Seeing and Not Seeing

After reading “That Which is Seen and That Which is Not Seen: The Unintended Consequences of Government Spending”, I had a couple of days of thinking…maybe the government shouldn’t spend money at all! Maybe we should strive for a purely capitalist society, and trust the market to take care of things. Well…I am no economist, obviously. For every economic argument ever made, there seem to be ten or twelve counter-arguments.

I liked quite a bit about what Bastiat said. I agreed the most with this statement he made, that summed up much of the essay, for me:

“Far from entertaining the absurd thought of abolishing religion, education, property, labor, and the arts when we ask the state to protect the free development of all these types of human activity without keeping them on the payroll at one another's expense, we believe, on the contrary, that all these vital forces of society should develop harmoniously under the influence of liberty and that none of them should become, as we see has happened today, a source of trouble, abuses, tyranny, and disorder.”

I like this, and I think he's right. But right away, I also thought about free market characteristics that don’t protect us from all “trouble, abuses, tyranny, and disorder.” Unregulated or poorly regulated industry has proven to result in polluted water and air, financial misdeeds, and other unintended consequences, themselves. Better government intervention could have reined in or prevented the poor lending and insurance practices that have led to the current economic recession, for example. Not all un-restricted, market-regulated industry is a good thing.

As I read this essay, I kept thinking of some friends of mine from Sweden (who live in western Washington) who are always telling me how great Sweden is. Health care and education, including college and university tuition, are all free to every Swedish citizen. They are deeply and understandably proud of this, and Sweden is a prosperous country with many advantages. My friends are distressed at the state of America’s economy and education system and tell me that our government has failed us because it has failed to provide us with the basic rights that Sweden’s government has been delivering for many years. And yet, industry in Sweden can’t provide all jobs that Swedes need, and some would argue that at least part of the problem is the high tax rate on citizens that discourage economic development while they enable the health care and education in which my friends take pride. Also, Sweden exports lots of Swedes to the U.S. and elsewhere in search of better opportunities for employment than can be found in Sweden. (I think that’s an unintended consequence of government spending, but the small size of the country could have something to do with that, too.)

Even though I agree with Bastiat’s arguments about the dangers of government spending, there are things that the U.S. has funded that have (arguably, of course) made the world and the U.S. better. The Library of Congress comes to mind; the Smithsonian Institute; the military, and lots of other things that make our country prosperous and free. One example of how U.S. spending worked to help the world: the Marshall plan, that put $17 billion into the economies of 16 European nations over 4 years, of which only about $1 billion was repaid. It was a self-interested gift, of course; the U.S. wanted the desperately impoverished European nations wrecked by WWII to become wealthy enough to start buying U.S. goods again, and also wanted to beat back Communism. But I love what George Marshall (Secretary of State at the time who proposed the plan) said about why the U.S. should contribute this money to its allies:

“Our policy is not directed against any country, but against hunger, poverty, desperation and chaos… Its purpose should be the revival of a working economy in the world so as to permit the emergence of political and social conditions in which free institutions can exist.”

That's an inspiring bit of statesmanship, to me. Europe would have recovered eventually even without the Marshall Plan, but many lives were saved and recovery was hastened because of it. (Oh, and Sweden, you got 250 million of those dollars. You’re welcome.)

I’m not saying that we could have universal health care and education in the U.S. if not for the Marshall Plan. It’s something we can’t see, Bastiat would say. (And he wouldn’t want tax dollars to have been spent on health care and education, anyway.)

In the interest of showing that the U.S. spends very tragically as well as heroically, here’s an example of government spending that went awry in a big way – the war in Vietnam. From Wikipedia:

“Between 1965 and 1975, the United States spent $111 billion on the (Vietnam) war ($686 billion in FY2008 dollars). This resulted in a large federal budget deficit… More than 3 million Americans served in Vietnam. By war's end, 58,193 soldiers were killed, more than 150,000 were wounded, and at least 21,000 were permanently disabled. Approximately 830,000 Vietnam veterans suffered symptoms of posttraumatic stress disorder. An estimated 125,000 Americans fled to Canada to avoid the Vietnam draft, and approximately 50,000 American servicemen deserted.”

Talk about unintended consequences.

For every dollar the government spends, there are a hundred thousand opportunities lost. That’s the nature of making choices with money, for everyone, not just governments. It’s one more reason, if we needed one, for voting carefully; the people we put in office decide where, how much, and for how long the government spends. I’m proud that the U.S. has the resources to contribute to disaster relief around the world, and that our military does so much good in so many countries. Those things are expensive, but I’m glad that my tax dollars go there. I’m not so thrilled about other things that the government spends money on, so I have to keep voting my conscience and choosing leaders that make spending decisions with which I can agree or accept.

If this is a bit rambling, it’s just because there’s so much that I’m still trying to synthesize about my opinions regarding government spending. I find that there are so many ways to look at these issues, there’s little chance that I’m going to be firmly convinced of anything anytime soon. There’s much, much more to read on this subject, and I read a little of Bastiat’s more famous work “The Law”, which addresses the particular problems of socialism. It’s really interesting, and I’m probably going to read more…but I don’t anticipate ever becoming an economist.

Juli