Note: To most this is a very unpleasant name for a website. But GREED, if directed correctly, is a most important driving force for human progress. Unbridled GREED can also be very destructive to human progress.

On this website I will explain why Socialism is often used to suppress GREED and thereby deprives humanity of the potential benefit to human progress.

Strangely the optimum economic success is achieved for the entire population of a country when the majority of people will never reach their personal level of economic satisfaction. When a large percentage of people reach their level of economic satisfaction, many will stop working and take leisure or early retirement. When many people exit the labor-force then productivity will decline and standards of living will decline. This is true no matter how high the GDP rises in different countries because personal satisfaction levels differ in economies of differing levels of GDP. A person in a "rich" country may feel poor and a person at the same income level in a poor country may feel rich. People base their economic contentment level on how their standard of living compares to the standard of others in their same country or community.

"The Rich" and "The Poor"

There is a standard of living level in every society below which people regard themselves to belonging to the "poor" and they are dissatisfied and strive for a higher level above which they belong to a group that is composed of satisfied people. There is a smaller percentage of people that will keep working no matter what level of satisfaction they reach. The percentage proportion roughly follows the 80-20 Pareto principle in that 80% of the people imagine themselves poor in relation to the remaining 20%. Most of the 20% economically more well off people keep working no matter what rung they have reached on the economic ladder. The 80% of people that see themselves as poor will most likely take more leisure or stop working alltogether when they have reached a relatively greater level of economic satisfaction. These 80% generally fall prey to the sirensongs of politicians that promise a "more fair" distribution of the economic wealth created by the 20%. Since the wealth created in a society is generally as a result of the labors of both the 20% and the 80%, the 80% feel exploited by the 20%. 

The average standard of living in a country is determined by how much work each of the workers contributes to the total GDP and how much automatic machinery is used in the process. Automatic machines will multiply the effective output of work from workers that operate them.

As soon as the personal income of the 80% is rising above their level of comfort, they will take more time off, work less and even leave the labor force alltogether and go into early retirement.


Hurrah for Greedy Capitalism

Most socialistically minded people will quickly arrive at a level of indignant disgust when reading the theories presented below. A fair percentage of people with lesser socialistic leanings may conclude that this writer is a heartless individual without any empathy for the less fortunate. Yet, let me make the plea that you will judge the following economic observations solely on their logical merits. Logic in economics has no place for touchy-feely considerations.

The merits of free enterprise capitalism
Free enterprise/capitalism has created the most prosperous economies. A vital ingredient for free enterprise is human greed. The First World countries will slowly become less prosperous because of a gradual increase in laws and regulations that seek to temper or curb greed. There are already a lot of “anti greed” laws and regulations on the books. The societies that teach their populations to be satisfied with what they have and admonish them not to be greedy and at the same time legislate into practice the sharing of all the productive output of a society, will create lower prosperity for their populations. Socialism might seem a noble way of running a country but it will lead to lower standards of living for the vast middle class and the society as a whole. It will promote even greater sloth and less ambition among the long-term “poor” because they become the recipients of a disproportionate share of socialist government largesse. The resulting lower prosperity also leads to contempt for and jealousy toward other countries that tolerate and even promote capitalism that results in greater total prosperity.

There are also demerits of capitalism
Greedy capitalism can also result in gross abuses of the free enterprise system with often damaging results to the economy as a whole and to large numbers of individuals in particular. Such abuses of greed are as damaging to the total economy as the total absense of greed. More often capitalism will only be able to become abusive when government has enacted laws and regulations that facilitate members of special interest groups among capitalists that than can freely exercise their abusive and monopolistic behavior under the protection and with the assistanse of the evil elements within governments everywhere. When people are not vigilant to curb corruption within their governments, they will have to suffer the consequenses of graft and corruption and a resulting lower standard of living for all.

Greed is an important factor in optimizing prosperity
The reason why greed is so important an ingredient in a country’s economy is because it takes fully advantage of the drive of the few to become prosperous beyond strict survival or average modest lifestyle. In any society there are 20% of the people that produce more than they consume and 80% that consume more than they produce (the famous 80/20 Pareto principle again). In a society where greed is tempered by socialism (socialist laws and regulations), the 20% of people that tend to produce more than they consume lose their incentive to produce, because there are no rewards for the extra effort they otherwise would be willing to make. Society as a whole loses production by curtailing the greed of these 20% of potentially highly productive greedy people. This well meaning social engineering results in declining production and that in turn results in an average lower standard of living for the total population.

Explanation
The 20% greedy people will keep working hard and will keep producing beyond having achieved a comfortable standard of living and security for their retirement. The 80% not greedy people will keep working and producing until they have reached a level of comfort and then prefer more leisure and a lighter workload instead of continuing to work much beyond the for them comfortable standard of living they have attained. Maximum production and contributions to the economy from the 80% less greedy people will then only take place when they have not as yet achieved success in attaining their level of comfort. The 20% greedy people never reach a level of comfort beyond which they will reduce work and production. In fact, many of them do not even take advantage of their greater financial prosperity by consuming beyond their basic creature comfort level. This lack of consumption by many of the greedy people is also detrimental to the economy because the produced goods and services must be consumed. If they are not consumed there will be a glut and that will result in a reduction in sales and a resulting decrease in factory orders which in turn leads to lesser employment and fewer wages which in turn leads to again lesser consumption. The whole economiy of a country is a triangle that interconnects Production-Distribution-Consumption. If one of the three factors of the triangle is lagging then the other two will be immediately affected as well.

