ownership, while a nail factory creates money regqrdless of its ownership.

[Philippus Flavius Homovallumus]

There's a big misunderstanding going around; that the public sector spends, while the private sector creates wealth.

Which of course is just simple rubbish. It's the nature of the service/company which decides whether it spends or creates, not its ownership. A hospital spends money regardless of its ownership, while a nail factory creates money regqrdless of its ownership.

That's not exactly true, a state run hospital will generally uses taxes to treat citizens, while a private hospital will bring money into the country when it treats foriegn nationals. Likewise, a nail factory only makes money for the economy if the nails are exported or they go into something that is exported. If all those nails build houses in their country of origin then just like a public sector hospital they do not generate wealth, they merely push the existing wealth through the national economy.

A country becomes richer when its exports generate more cash than it spends on imports, if it spends more than it makes the country gets poorer and GDP goes down. Of course, this equation is muddied by inflation, which makes it look like everyone is making money when in reality for one country to get richer another must become poorer.

So for Europe this means we need to sell more to China and India, especially China, so that more money flows out of the Chinese economy into the European one than flows into it from the European one.

[HoreTore]

No.

I stand by Adam Smith's definition; the wealth of a nation is determined by its annual land and labour-product. Creating a nail is the essence of creating wealth:

Let's say a man has 1 nail. Then he makes 3 more. Thus, through his labour and what he has taken from the land, he is now a wealthy 4-nail tycoon.

Wealth isn't created through trade with others, it is created by creating stuff. Odd concept, eh? Who pays for the workers upkeep while the nails are created, the government or a capitalist, is of no concern.

Trade is all nice and good as it allows people to focus on creating one thing to barter with what someone else is making, however it does not create any wealth itself. And the export/import-focus is re-donculous.

[rory_20_uk]

Services are an equally valid source of wealth. That it is not a physical construct does not invalidate it as being worth something.

The nail was created from iron ore, which is an item of less value and knowledge helped create something of increased utility. A nail is of itself of little value. If someone else has the knowledge to use it to create something of increased utility they have equally created wealth. The difficulty is that industries that create something from physical goods are difficult to relocate compared to those who deal with knowledge which can relocate much more easily.

Hospitals could in some cases be viewed as creating wealth if they are helping productive workers to continue to be productive workers. They are not doing so if they are spending resources on those that will not create wealth.

And how is a country that runs a chronic trade deficit is in essence trying to purchase something with IOUs which will become less and less valid if the country is not creating anything to repay these debts?

[drone]

For the purposes of this thread, what exactly is "public sector employment"? If a private sector company hires a bunch of people to work on government contracts, this skews the data somewhat.

It's somewhat ironic that red-state governments are shedding their workforce. While some of it is just the results of lowered revenue due to the recession/housing crash, reducing the local government without shrinking the federal just consolidates more power at the federal level. This effect is the opposite of what conservatives should want.

[Vladimir]

I'm having trouble with this belief that we're "well into recovery." 2% growth and a poor jobs report leading to a stock market plunge is more like treading water. 5% unemployment is a .long way off

[Philippus Flavius Homovallumus]

No.

I stand by Adam Smith's definition; the wealth of a nation is determined by its annual land and labour-product. Creating a nail is the essence of creating wealth:

Let's say a man has 1 nail. Then he makes 3 more. Thus, through his labour and what he has taken from the land, he is now a wealthy 4-nail tycoon.

Wealth isn't created through trade with others, it is created by creating stuff. Odd concept, eh? Who pays for the workers upkeep while the nails are created, the government or a capitalist, is of no concern.

Trade is all nice and good as it allows people to focus on creating one thing to barter with what someone else is making, however it does not create any wealth itself. And the export/import-focus is re-donculous.

No, Adam Smith was wrong, because something only has value when you trade it, either for cash or for another item. Creating wealth is the art of making the better trade. Your notional four-nail main eith has to use those nails in something else (a chair perhaps) or sell them for food. If he doesn't sell the chair for food he has to either grow the food himself or make something else to sell for food.

If Adam Smith were right then we would have no rish men, just lots of co-operatives, but men get rich by buying the labour of other men cheaply, using it to make product and selling it for more than the labour and materials are worth.

This is called "profit" - you may have heard of it, even in your Socialist Oil-fuelled paradise. Actually, that's an excellent example, Norway has made huge amounts of money by extracting oil on it's door step and then selling it at massively marked up prices, much more than it costs to extract and transport.

While's we're on the subject, Smith was wrong about somethin else. Capitalism reduces quality because it competes on margin, not product - the person who is most succesful is not the person who makes the best product, but the one who is able to make the product for the lowest percentage of it's sale price.

Further, if Smith were correct Britain would never have become a Superfpower, because we built ships and trains, but we sold cotton and comodities. We made out money through trade.

I stand by my original point, a country will become poorer if it only imports and does not export, as the State is generally involed in the provision of services it tends only towards the latter, and over time this leads to the country becoming poorer. Even if you agree in principle, you much be able to see that it is true in pratice. Countries with higher tax revenues and larger state expenditure grow more slowly or shrink. The ultimate example of this would be the US and the USSR, the US defeated the USSR by raising it's government expenditure building ships, tanks and planes. The USSR went bankrupt because it couldn't afford to keep up, because money was flowing out of its economy and into the American one via trade, anyone who could get hard currency in Russia spent it afroad.

[gaelic cowboy]

Adam Smith never sold a bullock or a weanling at the fairday obviously then so, things only have value if someone is willing to do a deal.


Creating a product in and of itself makes nobody rich, if I make a PC Game and no one buys it then tis worthless.

[Strike For The South]

We need to start making more nails