Monday, June 18, 2012

A Subsidy Based Economy

So, what's the opposite of a market-based economy?

You guessed it.

Governors, even Republicans like Virginia's Bob McDonnell, love using economic incentives to attract businesses they think might add jobs or burnish the image of their state. And so they compete ruthlessly with tax breaks, special bond financings and whatever other tools they can dream up to lure corporations.  
The public sees this happening most vividly in the case of sports stadiums. But it extends to all different sorts of industries, especially manufacturing.
Now, don't get me wrong. I absolutely understand the value behind public investments to grow private enterprise. That's the basic theory of government being responsible for infrastructure after all - such investments support a market by establishing physical properties needed to maintain a marketplace.  I get that.

And I also understand that not every investment will be made back on behalf of the public. Some investments don't pan out.

But a constant contest to see who can bow and scrape the lowest to already-wealthy businesses, with taxpayer investments offered up as sacrifice again and again? How can the market do what it is supposed to under such circumstances? It can't, that's how. It stops being a market and starts being something else. It starts being people paying other people's taxes.

And eventually, when too much public treasure is the only thing propping up a fake market, you find yourself in a seemingly endless cycle of stagnant economics - where growth stops for most people, wealth is redistributed to the top, and government spends themselves into debt despite cutting services.

Sound like any place you know?