03/24/10 Paris, France – Government’s role in an economy has never been properly explained. We will have a go at it ourselves. In a word, government betrays the future.
Government is a profoundly reactionary institution. It always favors its current clients – the present generation of taxpayers – over its clients of the future (who don’t pay taxes and don’t lobby). It provides protection against foreign invaders and domestic troublemakers. It also attempts to give its clients protection against the future.
Taxpayers want government to protect their existing assets…their businesses…their claims…their jobs…their franchises against all threats. In the modern world, most of those threats come in the form of economic and technological change. That’s why taxpayers demand subsidies and bailouts. It’s also why they like regulation. Anything that will keep change from diminishing what they’ve got.
A properly-functioning economy, as Schumpeter described it, is a process of incremental growth and also of creative destruction…in which old industries, old technologies and old institutions are blown up by change. This is what people pay their taxes to avoid. The present generation wants the government to “do something” to protect them from this process. It’s why they are perfectly happy to see the government take over the whole economy, if necessary, in order to prevent capitalism from happening.
What’s more, the current generation of retiring taxpayers in all the welfare states hopes to get something it cannot afford – pension and health care benefits above and beyond what it has saved for. How can it do so? Only by borrowing from future revenues – that is to say, by putting a claim on income that has not been earned yet…much of it by people who do not even exist yet. Government, again favoring live voters over those who are dead or unborn, goes along. In the case of the US, the newborn child in 2010 faces about $170,000 worth of bills – his share of the net financial obligations of the federal government.
Good luck getting him to pay up!
Regards,
Bill Bonner
for The Daily Reckoning
Bill Bonner
Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America's most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind The Daily Reckoning. Dice Have No Memory: Big Bets & Bad Economics from Paris to the Pampas, the newest book from Bill Bonner, is the definitive compendium of Bill’s daily reckonings from more than a decade: 1999-2010.
The Daily Reckoning is your premier source for making sense of the news Washington and Wall Street generate. Each business day, The Daily Reckoning calls on its stable of world-class writers and thinkers to show you how to get ahead.
Start your 100% FREE subscription to The Daily Reckoning today and you’ll get a free research report, “How to Survive the Fall of Social Security.” Simply enter your email address below to get your free report and join over 495,000 worldwide Daily Reckoning subscribers!
We Respect Your Privacy and We will
Never Share or Sell Your Email Address
“do something”??
I think Ms. Pelosi has all rights to that phrase, especially as a national economic and political forward-looking policy.
Government is a profoundly reactionary institution.No questions there.
It pretend to provide protection against foreign invaders and domestic troublemakers. It only attempts to give its clients/voters protection against the future.
It is most clear defenation of Government that I have seen for years.
By having reactionary governments you may be wondering why progress in certain technological fields exists at all. But wait until they are trying things like structural economic policies. You’ll have regress instead of any pogress than.