The So-Called Private Economy

by Jeffrey Tucker
Jun. 12, 2012

"The private economy is doing fine."

Those were the words of President Obama that unleashed a torrent of political hysteria. The Romney campaign immediately blasted him for suggesting that things are just hunky-dory, and he was right to do so, given the terrible slog we've been through and given that there seems to be no end in sight.

But the Romney response also missed the really telling point of Obama's remarks. The revealing thing about Obama's comment was not the comment as such but what he said immediately following:

"Where we’re seeing weaknesses in our economy have to do with state and local government — oftentimes, cuts initiated by governors or mayors who are not getting the kind of help that they have in the past from the federal government and who don’t have the same kind of flexibility as the federal government in dealing with fewer revenues coming in."

The Wall Street Journal editorial page noticed this and pointed out that he implies that the key to economic growth is expanding the government, through stimulus and shoring up the finances of state and local government itself. Again, that is a fine criticism, but even that does not capture the essential nature of the problem here.

The core problem is that Obama, like most government officials, imagines the "economy" and the health of government are actually indistinguishable. The words are interchangeable. The problem is not that he is merely a Keynesian who believes in stimulus; the problem is that he views his job as primarily dedicated to serving his government and the spinoff governments at the state and local levels. This is and always has been his focus.

There is first an intellectual problem of which Obama is personally guilty. Long before he was president, I recall reading a very long and candid interview with him that revealed much about how he thinks the world works. It was intelligent, articulate and, in many ways, insightful. But what was completely missing from any of his remarks and, I assume, missing from any way that he thinks the world works, was a consciousness of the contribution that private industry makes to the world.

This isn't just a small oversight. The whole of our standard of living — which has rocketed to heights unthinkable before the age of capitalism — is completely due to what he and others brush off at the private economy. It is, in fact, not just a source of wealth; it is the only source of wealth, the font of every aspect of civilization that is connected to the material world, which in turn informs the way we think, what we do, who we are and what we can accomplish in the future. It is the sum total of what we refer to as civilization itself, built piece by piece by the private sector. Everything depends it: our health, our culture, our freedom and our opportunities.

Those who credit government with all these things are mistaking the parasite for the producer. Government has nothing on its own. It creates no wealth. It can only take from what others have already produced, draining away the surplus by force. Government is not the "thin blue line" between chaos and us; it is the vacuum suction that extracts the source of life from society and its members' capacity for managing their own lives.

The best way to understand this is through careful study of The Market for Liberty, a book released into the Laissez Faire Club. Here we have a comprehensive demonstration of the following: nothing the government does makes a net contribution to the well being of society, further, all essentials functions of government can be better provided through the private sector.

But people who do not understand this can become victims of propaganda. And the propaganda can be very intense. After all, what is called "the private economy" doesn't have a single spokesman to put a spin on every news event and explain to the public all the blessings that come our way because of private enterprise.

But government does have such a spokesman, many really. And the message is focused and relentless: Give money and power to the state, or else the world will fall apart. And these same people are always ready to blame everything on the market economy, from the Great Depression to the Great Recession.

The government sector, in many ways, is not actually part of the "economy" as we conventionally use that term. That's because its contribution is to reduce growth, wealth and innovation and to put barriers in the way of progress. It is no more part of the economy than a hurricane, a criminal hangout or a terrorist act is part of the economy. It is injurious to economy and to all the purposes of productive endeavor.

In other words, Obama has it exactly backward. But he is hardly alone in this view, and whether he holds a sound view of economics or not probably doesn't matter that much in the scheme of things. It's not as if he is solely responsible for the manner in which government policy is conducted. He is a temporary manager who plays mostly a ceremonial and political role.

The president in his person has far less control over government than the typical CEO has over a major corporation. It is also highly characteristic for the head of government to think of himself as primarily a champion of the apparatus he heads and the funding sources that pay him.

We are really dealing here with an ideological issue that is extremely pervasive on the left and the right.

I recently took the time to see the new movie “Men in Black 3,” which imagines that there is some quasi-government agency that operates in secret to keep us protected from aliens. Using amazingly advanced technology, they blast away bad aliens and work with good aliens. They have been around for many decades, protecting us every day. They put a force field around the Earth to keep invasions at bay, and otherwise keep our streets safe, our food edible and our parks clean of horrible things.

If this scenario were even slightly true, it would be no secret. If government actually achieved even a tiny fraction of the feats in this movie, we would never hear the end of it. It would be advertised to us every single day. It would be used as the only excuse around for all the taxes, wars, regulations and controls on our lives. As they say, a crisis is a terrible thing for any government to waste.

If there were actually a dangerous gang of aliens threatening life on Earth, I'm quite sure that we would be left to fend for ourselves, just as we end up providing our own protection against criminals now through insurance, strong locks and, for many people, private firearms ownership. In every case I know of, the public sector's main tendency is to put barriers up to our ability to protect ourselves.

So no, the private economy is not doing fine, and the main reason is that the private economy is not being permitted to function as it should, precisely because the public sector is making it difficult to impossible. Until we can get this straight in our heads, we will never find ourselves on track to rebuild the prosperity that seems to be slipping away from us.
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Jeffrey Tucker, publisher and executive editor of Laissez-Faire Books, is author of Bourbon for Breakfast: Living Outside the Statist Quo and It's a Jetsons World. You can write him directly here.