Posted Sep 7, 2015 by Martin Armstrong
It is fascinating how some people interpret “total productive capacity” as only brute labor and thus, communistic. This becomes their argument for precious metals. True, Marx focused on labor as wealth, and he was partially correct. The total productive capacity includes those who create innovations, such as Henry Ford, Steve Jobs, or Bill Gates. What they tend to create with innovation is scores of jobs for others that expand the total productivity. You cannot limit the wealth of a nation to people digging trenches to plant crops or turning some machine to punch out widgets. The term, as I define it, is everyone acting FREELY within their personal capacity. That is Smith’s Invisible Hand. Marx saw everything as a battle between poor vs. rich, crediting nothing to the jobs created by people with ideas. Government is incapable of innovation, which is why communism failed for it cannot create innovation. This is the very same reason big companies die. They kick-out the creative people, fill the board with lawyers and accountants, and then they have to pay huge money to buy startups because they lack the capacity to create innovation.
There must be FREEDOM to reach your capacity without bribing government to prevent innovation. England saw the early development of the automobile. The horse & buggy crowd bribed government to put in regulations to stop innovation. They passed a law where if you drove a car, you had to hire someone to walk before your car with a horn and flag yelling, “WARNING, car approaching!” The automobile innovation took hold in USA and Germany, reducing England to a second-rate country incapable of taking the lead during the Industrial Era. Government can be the worst enemy of everyone.
Tags: Adam Smith, Communism, Innovation, Invisible Hand, Labor, Marx, Total Productive Capacity