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Source link: http://archive.mises.org/3486/my-michigan-speech-the-empire-shrinks-back/

My Michigan Speech: The Empire Shrinks Back

April 18, 2005 by

What is the relationship between the rise of big government and the rise of American prosperity? It seems that people on the right and left are quick to confuse correlation with causation. They believe that the US is wealthy because the government is big and expansive. This error is probably the most common of all errors in political economy. It is just assumed that buildings are safe because of building codes, that stock markets are not dens of thieves because of the SEC, that the elderly don’t starve and die because of Social Security, and so on, all the way to concluding that we should credit big government for American wealth.

Now, this is where economic logic comes into play. You have to understand something about the way cause and effect operates in human affairs to understand that big government does not bring about prosperity. Government is not productive. It has no wealth of its own. All it acquires it must take from the private sector. You might believe that it is necessary and you might believe it does great good, but we must grant that it does not have the ability to produce wealth in the way the market does.

Full speech text at LRC

{ 9 comments }

Stephan Kinsella April 18, 2005 at 9:12 am

Great column by Rockwell. He mentions the paradox of the US government being the largest, most intrusive, and “the most powerful leviathan state that has ever existed”; and yet, “At the same time … the United States is overall the wealthiest society in the history of the world. … What is the relationship between the rise of big government and the rise of American prosperity?”

This calls to mind one of my many favorite quotes by Hans-Hermann Hoppe, from his great article Banking, Nation States and International Politics: A Sociological Reconstruction of the Present Economic Order, Review of Austrian Economics, (Vol. 4 Num. 1), 1990, which explains why the relatively rich, Western countries, which have relatively liberal internal economic policies, would tend to be militarily more powerful, and thus more aggressive, than developing states. The full quote is reproduced at this post.

Brian Moore April 18, 2005 at 9:34 am

“He mentions the paradox of the US government being the largest, most intrusive, and “the most powerful leviathan state that has ever existed” ”

Well, not compared to most other countries. It is the largest and most powerful (compared to other governments) but not particularly more powerful or intrusive than most of the other countries in the world. Certainly, it is TOO powerful and intrusive — but if the average score of national governments is a 2 of out 10, then the US deserves a 4.

It is interesting to note that economic prosperity is claimed to have been brought on by big government, and we always seem to need so many government interventions in time of economic recession. In many cases I believe this is due to the “do something” mentality of politics, something I despise. In politics, it doesn’t matter what you do (or if it helps) as long as you do “something.”

Somehow government in America has gone from “avoiding hurting the people” to “trying to help them,” despite the obvious truth that our founding laws were what the government could NOT do, as opposed to what it should do.

Stefan Karlsson April 18, 2005 at 10:27 am

It is hardly any mystery that Americans are so rich even though its government are the largest-simply because the characterization of the U.S. government as the largest is extremely misleading- at least in this context.

What is relevant in this context is its size relative to GDP and measured that way America has a very small government compared to other western countries. Its obtrusiveness with regards to regulation is also smaller than most other governments.

perrosuelto April 18, 2005 at 11:00 am

I wonder to ask this pundit, what have to do ALL the firm working for the most powerful military machine complex, both for domestic use of empire and export via tricks to corrupt foreign governments all over the world, ALL the entrerprise working for federals contructions, public building, police, judges, roads etc. If a technological firm want to obtain, say, a plane contract, an administration web service, a big order or trains and/or a state police car park, have to do something to push with foreign statal administration to obtein vantage over competitors or sits on his hands? I don’t discuss the “beauty” of free market, when it was possible, but really someone thing once more in the”invisible hand” of market “that make everyone happy” as in XVIII° century? I may understand if one come out with some innovative ideas to arrange the economic policy, but one come back to a failed ideas is it not raisonable. Free market in reality don’t stay on his leg, let ALONE.Must be “covered” with the tricks of government. Take the cotton produced in Mauritania for exemple and that produced in Middlewest, this one may survive grace to state subsidies that are not possible in a poor country.And not forgetting the mass media complex, that employ lot of workers, all on the payroll of the government power. Surely, taxation is scrabling the cards in the socio-economic play, but seems to me to repeat the rethoric of free market on ideal ground, is losing time on the matter.

Wild Pegasus April 18, 2005 at 11:42 am

Never before has a government in human history…assumed unto itself so much power to regulate the minutiae of daily life.

And we wonder why no one takes libertarians seriously? One of our supposed intellectual leaders is out there making assinine comments like this?

- Josh

jeffrey April 18, 2005 at 12:24 pm

I don’t see what could be controversial about Lew’s claim that the US is the largest and most powerful government in history. In 2003, the US accounted for 47% of the entire world’s military expenditures. See chart. Also see comparative nuclear stockpiles. If another government collects $2 trillion and spends anything like $2.2 trillion per year, I don’t know of it.

Brian Moore April 18, 2005 at 12:41 pm

“I don’t see what could be controversial about Lew’s claim that the US is the largest and most powerful government in history.”

We were just making the distinction between “relative governmental power” and “governmental power over citizens.” The US is indeed the most powerful government on the planet, in that it would win any confrontation with another government. But it is less powerful in interfering with our lives than many foreign governments, even with the excessive amount that it does.

“What is relevant in this context is its size relative to GDP and measured that way America has a very small government compared to other western countries. Its obtrusiveness with regards to regulation is also smaller than most other governments.”

Exactly. The American government is one of the “best” of a bad lot.

Has anyone determined is ‘perrosuelto’ is an AI or not? :)

billwald April 19, 2005 at 11:14 am

“Government is not productive. It has no wealth of its own.”

This is obviously not true.The govt owns half of the land west of the Mississippi and this land obviously is a form of wealth.

“All it acquires it must take from the private sector.”

Non sequitur. The source of the materials of production must logically be divorced from the goods produced. For example, a road is not less valuable because it is built by the state and not by a private concern. The argument should be made in terms of efficiency. It may be more efficient for a road to be a toll road in terms of bottom line cost to the user.

“You might believe that it is necessary and you might believe it does great good, but we must grant that it does not have the ability to produce wealth in the way the market does.”

The way? What does “way” have to do with cost accounting execept in terms of efficiency and best use of resources?

Why is a Condo or home owner association morally acceptable to Libertarians but a town government is not – as long as a person is free to leave the town and take his portable assets with him?

Alex April 19, 2005 at 11:57 am

Um, Mr. Wald.. I think you missed the whole point.

The point that Lew was pointing out was the fact that all government revenue’s must necessarily come through the market – it’s not the other way around. This is inescapably true; the State cannot produce wealth (or if you disagree with this you are a communist, or communist sympathetic).

And, uhh… it might be just me, but you know, if I decided to take a ton of money from people and build lots of houses (that they could live in for free!) how different would this be from me taking a ton of money from a bunch of people and building a lot of houses for me?

Or are you saying it’s ok to rob some people in order to build a buncha stuff if that stuff is ‘handy’ and people could use it according to their own ‘needs’ (holy crap! That sounds like a commie idea! My bad..)

The act of taking goods away from people without their consent is called robbery – or taxation. Who cares if some people can take the goods that have been taken from others? You’re missing the giant elephant in the room.

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