Optimizing success for any economy
Any economy will optimally succeed when 80% of its population will fail, fail to reach the desired level of economic comfort, because as long as people have not achieved their comfort level they will keep trying to reach that level of comfort by contributing at their normal level of work output. The problem now becomes that the additional production in the economy must be consumed in order for it to be able to be produced. If the optimal level for the entire economy can only be reached when the comfort level of the 80% of the people is never reached, then a proportionally distributed rise in the economic growth will cause the 80% of the none greedy population to reach their comfort level and that will reduce their work effort (this is the main reason for economic cycles). There are several solutions to the problem of absorbing the extra production without causing the 80% non-greedy people to reach their comfort level and avoiding the decrease in production. Some of these solutions to absorbing the extra production are desirable and some are not desirable.

Several harmless solutions
There are several harmless solutions to absorb the extra wealth created and all of them may be employed simultaneously to perpetuate an ever growing standard of living for all.

The public spending solution
One of the solutions is to absorb the extra wealth produced in an economy with larger government spending on things that benefit the whole population equally. Spending could be for infrastructure improvements such as (in order of relative importance) higher quality education, better education buildings, better libraries (electronic as well as physical facilities), better quality drinking water, better quality standards for food, better road maintenance, better public transportation, better road building, beautiful landscaping, upgrading of sports facilities, better tending of parks and other public facilities, better police and fire protection (without creating a police state). With public spending the personal satisfaction for individual consumption is not reached.

The "keeping them poor" solution
Another solution to absorb additional production without the 80% not so greedy people reaching their comfort level by which they will decrease their work effort and take more leisure is the following: People tend to measure their comfort level by their personal relative standard of living in comparison to others. They do not measure their standard of living by nominal standards. In poor economies members of the non-greedy 80% of the population attain their level of comfort/success at a nominally much lower standard of living than in rich countries. That is why many people who are considered poor in a rich country have a nominal standard of living equal or higher than people that belong to the upper middle class in very poor countries. Even though they live at a much higher standard of living than the middle class people in very poor countries, they perceive a relative low level of satisfaction as long as they have a much lower level standard of living than the upper middle class in their own country. The production of high priced high quality items and ever changing fashion items is a good way in which to keep the 80% wanting and feeling relatively dissatisfied.

Poor people in poor countries
Many poor people in poor countries will stop working when they reach a standard of living that would still be considered extremely poor in rich countries. International aid organisations and multi-national corporations that make investments in such very poor countries have little understanding for the phenomenon of the low level of living standard at which people in these countries will attain satisfaction and at which they will reduce their work effort and prefer more leisure rather than work. These multinational employers and international aid organizations will now incorrectly conclude that these poor people in poor countries are beyond help and cannot be motivated to work. The often incorrect conclusion is that these poor people are genetically afflicted with natural laziness That is absolutely wrong, they are certainly not less ambitious or more lazy than people in rich countries. They just reach a level of economic satisfaction at a much lower standard of living. As luck would have it, among these poor people are also the 20% of greedy individuals that never attain a level of satisfaction that will cause them to stop working. But unfortunately the aim of the foreign aid organizations is to raise the comparative standard of living for the poorest people in such poor countries. The result is that 80% of those poorest of people will now reach their individual level of satisfaction and that will result in a decrease of their willingness to work or a cessation of work alltogether (depending upon the level of aid and the manner or conditions upon which international aid is given). So the "greedy" 20% of enterprising people within these poor countries are unable to motivate the 80% of their less greedy countymen into work because they are unable to compete with the generous and well-meaning socialistic aid given to their poor countrymen. These 20% of "greedy" people will now be compelled to use efficiency measures in their businesses such as buying automatic machinery that will aggregate more wealth to them and withold it from the 80% and will not add to consumption.

What to do about the unwillingness to work?
The most practical method to increase the willingness to work in these very poor countries is to raise the level of expectation and desire for consumption of goods and services. This can be best done by making the population aware of new goods and services and create a desire in them to consume those goods. This can be done by exposing the population to such consumer goods and services in incremental steps. These incremental steps must be seen as attainable goals by the poor people. No use to expose extremely poor people to Mercedes automobiles. It is best to start with bicycles, cell-phones and small household appliances and incrementally step up to motor scooters first and then to cheap automobiles after that. Such scenarios will not make environmentalists very happy because they think about larger garbage dumps and polluted air before they are interested to fulfill the desires of poor populations. The reality is that when populations get richer they will have a dramatic drop in population growth rates and it often results in negative population growth or population reductions. Such reduction in population growth is the only realistic solution to environmental concerns of Global pollution and limited raw material supplies and water and energy resources. Unfortunately, foreign aid organizations are most often staffed by idealistic young individuals with strong socialist leanings. They spend a few of their younger years trying to do good things for poor people in poor countries. Then many years later they see that all their good intentions did not have the expected good outcomes. In fact, they have to admit (which only the more intelligent ones do) that all their well intentioned efforts had the opposite outcome and created often more poverty and misery. The reason for these unexpected outcomes are explained best by my http://www.universaldemandlaw.com/ . For people to understand and accept the brutal reality of this merciless law of nature, things will first have to become worse before people and governments will pay any attention to it.

