State Supported Free Enterprise?

IMHO, “free” enterprise (aka Capitalism) doesn’t work without the explicit support of a state. For obvious reasons, capitalists cannot build the infrastructure for the public good because they don’t own it. But they certainly profit from the public investment. American capitalists seem unable to invest in the private infrastructure and human capital (e.g., jobs) necessary for economic expansion without explicit support from the government. This is not a new phenomenon but becomes more apparent over time. For example, the Union Pacific railroad wouldn’t exist if the US government had not paid Mexico $75,000,000 in gold bullion to buy the southern route.

Capitalists don’t like to risk their own capital. They are loath to invest without state-supported risk-sharing at best or state-supported risk taking at worse. With few exceptions, technical innovation doesn’t happen without state-supported incentives and monetary contributions. The entire alternative energy sector wouldn’t exist without tax incentives and public investment in R&D.

Although the public rails at increased public spending, remember that somebody always gains from that public spending, be it medical suppliers (doctors, hospitals, drug companies) from Medicare; builders from Freddie Mac & Fannie May; large banks from the TARP; Defense contractors, truckers from better roads, etc.

I posit that increased government spending ultimately increases income inequality by transferring money from all American taxpayers to the select few at the top of they pyramid.

Consider this chart.

Government Spending and Income Equality

The red line represents all government spending in the US. The black line represents the top .01% of all tax payers share of income. During President Reagan’s first term, he dramatically increased the rate of government spending while, at the same time, significantly decreasing the income tax rates for higher brackets. Thereafter, changes in spending are a leading indicator (by about 3 years) for changes in levels of income inequality. Simple correlation or causal effect?

Is the price of a growing economy greater inequality?


About ViAnn

Progressive retired geek who loves to play golf
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