Ed's Second Law of Economics
While solid economies like the United States have grown by leaps and bounds over the past few years, we’re still confronted with television images of toothless peasants in squalid settings who are either starving, hacking each other with machetes, breeding like cockroaches, or, most likely, engaging in all three actions.
Some folks, usually the American cappuccino and save-the-whales set, express dismay that some societies are so rich, while others are so poor. The bleeding hearts are under the impression that prosperity should somehow magically spread like the “Melissa” e-mail virus.
Those folks frequently have the cause-and-effect wrong. You could poor billions–trillions, even–of dollars into the third world, and you’d still be left with: the third world.
The definitive truth on this comes courtesy of Ed’s First Law of Economics: “Poor countries aren’t messed up because they’re poor. They’re poor because they’re messed up.”
That’s given us a useful way to weed out a lot of the gibberish surrounding so called “developing” countries, which seem to be better at developing AIDS and Hepatitis than developing free and efficient markets.
At issue, both in those countries and even right here at home in Saipan, is often the low productivity of labor.
As for the CNMI, reliable statistics are hard to come by, but if we take the preliminary results of a U.S. Census Bureau study for 1997, the average economic output per resident here is about half of what it is in the United States.
Got that? Half.
It takes two of us to equal the production of one person in the United States. If you want to know why wages here are generally lower than U.S. levels, there’s your answer.
Meanwhile, the CNMI continues to discourage economic activity by cockeyed policies and crooked dealings. The theory seems to be that if we cripple business, cripple the alien labor pool, and cripple the investment environment, that those of use who aren’t alien laborers will somehow get a financial windfall…and then we can afford to play darts seven days a week instead of the usual three! Ah, paradise!
Well, it won’t work…and here, to prove it, is the long-awaited Ed’s Second Law of Economics: “You can’t make the unproductive productive by making the productive unproductive.”
In the coming year, you’ll see a lot of local policies aimed at reducing the productivity of the productive, because the non-economist economists think it will somehow magically make the unproductive people richer. And if that sounds pretty messed up to you, well, then we’ve come full circle to Ed’s First Law.
All the laws, schemes, ideas, crusades, and policies that we’ll see won’t better the local economic situation unless the productivity of labor here increases. And that means a lot of people would have to hold real jobs, produce real goods and services, engage in real economic production, and earn paychecks that are roughly on par with the value of their economic output. Do you think that will happen? Your answer to that question is an economic compass; it shows you which path the CNMI is taking.
