The first set of problems within our idyllic little society begin arising because people start deviating from the fair exchange of value. Let’s say that the primitive government of our example society introduces the first public welfare program, promising to support people who cannot find a job. It is not long before people realize that they do not need to work anymore and a full quarter of the population wastes no time in registering for these new welfare benefits, faking all manner of ailments and spinning the most amazing stories as to why they cannot support themselves. These people have now devolved from contributing citizens to the non-creators introduced here.
These loafers now get their money, but the problem is that the money they get has to be paid in the form of taxes by the still productive members of society. Because of these higher taxes, the productive members of society now have a smaller amount of money to spend on other things and have to cut back on non-essential spending like the newly developed entertainment business. In addition, the number of people now producing essential goods has declined because many of them have taken welfare benefits, thereby creating a lack of basic stuff like bread. Since bread is now scarce and everyone needs it to live, a large demand for bread originates and people are suddenly willing to pay more money for bread. The resulting bread price hike forces many entertainers back to farming because they cannot make a living anymore and farmers seem to be making good money because of the large demand for bread.
In the end, the welfare-recipients received their free money, but only at the cost of society as a whole. Productive members of society now have to pay a larger percentage of their income in taxes and pay more for bread. The result is that the society is now back to where they were before they had any entertainers, the only difference being that they only worked half a day then, but now have to work a full day. It takes a while, but gradually more and more people realize that this happened because of the introduction of welfare and finally the people decide to vote out this system. The welfare-recipients are forced to go back to work, the tax burden is reduced, bread prices fall to acceptable levels again and the entertainers are back in business.
By this time, the government has grown significantly in size and complexity. Various committees and sub-committees are established and the concept of bureaucracy is born. Lots of people are employed on taxpayer salaries to sit and argue in meetings about more regulations and government controls, drafting a wide range of forms and other types of red tape that must be understood and completed before any meaningful work can be done, essentially becoming creation preventors as described here. In effect, taxpayers pay the salaries of these people and only get rolls and rolls of red tape and oppressive government control in exchange. As a result, citizens have to pay more taxes, leaving fewer reserves for everything else, and their production is hampered both by excessive bureaucracy and by unnecessary government intervention into the free market. The obvious resulting decreases in production causes decreases in supply and increases in price. People therefore have less money with which to buy more expensive things and the standard of living starts dropping quite dramatically.
Just to make things worse, news begins to spread that a neighbouring country is planning to invade. The people respond swiftly by forming a military and a quarter of the population is drafted into the army. The effect on society is exactly the same as in the case of the welfare recipients: taxes increase to sustain this army and bread prices increase because many farmers have now been converted to soldiers. Once again, our poor entertainers are forced to go back to farming and society has to work full days without any entertainment.
Then the war breaks out. Many lives are lost and much infrastructure destroyed, but in the end our army of farmers and entertainers manages to defeat the invaders. Unfortunately, the war has caused many people to expend their efforts as the value destroyers described here and this has serious and long-lasting effects on society. Due to the destruction of infrastructure and the loss of trained farmers and bread-makers, the efficiency of bread production is further reduced, lowering the supply and raising the demand together with the price, thereby causing widespread hunger even though almost everyone has now been driven back to farming. As all wars, this one is inflationary by nature as prices everywhere rise rapidly and people can buy less and less with their fixed amount of money.
Many hard years of rebuilding follow, but eventually the society manages to build itself up again and increase the efficiency of production, allowing many born entertainers to once again follow their hearts’ desire. Actually, the people have now been very effectively conditioned to over-produce and under-consume, causing them to just keep on producing lots of excess value and continuously build up their society. Simultaneously, fossil fuels are discovered and people suddenly have access to incredible amounts of cheap and reliable fossil fuel slave labor that can be used to easily increase production. A few short decades later, life becomes so easy that people can get everything they need to live a comfortable life together with lots of entertainment without having to work very hard at all. The price of bread has now fallen to a mere one hundredth of an ounce, leaving a very large chunk of money available for the wide range of non-essential goods and services that have emerged to fill this void. Life is better than it has ever been before and everyone is happy.
But, as per usual, these good times don’t last as our example society starts self-destructing once again on next page.