Unequal distribution of wealth increase
Another aspect to solve the problem to a certain extent, is that additional wealth by a society must be distributed unequally with relatively more of the wealth increase going to the 20% already proportionately wealthier and greedy people. This seems very unfair, but it is the best way for the 80% lower income people to remain at a level of discomfort despite having reached their previously assumed level of satisfaction. the disproportionally higher increase of wealth to the already relatively 20% wealthier individuals will perpetuate a discomfort and dissatifaction level with the 80% less wealthy people in an economy and that will keep them productive in an effort to try to close that gap between poor and rich and will keep their consumption of goods and services up as well.

The beneficial widening of the gap between "rich" and "poor"
Current economic dogma is that the widening income gap between "the rich" and "the poor" is a bad thing and here I am as brash as to declare the opposite, that the widening gap is a good thing for the economy as a whole and even for "the poor". This unequal distribution of increased wealth within an economy occurs as follows:
When economic wealth rises it tends to distribute naturally by unequal percentage increases. The so called "rich" not only tend to get richer, but they tend to get richer by larger percentage increases than the so called "poor". For example if the average income of the top 20% income group is $100,000 per year and the average income of the 80% lowest income group is $20,000 per year, then the percentage gap between "rich" and "poor" is 400% and the nominal income gap is $80,000. When the total wealth in an economy increases by an average of 15% (constant purchasing power), the income of the "poor" may increase by only 10% while the income of the "rich" may increase by 20% or more. It means that the average 20% top earners will now have an average income of $120,000 per year and "the poor" will have an average income of $22,000 per year (in constant purchasing power). Now the percentage gap between "rich" and "poor" has increased from 400% to 445% and the nominal (measured in constant purchasing power) income gap has grown from $80,000 to $98,000. If the percentage increase for both income groups would be the same 15% where the "rich" and the "poor" would both experience an equal 15% increase in income from $100,000 to $115,000 for the "rich" and from $20,000 to $23,000 for the "poor", the percentage gap between "rich" and "poor" would stay the same 400% but the nominal income gap in purchasing power would still grow from $80,000 to $92,000 or an increase of $12,000 between "rich" and "poor". So, if the standard of living for everyone in any economic area is rising by an equal percentage rate the socialists will always incorrectly complain that "the rich are getting richer and poor are getting poorer, even though both the "rich" and the "poor" are getting richer by the same percentage rate but the "rich" are getting richer by 5 times the amount of money by which the "poor" get richer. That fact makes for a greater dissatisfaction for the "poor" than if all standards of living were to remain the same. In fact there seems to be greater satisfaction for the "poor" people when the standard of living drops an equal percentage for "rich" and "poor" alike because the wage gap of nominal income between "rich" and "poor" will become smaller even though the percentage difference between "rich" and "poor" stays the same.

Raising the level of dissatisfaction
So when there is an equal percentage increase of nominal income resulting in a greater nominal income gap between "rich" and "poor", the level of dissatisfaction will rise with the "poor" and they are more likely to set their personal goals for reaching personal satisfaction at a higher level. It will create in them the willingness to work better and harder to reach their newly adopted level for reaching satisfaction.

Well meaning socialism
The constant attempts by undoubtedly well meaning socialists and communistic leaning politicians are always at odds with with free market forces that generally lead to the natural advantages of unequal distribution of wealth that leads in turn to more wealth. Socialists and communists are more in favor of what they call "social justice" which amounts to no more than narrowing the income gap between "rich" and "poor" and a resulting lesser prosperous standard of living for all. Progressive taxation and tax breaks for the "poor" are very detrimental to the economy as a whole and to the "poor" in particular because the resulting lower prosperity will affect the "poor" more than the "rich".

The fallacy of progressive taxation
For this reason the socialistic notion of "fair" progressive taxation runs counter to reaching higher standards of living for all, because it causes the 80% less greedy people to be less jealous and they will reach their level of perceived comfort sooner at which point they will opt for more leisure and less work. This is all a bit confusing and not easily understood by the run-of-the-mill politicians that dream up all this feel-good legislation that they expect will improve the economy and then results, to their great amazement, in exactly the opposite. An exactly equal percentage of taxation is the best possible method of taxation to optimize an economy (see my http://www.automatictax.com)./

Reading http://www.fastexercise.com/?LP=12 will help understand the reasons why the results from well intentioned socialist legislation is often the opposite of the expected beneficial outcomes.

If you have comments or questions write to alf@fastexercise.com

last updated 2007-1217