The many and varied thinkers and practitioners of economics and finance, perhaps distracted by the ubiquitous phantom of the “deficit” and public debt, have missed the greatest obstacle to freedom and wealth in any society: the atrocious waste and destruction of large fractions of the community’s productive resources as measured in labor, material, and equipment. That government squanders such precious and transformational resource caches with inexplicable impunity amid heedless populations is as bewildering to me as the failure to comprehend the true nature of the deficit.

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Savings are the true life blood of any economy. They are the stock of goods produced in excess of costs or needs by the calculating, energetic, and industrious. Such stocks are often converted into their monetary equivalent and referred to as capital. Imagine a baker temporarily leases a facility and produces 10 loaves of bread, nine sold to cover the costs and wages of his operation, the remaining one representing his savings or capital. The greater this stock of retained production, the greater one’s wealth and capital for use in other valued economic endeavors.

In deciding upon which endeavors to pursue, one invariably employs some form of Cost and Benefit analysis, a tool used daily by people to make responsible and prudent financial decisions in the allocation of scarce resources. There are always costs in the things that we do and there are always benefits. If the fully examined and accounted cost of performing an action X is greater than the benefit of performing X, no rational person would execute X. Thus, the baker could sell his retained loaf and use the capital to upgrade or expand his operation in pursuit of greater returns, or he could choose to loan the money to another in expectation of its eventual return with a suitable reward in interest.

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Thus, corporations and individuals perpetually risk their capital or the borrowed capital of others in new or existing ventures when expected rewards outweigh costs and risks. If failure should occur, survival may not be guaranteed. This is the marvel of the capitalist system. The aim is new or better products to resolve an ungratified need, or greater or less costly production through distribution of the means of production to those best able to extract the greatest returns from their use. More production creates lower costs and prices, leaving all better off, especially the poor and struggling.

There is only one organization on this planet that can ignore the imperative to invest wisely and avoid financial ruin. Government, having no funds or resources of its own, must commandeer the labour, material, and equipment required from others. There is not presently, nor has there ever been a measure with which to confirm that money so industriously earned and carefully accumulated by the citizen and corporation and so mechanically seized by authorities, is ever directed to pursuits that bear calculated, salutary, and profitable returns for a community and its resident citizens. There is some accounting of the financial costs of public enterprise, often vague, erroneous, and prone to many an upward adjustment. But a proper accounting of the financial benefits of building or improving roads, welfare payments, creation and maintenance of police and fire departments, is a rarity. 

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One would think that the subject of returns on government expenditures would attract broad attention and scrutiny from the various interested parties. Unfortunately, what we receive for the great sums seized via taxes or borrowed from lenders is a query rarely heard or made by the public and, curiously, by the erudite folk inhabiting the numerous departments of economics. And when one does venture to ask, an honest answer is never uttered.

Suppose a government requires $1 billion for some public venture: a job creation project consisting of workers digging holes in the morning and filling them in during the afternoon: an undertaking of overtly no worth. Funds are raised by taxes and spent accordingly.

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When the nation initially earned the $1 billion subsequently commandeered, value was given for the income received. Owners of capital, entrepreneurs, and laborers gave the economy some greater amount of production, perhaps $10 or $15 billion worth. They built, designed, engineered, piloted, and manufactured, performing a variety of economically worthy pursuits and supplying goods demanded by markets and consumers. The Government’s Dig certainly consumed material, equipment, and labor, but the public good elicited no one needs, no one values. If none of the laborers receiving pay had bothered to show up, the result would have been the same. This is a frequent event in public undertakings.

If funds were borrowed from the saving’s reservoir of resident citizens, the results would differ little. Government, to garner the required resources, must bid up the prices of inputs, resulting in a certain amount of inflation.

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In the 19th century, Britain at the height of empire, with flourishing trade, colonization, industry, innovation, possessed of a formidable navy, enjoyed its highest growth rates. Never during that unprecedented period did Government expenditure comprise more than 10% of GDP. The U.S. too in the 1800s experienced its greatest growth rates amid total government expenditures rarely rising above 10% of GDP. In the present era, in North America, we have moved well beyond those scant percentages. Government participation routinely nears 40% of GDP amid sharply diminished growth rates.

Government presently at all levels in the U.S. spends about $10 trillion, roughly 40% of the economy. If government waste comprises half the amount, then an astounding $4.5 trillion as measured in resources yields nothing of value. If one were to calculate waste by the standard participation of government that prevailed through much of the 1800s, that is a worthy 10% of GDP, then 3/4 of $9 trillion or $6.75 trillion, roughly 30% of productive power of the U.S. economy, yields no return,.

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The powerful parasitic interests that infect the legislative bodies and ensure preference for influential companies and individuals are many and ubiquitous. As Government grows, it takes more of the nation’s resources, more of its declining reservoir of capital, its life enriching blood, sapping the nation’s strength and vitality. Think of what one could do with such resources, the worthy investments that are never made, the new and innovative products that never arrive, the advances never elicited, the discoveries that remain hidden, the wealth and capital lost to unyielding scrap heaps. Misery, corruption, and poverty must thrive when those who produce so little strip precious resources from those who produce so much.

Attempts to counter or hinder the destructive and exorbitant waste of resources with conventional tools and understanding has generally proved a forlorn undertaking through centuries of civilization. We all know the ingenuity and scheming of parasites is formidable and boundless. This cruel fact seems lost on the free market advocates and defenders of the past and present. One may find in financial and economics articles and books an abundance of directives, of coulds, shoulds and woulds for those managing and operating the leviathan of government. But the scourge of highly complicated tax codes, the costs of interference in and disruption of trade, the endless failure of the drug war, the threat posed by the expansive reach of the U.S. military, its bases scattered about the world, not only to foreign nations, but also U.S. citizens, in supposedly protecting those open U.S. borders, and the myriad programs charged with pricey and multitudes of bureaucrats to “aid” the destitute expand remorselessly. 

The big push in economics should not be to lecture us on what needs to be done. It should be to discover the means to compel corrupt, wasteful government to adhere rigidly to sagacious and availing rules and policies that encourage wealth and prosperity. On that subject the economics and financial community is almost wholly silent. A government stripped of the right to confiscate wealth and savings would leave the world a far better place, but how does one impose a commensurate “capital charge” upon government endeavors such that it identifies, separates, and eradicates government squander and retains truly salutary public expenditures that lower costs or enhance returns for the many firms and individuals of a community?

As hinted in the preceding paragraph, there is a formidable and irresistible solution for this hitherto unavailing enterprise, but that is a future article.

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