Without The Private Sector, There is No Public Sector
- Posted by Jeff Carter
- on June 19th, 2012
Liberals I run into are fond of pointing out that “without bridges, roads, and public utilities the private sector wouldn’t exist.” It’s as if the private sector owes government something. They are sadly mistaken in their logic. Without those things, the costs of doing business would be higher. Businesses would build them independently and charge more for the service.
Because businesses could bargain using the principles of Ronald Coase, all those bridges roads and power plants would get built. They’d probably wind up operating them cheaper than the cost today.
In a recent article, I read this.
Democracy is about citizens caring about each other. The Public is necessary for The Private. Pensions are delayed earnings for work already done; eliminating them is theft. Unions protect workers from corporate exploitation — low salaries, no job security, managerial threats, and inhumane working conditions. Public schools are essential to opportunity, and not just financially: they provide the opportunity to make the most of students’ skills and interests. They are also essential to democracy, since democracy requires an educated citizenry at large, as well as trained professionals in every community. Without education of the public, there can be no freedom.
Democracy isn’t about citizens caring for each other. It’s about giving citizens a voice in their governmental processes. One man, one vote doesn’t translate into everyone having the same amount of money. Democracy gives everyone unalienable rights that are equal. Governments don’t decide what you do with those rights, or how successful you are with them. Individuals do.
Unions don’t protect any workers from anything anymore in the US. Especially public unions. Were there ever inhumane working conditions at government offices? They are relics from a prior age. Unions are not essential to democracy. We’d function perfectly without them. Prior to unions, there was an apprenticeship required of tradesman in the US. It was a carryover from the way they did things in England. Serve your apprenticeship and then hang out your shingle and see if you could generate a business. If successful, you made money. If not, you failed and tried something else. That’s called capitalism. Unions are anti-capitalistic.
The question to ask is “Where does the money come from for all this government spending?”. The answer is the private sector. Even when the Federal Reserve creates money out of thin air, the private sector is responsible for paying off the debt. When governments decide to spend a bunch of money on a project, hire a bunch of new employees, it’s not the government that pays. It’s the citizens that pay through their taxes.
This is the ultimate fallacy of Keynesian economists. The multiplier effect of government spending is 0, ZERO. Nada, Zip, bupkis. Monetary stimulus isn’t created in a vacuum. It’s borrowed from future tax revenues. That’s why GDP growth is so important. Without it, an economy can’t support its borrowing and it goes kaput.
Check out the problems in the EU and you have a textbook case about governments run amok. They have a great pension system in Greece. But you can’t get a job. Industry has abandoned the country. Spain isn’t a lot different.
Economic incentives matter. Government generally creates incentives that are not in tune with the market. If the incentives start out correct, the market usually evolves to a point where they aren’t correct and government isn’t quick enough on its feet to change and imbalances happen. Government incentives breed crony capitalism as lobbyists work to get them written in their favor, or businesses curry favor with politicians/bureaucrats in power to jump through hoops to get them.
Ironically, in Wisconsin the reforms that Scott Walker brought are saving big money for governments, and thus the citizens that those governments should be accountable to. In Indiana, pension reform of government employees has helped the state, and helped its citizens. In states where there is no reform, taxes and regulation have gone up and the business climate is horrible. Roads and bridges are failing. Many parts of those states resemble third world countries.
Smaller government decentralizes power and creates opportunity for enterprising individuals. Our Constitution was written not only to elucidate the rights of individual persons, but to also protect them from over reaching government. That’s why power mongers from all political parties try to find loopholes in the language of the document.
The debate today should be about the role of the government versus the private sector. Knowing what we know about government, and witnessing the melt down that is the European socialist model, we all ought to be about choosing less government and relying on ourselves and the private sector.
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.
Jeffrey Carter is an angel investor and independent trader. He specializes in turning concepts into profits. He co-founded Hyde Park Angels one of the most active angel groups in the United States in April of 2007. He previously served on the Chicago Mercantile Exchange Board of Directors. He has done market commentary for (More...)
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