January 20, 2012 Reading Time: 3 minutes

If the State is so resourceful, why does it need to borrow and tax so much?

The debate over the divine “multiplier” rages on.  Proponents argue that the economy is plagued with idle resources just sitting around collecting dust.  “Why, if the Private (read: Voluntary) Sector won’t pull its weight, the State must step in to pick up the slack. There are profit opportunities out there that people aren’t taking because they are just plain scared! Therefore, if the State will just borrow the money necessary to get that big glob of ‘capital’ moving again, we’ll see prosperity right around the corner!”

Kurt Schuler makes the point over at Free Banking that pieces of ‘capital’ aren’t ‘idle’ in the economic sense, “[t]hey are held in inventory, set aside by their owners for whatever need may arise to use them.” He points out that a car is not ‘idle’ as it sits in the parking lot while you work; it is waiting for its next active use and turning down countless paying jobs during that time. The opportunity cost of people using your car while you work is what you are paying for it to sit there. You are paying for value.

For those without a car, another case would be your bed.  Take mine, for example.  It appears idle anywhere from 10 to 12 hours a day.  But in fact, I prefer (and, in that sense, pay for) it not to be used in my absence.

Further, if this ‘capital’ is resting in inventory longer than had previously been the case, it is not causing the economic downturn; the increased inventory is a reaction. This is just the result of millions of different entrepreneurs recalculating that it is now, given the normal risk and added regime uncertainty, more profitable to hold their capital goods off of the market for a bit.  The government’s, and their economist’s, position is simply that these millions of people are all wrong, and that the conditions are just fine and dandy.  Hence, $20 bills are just laying around waiting to be picked up, and the government bureaucrats are the only ones with enough courage to do it.

Even if this were true, it begs the question: Why are so many people afraid of the economy?  It is the government policies of counterfeiting gone wild that has led us to this point to begin with. Those who created the conditions that led to malinvestments on a grand scale and who distorted the price signals necessary for rational calculation, now they are complaining that no one wants to keep playing their rigged game!  And to ‘fix’ the problem they propose to hand the reigns over to … themselves.

If a government project could turn a profit, no one in the real economy would need to be forced to do it.  When a project is profitable for the State, but unprofitable for a civilian, it is evidence of problems in government, not the free market economy.  The red tape the government can avoid (of its own making) may indeed mean that it can get some job done for less nominal cost than a civilian company, but hidden are the costs of the regulations that put so many profitable human endeavors out of reach.

Capital goods, the people’s resources, appear idle because of a calculation that the environment is too dangerous to let them out of the garage.  Government expropriation of purchasing power and destruction of accurate market signals has created this situation.  It is odd for some to argue that those responsible should be rewarded. That makes me angry.


image: mauduin.deviantart.com

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