Save the World By Spending Your Nest Egg

Priorities to Save World

The other day a good friend sent me a link to a YouTube video entitled, “ Bjorn Lomborg: Out priorities for saving the world”.

Misplaced Priorities to Save the World–Please CLICK to watch the video in place

Bjorn opens by saying he is going to talk about the biggest problems in the world (this was pre the financial crisis).

Bjorn’s ideas are well-meant but are really more of the same – wealth distribution from the West to the underdeveloped countries. I don’t have a problem with him presenting his ideas. My problem is, we have in powerful positions around the world like-minded people who believe what he says and who take your tax dollars and redistribute them of short term fixes.

How does this affect your Nest Egg?

How does this affect you and your retirement nest egg? If more and more of our taxes are sent off-shore and spent on giving people handouts, your government will have less of your taxes to spend on you through your own welfare programs. Plus if your taxes are raised to pay for it less money is left in private hands to grow your nations economy and create additional wealth.

Governments hide this fact chiefly by either borrowing money or printing it. Both methods are virtually invisible to the average tax-payer who is often too busy trying to manage their own lives.  If Governments borrow they incur a debt which must be paid for in taxes either now of in the future. This reduces your nest egg through additional taxes to pay for the interest on the loan. If they print money it leads to inflation and your paper money is worth less in purchasing power making your nest egg’s purchasing power less.

Inflation is also exported from the US if US dollars are used as foreign aid payments. Thus the aid buys less than it would have if inflation were not created through the printing press. You only have to observe how commodities in food and oil are sky-rocketing in price as the dollar drops in value. Inflation is part of the problem here.

Who’s Problems are they?

By implication the West appears responsible as usual and even if not, it is likely they will be paying for these problems to be “fixed. Heck, we are blamed for many Bjorn Lomborg - Top Ten World Problemsof them.

I won’t go through them in this post. You might want to review it and make up your own mind, but remember each one you agree with is going to cost you. Also note that in 70 years the UN, the IMF and the World Bank have done or are doing a lousy job at trying to help solve these problems.

Africa and the Failure of Development Aid:Time for Designing an Exit Strategy

“Some of the major recipients of IMF and World Bank aid over a number of years in Africa, like Sierra Leone, Liberia, and Somalia, later became failed states”

The point is that some are relevant to our own countries and our taxes should be used to solve those problems first if that is what we chose to spend our taxes on.

Today’s Economists Do Not Prioritise

Bjorn said you have to use Economists to priorities what the “World” can do to solve it’s problems. This is in fact his main contention and the basis of his solution.

My view is that most economists working for government do not priorities because politicians who employ them don’t have to. Also many economists have been taught debt is good, and deficit financing is even better. If you can’t afford something and you can’t increase taxes, borrow or print the money you need. Unfortunately many economists have never been taught anything except Keynesian economics and as such believe they can spend their way to prosperity at home and overseas.

When did you last hear a politician, or an economist working for a politician, say they cannot implement something such as National Health Care, until they clean up Medicare and Medicaid and the fraud that goes with them and find some money in the budget? No they say, don’t bother, just put a National Health System on top of that flawed structure and borrow or print the money, and it’ll all work out fine. Sad smile

This is Political Economy at work and that is the problem. Actually I think it is an oxymoron if you take the literal meaning of the word economy to be doing things for least cost. Politics on the other hand by its very nature is an expensive business – buying votes and influence politicians.

Mixing Economics with Politics leads to your tax dollars being misused much of the time for political ends, not economic good. In this instance as with most things in government, it’s got nothing to do with the merits of a National Health Service. And economic priorities don’t enter into it either.

The Long Term Affects of Spending $50Bn a Year

There is no doubt that many of the problems on the list require our attention. However we need to think long term, not just about the immediate problem however heart-wrenching that may be. For instance Bjorn is probably right in saying we can solve the problems of malnutrition by giving away micro-nutrients.

Just forget the morality of keeping babies alive short term for a minute please, and think of keeping them alive long term as well. We provide the micro-nutrients in year one. Then in year two unless something else is done there will be those additional babies who survived because of the micro-nutrients last year, plus a whole bunch this year that will need the micro-nutrients.

What happens if there is a 10% increase in the number of babies needing help each subsequent year? Using the Rule of 70 in 10 years all things being equal, there will be double the number of babies wanting the micro-nutrients. So the cost of supplying them, which will fall to the West to pay for, will double. That does not take into account inflation either.

What I say is this is only a short term fix. The long term fix is to ensure the countries where these babies live implement democracy, enforce the rule of law and free up their people to create their own wealth. That is something I really think we could then help them with. That is something worth investing in, even if the investment return is given to the people for them to re-invest in themselves. That is positive aid in my view and should see us provided less and less of our tax dollars to just keep people alive. That should leave more in your nest egg too.

Doing the “Hard Thing”

Don’t get me wrong I am not advocated babies should be left to die. I am saying the priorities should include getting the governments of the countries receiving the aid, to implement democratic reform at the same time. This assumes we all agree to spend our tax dollars on this particular project. Otherwise it will be a waste of money in my view, despite saving some babies in the short term.

Unfortunately this is the “hard thing” to do as most of the people redistributing our tax money believe that what they are doing is a “good thing”, when in fact many keep their job only so long as the aid program they are administering is maintained. So it is often in their best interest to redistribute our taxes as short term fixes to ensure their personal long term employment.

On the other hand many of these people are good and genuine people who see the suffering and want to fix the immediate problem and often when that is done there is no money for the long term solution.

Either way much of the wealth of the West is going into programs that are short term and will not help long term to solve the problem they are designed to fix. The impact on you is your nest egg will take a hit and a big one in the long term unless we can change

Leave a Reply

CommentLuv badge