Tag: Robert Higgs

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free trade & free markets national politics & policies too much government

Why Such Slow Growth

Why such slow growth, after the federal government spent trillions to spark recovery?

Could it be that binges of throwing borrowed money around don’t matter? Spending money can’t be the solution if the problem is low or dark expectations of the future — and the spending of borrowed money feeds that dark view.

So what is the solution? 

Well, take a step back. According to economic historian Robert Higgs, the key to economic growth is “private domestic business net investment.” And that’s down. 

The peak occurred in 2007. The next two years saw the very opposite of growth, a precipitous fall in investments in private business. Last year, Higgs tells us, “net private investment increased smartly for three quarters, reaching an annual rate of $270 billion in the third quarter, then contracted sharply — by almost 47 percent — to $144 billion in the fourth quarter,” which is about a third of what it was at peak in 2007.

“Jobs,” which everybody’s thinking about, don’t come from spending as such. New jobs happen when people who save take their unspent money and invest it in production processes that they hope will yield goods that consumers in the future will spend money on.

So, private investment depends on positive expectations, a kind of rational hope.

What could government do? 

Provide less reason for fear by putting a halt to doing things that elicit rational fear instead of rational hope.

Saner government, more productive economy.

This is Common Sense. I’m Paul Jacob.

Categories
free trade & free markets too much government

What About the Roads?

The classic political study Crisis and Leviathan, by Robert Higgs, argues that the state often exploits the sense of urgency that attends a crisis to enlarge itself as the way to “solve” the problem — even when government itself created the problem.

The federal government’s profligate credit policies, which fueled the now-​busted housing bubble, come to mind. The government’s “solution” here is to lard some failed companies with subsidies and nationalize others. Why? Oh, no time to think, just hurry up and do it before investors get even more jittery.

Sometimes, though, officials scrambling for a solution consider solutions that might actually help. Crumbling infrastructure is on the minds of many city and state politicians. But the tough economy is also on their minds. Many are therefore more open these days to the idea of private financing of roads
and bridges. As Norman Mineta, former transportation secretary, puts it, ”Budget gaps are starting to increase the viability of public-​private partnerships.”

I don’t know about the “partnership” part of it. Too often such ”partnerships” mean that a business is prevented from making good decisions, or is protected from the costs of bad decisions.

If we’re going to delegate a train or road to a private company, let them take full responsibility for it. Companies that succeed will get us from here to there just fine. And taxpayers won’t have to cough up money for the ones that fail.

This is Common Sense. I’m Paul Jacob.