The Question

 

The America we know, built on freedom or government institutions?

Mitt Romney argues the “nation was founded on the principle of being a merit society, where education, hard work, risk taking, have lifted the individual, and they have helped lift …the entire nation.”

Ron Paul contends individual liberty is what made the country prosperous: I believe our country has been the greatest and most prosperous because we had a better understanding about liberty than any other country.”

  

Bailey writes in reason:

 

Adding up all of the natural and produced capital and dividing it by our population, the World Bank calculated in 2005 that our natural capital amounted to about $14,000 per person, and produced capital was about $100,000 per capita. Intangible capital was a whopping $627,000 per person. In other words, about 85 percent of American wealth consists of institutional and social capital, such as strong property rights, the rule of law, an honest bureaucracy, and an educated populace, that enable the process of entrepreneurial innovation and job creation in free markets.

 

Good governance underpins these things, but not all governance is good. Just as government can enable the voluntary creation of wealth, it can also impede and even destroy it. Consider the case of Venezuela where Hugo Chavez’s Bolivarian revolution has so impeded that country’s economic growth that increased total per capita wealth has fallen from $80,000 to $70,000 per person between 1995 and 2005. Zimbabwe under Robert Mugabe has even much worse record; total per capital wealth has dropped from $6,500 to $5,000 per person.

 

A new study for the Weidenbaum Center at Washington University in St. Louis reports that in constant dollars federal regulatory agency spending has increased from $15 billion in 1980 to $50 billion today. If every dollar of federal regulatory spending multiplies by $21 in compliance costs, that implies more than $1 trillion annually in regulatory costs to businesses and individuals. The IRS expects to collect $1.4 trillion in income taxes this year. Regulations can act as substantial barriers to entry for the startups that have historically been the source of job creation in the U.S. economy.

 

In his speech last week in Virginia, the president declared, “The point is, is that when we succeed, we succeed because of our individual initiative, but also because we do things together.” But all of his examples of the things we "do together" were government projects, e.g., building roads, the Golden Gate Bridge, the Hoover dam, fighting fires, public schools, and inventing the Internet. We can argue over whether or not these are services that can only be provided only by government. The crucial point that the president misses is that “this unbelievable American system” thrives chiefly on private enterprise, and that a lot of the government intervention that he favors is hindering rather than helping businesses and entrepreneurs create new jobs and more wealth.

 

Comments

 

Who built what?