Origin of Wealth and Poverty

When John Stuart Mill, who wrote the definive book on Classical Economics, dealt with the issue of over-production, he made the correct analysis-that 'any difference in opinion on it involves radically different conceptions of Political Economy'. Unfortunately, Mill made the wrong choice, and we are all living with that mistake now. This book is about that other conception of economics where over-production is not contrary to the basic assumptions of the theory. The book describes, in plain English, how our economic activity creates wealth, and how our compulsion to save creates poverty. Those findings and most of the others presented in this book emerge naturally, and logically, from a new set of basic assumptions, which include some from the old economics but in modified form. The failure of conventional economics to solve the great problems of the world (poverty, unemployment, and underdevelopment) can only be reversed by a more realistic conception of economics. For example, current textbooks define Economics as 'the management of scarcity'. Then they go on to describe how a society must choose very carefully what to produce in order to be able to produce the greatest amount of goods possible, given the scarce resources available (remember the infamous PPF or production possibility frontier?). From that, it follows that government should use as little of the economic resources as possible, and that we should be frugal and thrifty, and save, save, and save, in order to let the capitalists invest and increase our country's wealth. And of course, we must import whatever can be gotten cheaper abroad, so we can relieve somewhat the eternal scarcity of goods we are supposedly condemned to endure. The new theory claims instead that that world of scarcity is a cruel and inhumane fiction perpetrated by a mistaken ideology. In other words, we believe that we live in a world of scarcity only because economists also believe that themselves. The reality is the exact opposite: we live in a world of abundance and government has the power and the duty to foster a freer and more equitable and prosperous economy everywhere on Earth. The new theory of economics is powerfully optimistic in its assertion that poverty and underdevelopment are curable; that fiscal deficits are preposterous; that unemployment is an economic aberration; and that competition in international trade is an absurdity perpetuated by the prevailing erroneous capitalistic ideology.