Government Spending and Economic Growth

There is a major difference between a dollar “invested” by government and a dollar invested by private industry.

State control enthusiasts believe that they’re the same. That in fact, it’s better if government makes the decision to spend. Or as the Obama administration says, “invest,” as opposed to private enterprise doing the function.

In one instance, the allocation is made by a political decision. That is often subject to pressures which have nothing to do with supply and demand. Rationing and corruption invariably follow. The other, privately imposed decision is, however, more likely to conform to what the public wants.

Moreover, private industry investment has a multiplier effect; government spending does not. Government jobs have no leverage impact on the economy. Their purpose often has political, social and environmental intentions.

Governments do not innovate and create new companies and multiples of jobs. Nor do they enervate the needed psychology of a booming economy. Psychological effect is most important.

Remember: Socialist countries have never been satisfactory consumer societies.