Writing for the latest Forbes magazine, hedge fund manager Mark Spitznagel offers a lesson on the role of capital. It’s a lesson the “tax-the-rich” crowd hasn’t learned.
The nonchalance with which politicians on both sides of the aisle discuss ever higher taxes as the solution to our endless budgetary ills is emblematic of a widespread and consequential misunderstanding of capital. Indeed, those who claim that higher taxes bring prosperity miss the point entirely. That is, they mistake means for ends.
You see, capital is not ends; capital is means. Capital is not what humans strive for, the triumphant reward of our material aims. Rather, it is what we strive with, the intermediate tool by which we attain those aims. It is the means of higher output per unit of input (bringing our species from its hand-to-mouth past to the present), whereby, when paired with more inputs – among which is labor – we get greater economic profit and real GDP growth. …
… Consider most economists’ treatment of capital as a homogeneous blob fabricated by central bankers out of credit. They ignore that means, by necessity, are scarce (they are foregone consumption) and must be economized to attain the most desired ends. Circumventing that fact, as history has repeatedly shown (for instance, in past periods of economic growth despite high taxes), leads only to artificial booms canceled out by subsequent credit collapses. …
… Amid all of this messy thinking we miss the simple truth behind our material wealth: It has been achieved through the accumulation, by us and inherited from our forefathers, of a stock of highly configured and embedded tools that make human effort more effective and things possible that never were before. And we turn our backs on this truth when we turn more and more of these tools over to government bureaucrats.
