“As the only entities in society – besides criminals – that exist through the involuntary exaction of private property, governments rely on compulsion to achieve their ends.”

For my money you can lump criminals and governments into the same category.

The central issue which Nulle neglects is *class*. He is wrong to take at face value the claims that state infrastructure spending is intended to serve “societal interests.” The appeal to the interests of “society” or the “general welfare” is just the ideological sugar-coating used to make the policies of a class-state easier to swallow. Like all corporate liberalism, such spending does indeed promote profit–but the profit of some at the expense of others. THAT is why coercion is necessary.

State spending on transportion and communications infrastructure, R&D, etc., are all examples of what James O’Connor (Fiscal Crisis of the State) called “social investment”: “Social investment consist of projects and services that increase the productivity of a given amount of laborpower and, other factors being equal, increase the rate of profit….”

Along with “social investment” goes “social consumption (e.g., higher education, technical training), which serves to lower the cost of reproducing human labor power.

As a result of such government spending, an ever-growing portion of the functions of the capitalist economy have been carried out through the state. Their effect, in every case, is to indirectly increase the rate of profit for capital in certain privileged sectors of the economy, by allowing the corporatist sectors of the economy to externalize their operating costs on the public. This means that investment in those sectors is artificially rendered more profitable, and economy of scale is artificially shifted upward, so that those sectors profit at the expense of the working and taxpaying public.

As a side-effect of these policies, the use of subsidized factors (high-tech, capital-intensive forms of production, skilled labor, etc.) is increased beyond pareto-optimal levels, far beyond what they would be in a free market.

From the perspective of the big business interests served by such spending, the effect is to cartelize the consumption of the services subsidized in this way. Because they act through the State to organize a non-defectable cartel, the cost of such services is generalized among all firms, and is not an issue of cost competition between them.

As O’Connor pointed out, the ultimate result is rapidly accelerating consumption of subsidized factors, to the point that the state reaches the fiscal breaking point. What O’Connor failed to perceive was that such irrationality is an inevitable result of government interference with the price feedback mechanism. Since the market actor does not fully internalize all the costs of his decisions, he has no rational incentive to weigh costs against benefits. Hence, snowballing irrationality and geometrically increasing demand on transportation, etc., until the system breaks down under its own weight.

State capitalism contains the seeds of its own destruction.