Improved living standards only ever come from proper allocation of the resources at your disposal. For example, wasting food while trying to grow the food won’t improve your living standards, but carefully storing and consuming and selling exactly what you need will lead to improvements in living standards.
The upshot: Productive effort builds on itself (life improves), with proper resource allocation.
In early America, there was proper resource allocation, because of how decentralized it was. More people were allocating higher shares of all resources than today. Today, a few elites and bureaucratic fat-cats allocate much higher shares than is fair.
A bureaucrat may not personally produce $100 million in value, but he or she may be disposing of $100 million in value. When you are in charge of more than you produce, that’s unfair.
Incomes & Expenditures
Economic output is most often estimated by looking at expenditures, where the entire economy is said to come from the equation: C + I + G + (X-M), where the C is consumption, I is private investment, G is government spending, and (X-M) is imports-exports. A less popular method of estimating economic output is by incomes only.
The following graph is guilty of mixing-and-matching incomes and expenditures, but the relative shares of the 4 things in it still hold, even if the sum of all shares of those 4 things fails to be exactly 100%:
Notice the ratio of resource allocation at bottom left in 1929:
Private Investment = 2x government
Non-wage Income = 4x government
Private Wage Income = 5x government
And the source and subsequent explanation of the numbers comes from adjusting 4 series from the Federal Reserve of St. Louis so that they are each divided by the GDP:
[click to enlarge]
The Net Operating Surplus is non-wage income, such as business profits, and the Wage And Salary Accruals is wage income. The Private Domestic Investment and the Federal and State Government Expenditures are expenditures.
The takeaway message is that, in 1929, private investment was twice the total of all-levels government spending, non-wage income was 4 times the total of all-levels government spending, and wage income was over 5 times the total of all-levels government spending.
Because wage earners are numerous, it is healthy when they allocate over 5 times the total of all-levels of government spending. In 1929, wage earners were the primary resource allocators in the USA — until Hoover, and especially FDR, fundamentally transformed US society to forge a different relationship to the free market.
Hoover & FDR screwed us
By moving away from free enterprise, Pres. Hoover and Pres. Franklin Delano Roosevelt screwed America over. Ninety years later, we’re suffering from the path that they set America on.
Hoover was a businessman and he was at least indirectly involved in shenanigans regarding Banks and Public Utility Holdings Companies (PUHCs) — the two biggest reasons for the great stock market crash of 1929. Remarkably, the price-to-earnings ratio of Banks and PUHCs got up to 100.
This means that, holding all else constant, you’d need 100 years of earnings to get your money back from buying the stock! I know, I know what you are thinking: Don’t buy the stock!
But, because Hoover had signalled protectionism for both banks and public utilities, people kept buying the stock, inflating the bubble to irrational levels, which caused the stock market crash. FDR saw the crash as a crisis that he wouldn’t let go to waste.
The rest is (our) history.
Here is the sad situation today:
[click to enlarge]
When government is the primary resource allocator, living standards cannot improve. But those behind the Great Reset seek to increase the share of all resources allocated by the government, because they are, themselves, government cronies.
Instead of a Great Reset, we need to un-Hoover ourselves, and un-FDR ourselves. We need to return to such a level of free enterprise that wages are once again several multiples of all-levels government spending.
No more protectionism for big banks and big industry, no more “public-private-partnerships.” Those things are killing the US economy, progressively making it impossible for US grandchildren to live as well off as their US grandparents lived.