Why Do People Think The Government Is The Economy?


leech (Photo credit: KCBIO)


Government can only exist if it is funded. In the market, people produce a good or service, and exchange it for a good or service that someone else has produced. You might think that through this exchange process each of us funds each other, but that would be incorrect. Each person funds himself from what he produces. If I don’t produce anything, not only would I have nothing to use for exchange, I would have nothing to consume. If I decide not to produce, I would have to depend on other people’s generosity, or I would have to steal someone’s production either directly or indirectly, in order to survive.


Government doesn’t produce any goods, it only produces “services”.  A vast majority of these could be provided at lower cost with better costumer satisfaction through the free market. Government services hold a monopoly position, and because there is no competition for your “business”, the “consumer” has no choice except standing in line, remaining on hold, and accepting whatever happens as his only option. These monopoly services wouldn’t survive if they relied on voluntary exchanges, which is the way of the market. They can only be funded by the Government confiscating a portion of what each individual has produced through its three-legged stool of  taxing, borrowing, and counterfeiting. Not only does each tax payer fund himself with what he individually produces, his production funds a portion of the operation of Government bureaucracies, and also a portion of all transfer payments. Government employes, welfare recipients, corporate welfare recipients, bailouts for banks and businesses, foreign aid, etc, can only receive funding from what is picked from your pocket.

Read these excerpts from a recent speech by the President, 1/14/13   “Right now, our economy is growing and our businesses are creating new jobs. So, we are poised for a good year if we make smart decisions and sound investments, and as long as Washington politics don’t get in the way of America’s progress.”

“The fact is, though, we can’t finish the job of deficit reduction through spending cuts alone. The cuts we’ve already made to priorities other than Medicare, Medicaid, Social Security, and defense mean that we spend on everything from education to public safety less as a share of our economy than it has — than has been true for a generation. And that’s not a recipe for growth. So we’ve got to do more both to stabilize our finances over the medium and long-term, but also spur more growth in the short-term.”

 ” Now, I’ve said I’m open to making modest adjustments to programs like Medicare to protect them from future generations. And I’ve also that we need more revenue through tax reform, by closing loopholes in our tax code for the wealthiest Americans. If we combine a balanced package of savings from spending on health care and revenues from closing loopholes, we can solve the deficit issue without sacrificing our investments in things like education that are going to help us grow”

” These are bills that have already been racked up, and we need to pay them. So, while I’m willing to compromise and find common ground over how to reduce our deficits, America cannot afford another debate with this Congress about whether or not they should pay the bills they’ve already racked up”

 “It would be a self-inflicted wound on the economy. It would slow down our growth, might tip us into recession. And ironically it would probably increase our deficit. So to even entertain the idea of this happening, of the United States of America not paying its bills, is irresponsible


I don’t want to be called a “hater” but do these comments make any sense? Do these comments  sound like they come from a person who has any understanding that the free market funds the Government and not the other way around? He can’t possibly believe that Government produces everything and hasn’t quite figured out how to distribute it in a fair and equitable way, can he? People like him are caught in a catch 22. They do understand that the free market produces everything, they just don’t like how it is distributed. They try to walk a tight rope between letting the market have enough freedom to continue producing the wealth to sustain or grow our standard of living, on the one hand, and confiscating and redistributing what has been produced, on the other. If taken too far, this confiscation and redistribution will destroy the very free market that produces what they confiscate. This is a parasitic relationship, and at some point if the parasite grows to big and kills the host, it kills itself. Just like  production comes before consumption, as we have discussed in a previous post, so to free market production comes before Government confiscation. If we in the free market fund the Government, how can the Government be more important than us? Quite simply it can’t, but we have slowly started to believe this as Government has grown and intervened in every facit of our lives. We have to change this way of thinking about Government if we are to remain free men.

Related article

“The World Of Tomorrow Demands Private Property Of The Means Of Production”, by Dusan Potrovski at Mises Institute of Canada.

Here is a quote from the article, “Poor insights into economic truths have prevented Man from maximizing the potential of his technological state. Technology has, much like the market system (capitalism), been unjustly blamed for the outcomes brought upon by government intervention, and economic cranks like Krugman are only perpetuating these misconceptions. Time and time again the free market in a system of private property of the means of production has proven to be not the best, but the only means toward progress and sustainable prosperity. So it has been, and so it shall be for as long as there is a state of scarcity.”

Explore posts in the same categories: Econ. 101, Government and Politics

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