The Motley Fool Discussion Boards
Investment Analysis Clubs / The BMW Method
|Subject: Re: Why the Stimulus Package Can't Work||Date: 2/24/2009 11:48 AM|
|Author: Goofyhoofy||Number: 35340 of 41783|
The problem with government is that it is totally incapable of creating supply, that is the job of free enterprise.
This, of course, is completely wrong. The Erie Canal was created by government. Oh, private enterprise tried, and failed, a half dozen times. When government got behind it, it opened up a new transport system which brought midwestern flour to New York, and New Yorkers to new lands in Ohio. The price of bread dropped by 90% as transport became so gigantically efficient.
Along the way it produced thousands of jobs for people digging the big ditch, and then monitoring the barge traffic, running the locks, collecting the tolls, and so on. That was a stimulus package for the 18th century which paid dividends for the entire economy for a century afterwards.
Anybody want to argue that we are better off with a Panama Canal than without it? Want to guess whether it was private enterprise or government which managed to make it happen?
Hoover Dam, anyone? The Grand Coolee? The TVA? That one is of particular interest because it pitted private enterprise against a government bureaucracy. Prior to the TVA, 30% of the people living in that area contracted malaria. The many rivers which make up the current system were impassable, and of little use for energy production or much of anything else.
The private power companies were entirely uninterested in developing more production capacity; they had all they needed to serve a handful of wealthy enclaves, and it was too expensive to run all those wires to the poorer population, so they didn't. Along came the TVA, along with government mandated rural electrification programs, and within a few years everyone had access to the miracle of electricity. That created a virtuous cycle with millions, instead of thousands, of people shopping for refrigerators and washing machines and lightbulbs and all the other gizmos we now take so for granted.
I know, I know, private enterprise would have done it "eventually", I am told. Edison invented the lightbulb in 1880. The TVA came about in the 1930's. How long should we have waited, particularly since the private companies went about ruthlessly enforcing their nascent monopolies by cream-skimming and holding the best customers away from anyone else who tried to compete?
No, this is just another ill informed rant by someone who takes it as faith that everything government does is wrong, and that the market always gets it right. Baloney.
Spending money at Mac Donald's circulates the money back into the economy faster than paying Lockheed to pay Raytheon to pay a university to do research on a fuel valve for the space shuttle.
See what I mean? The money at McDonald's pays the wages of burger flippers and farmers who produce the meat and the cows. The money spent by Loockheed pays the salary of researchers and fabricating plants which produce the test equipment for the fuel valve. How is that any different?
Well, for one thing, McDonald's R&D is a pittance, and the long term benefits are that we might get a veggie wrap someday instead of a Big Mac on the menu. The Lockheed money encourages engineering advancements which may show up in artificial heart valves, medicines grown in zero-gravity, smaller and smaller electronics, satellite deployment for new technologies such as GPS, and lots of other things. You might want to think of it as the Erie Canal of space, a piece of infrastructure which geometrically expands the possibility of humankind in the fields of medicine, communications, media, electronics, engineering, and so much more.
And McDonald's you might want to think of as "getting tastier french fries."
Many billions of dollars have already been given to the banks and they disappeared into a black hole.
Well, what didn't happen is that the worldwide financial system didn't collapse, which some people might consider a pretty good thing. It has in Iceland, it's about to in Ireland, there's a reasonable prospect of it happening in parts of Europe, and if we listen to people who say "Oh, let it all fall down" we shall be looking at the prospect of rebuilding the World Trade Center after it has already fallen to the ground, rather than being able to extinguish the flames expeditiously and rebuild the structure while it is still standing.
Why should new dollars have a different fate?
Maybe they won't. Then again, since you seem inclined to hold the gun to the economy's head and pull the trigger, maybe they will. It's like russian roulette. You keep doing nothing long enough and it all comes tumbling down. How quickly we forget the Down-500 point days last fall when Congress was following your advice, when Lehman failed, when government did nothing.
It appears that some people refuse to learn, they are so encumbered by naive political theory that they are incapable of looking around and seeing what's actually happening in the world.
|Copyright 1996-2015 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us|