How can a government create wealth and redistribute it to others? Only businesses can create wealth and then distribute it to others. Governments can only create wealth by increasing the value of non-market production and tax revenues. But how can the government create wealth? Can it increase the value of a product by using market forces? These are great questions to ask. However, the answer will depend on who you ask. It is generally believed that government wealth creation is a good thing.
Only businesses can create wealth
It is a common misconception that only businesses can create wealth. This belief is often reinforced by people who assert that only businesses can create wealth, and therefore governments cannot create it. They also claim that public sector pay and unions do not create wealth, which is a false statement. This mindset can be dangerous for those who are familiar with capitalism. In contrast, those who believe that only businesses create wealth can benefit greatly from its benefits.
Only governments can redistribute it among others.
The concept of economic development largely underlies the idea that only governments can redistribute wealth to other people. This policy is designed to improve the standard of living for all citizens. It has its drawbacks. Poor people suffer from a loss of wealth since they have very few resources to invest in their future. Redistributive policies discourage hiring, which would improve the lives of the poor.
Progressive taxation aims to achieve redistribution among non-poor citizens. It comes with significant costs. There is no clear line between redistribution to improve poverty and redistribution for the general welfare. The distinction should be enforced by policymakers. They should also limit redistribution that is specifically designed to benefit the poor. Let’s say that a person who earns a thousand dollars per week earns an additional dollar. Would it still be beneficial to give this money to them? Of course, the answer depends on the perceived distortions of wealth distribution.
Income redistribution is the transfer of income from higher earners to lower earners. This is often done through welfare programs like TANF, earned tax credit, SNAP, or Medicaid. Additionally, government programs may receive extra funding for these programs. These programs can help reduce inequality and increase economic stability. These programs may not be means-tested, but they do reduce poverty and increase opportunity.
Only governments can increase the value of non-market production.
It’s not entirely clear how free public education can increase GDP, or what kind of value it adds, and yet, the teachers are paid. The value of the teachers, of course, does not increase GDP. Also, only governments can increase the value-added from non-market production. This obscures the role of the government in the economy. Education and government businesses don’t count towards GDP as value-added.
Governments own productive businesses, too. This doesn’t mean that all state-owned enterprises are private; public railways, for instance, generate huge profits and increase value-added in this sector. However, government-owned enterprises that do not sell at market prices count. Market production doesn’t count. If a government owns public utilities, its value-added is in that sector.