Government - Thief, Liar, Destroyer
by Ethan Glover, Fri, Nov 01, 2013 - (Edited) Fri, Nov 01, 2013
TED videos are great, a lot of wonderful ideas come out of them. Unfortunately, it is mostly a statist audience that seeks government favoritism and “funding” for their pet projects and lifestyles that for the most part can not be supported by free and mutual transactions. Normally, that doesn't take away from some of the brilliant minds that come across the stage. In the case of Mariana Mazzucato, this becomes embarrassingly obvious. Her 14 minute speech called, “Government – investor, risk-taker, inventor” is a misinformed talk of the greatness of the government as an entrepreneur. Give the video a watch for yourself:
First, and as always, is the issue of vocabulary. Mariana uses the word “juxtaposition” to describe how people think about public/private institutions. She says that when someone claims the state holds back private schools with free public schools, this is a juxtaposition. When looking at the Commonly Confused Words List [List Deleted] this doesn't make a lot of sense. However, I believe that in terms of “logical fallacies”, she is trying to say this is just a correlation but not necessarily true. I don't know where you get the idea that when governments force people to pay for one company it's not a distinct advantage. The fact that the poor and middle class can't pay for both public schools and private schools is basic economics, not a “juxtaposition”, which just means being placed together anyways.
All Hail The State
Mariana, for an economist, doesn't show a lot of understanding of cause and effect. She says that the government is necessary for market corrections and the solving of market failures. By this logic, what if I were to say that I had a mud pie company and, surprisingly, it wasn't doing so well. Nobody is buying, but I persist, I know my mud pies are the best in the whole darned country! If my company fails and I start going into debt because I can't pay my bills, what happens when the government bails me out? This is not a correction. It is a misrepresentation of consumer demand. Maybe, just maybe, people don't want my disgusting mud pies and don't want to fund my crazy business. A great question was once posed over at the Daily Anarchist as part of “20 Hard Questions!” (#8). It asked about when banks go bankrupt, and if there are no government bailouts, how can people be secure in their money? The answer I gave him said that just because there is no government insurance like the FDIC, that doesn't mean private insurance can not exist. The better coverage a bank has, the more customers it can attract; however, it may have to charge higher prices based on that coverage. This is how business and competition works. When there is no competition, and instead forced monopolies, the services you end up with are sub-par, and when you utilize corporatist favoritism you get self-serving politicians who don't have to worry about the demands and complaints of the “customer”. When bailouts, taken by force through taxes, are used to allow companies to take bigger risks, those market failures are done at the expense of the taxpayer while the corporations generally get off scot-free.
Of course, that's not to say if the government did not fund the popular programs that Mariana mentions, they wouldn't exist. But I'll get back to that later. For now, let's finish up these so called “necessary functions”.
Mariana also believes that the government is necessary to solve the problem of pollution. This is not an issue of the evil private companies and citizens. It is an issue of responsibility. Who is responsible for keeping public space clean? Who even cares? In truth, not one person is responsible, and nobody really cares. If the thievery of the “government” were to be removed, that leaves room for property to be taken privately and to be traded and cared for on a commercial or personal basis. The tragedy of the commons is a subject I have covered many times on this site and the two articles that cover this to the greatest extent can be found here and here. [Link Removed] When people, especially companies, own their own land and can be held truly accountable for damaging the property of others they are more inclined to take care of it. Farmers take great care of their land because it must be reused over and over. Raising free range cattle involves owning a lot of land so that the cows may roam and eat grass in a rotation. Or to put it in other terms, they eat the grass down in one area and move on to the next, in the meantime the grass grows back in that first area. When we then look at something like logging in the Amazon forest, this is done on public land. The Brazilian government “owns” that land and hands out contracts to companies. If they want to get in and make their profits they must do that as fast as possible and do as much as possible simply because if they don't, someone else will. If the land were to be owned, it would be recycled and cared for because stripping land is bad for business.
So what does all of this have to do specifically with pollution? Let's use the example of the classic evil smoke stack factory. If I were living in a great area with my own house and a bit of land, what happens when this evil factory moves in and the smoke begins damaging that land? I would inform the owner that he is damaging private property, and if he ignores that simple fact, we go to court. (A private one of course.) If, on the other hand, the factory is already in its place and I decide to move in next door and build a house, is this the same situation? As an adult, I should have the responsibility and care to pay attention to and weigh the risks of moving into any area. If that factory is already established, I should clearly be able to see the potential harm it can do to my property, or the damage it has already done to that property, and take personal responsibility for the decision to move in. The same goes for bodily damage. If I can prove that the smoke is damaging to my body, it again comes down to who was there first and whether or not I knew the risks, or at least saw what I was getting into. Government solutions to pollution, as always, involve forcefully taking money from people to build unwanted projects such as wind farms and artificially driving up the costs for the technology (by way of fake demand) and the surrounding land. These programs are a burden and do no real good. Even if we ignore the fact that science has shown us that humans have little to no impact on the overall environment of the earth, we must consider that when people are allowed to, and must take care of their own land instead of abusing the commons, the “health of the land” does indeed improve in the general sense. There will be a select few that allow their land to degrade and thereby destroy its value, but really that is only an opportunity for real estate investments in the future. (Wealth creation.)
Mariana later concludes with more points on pollution and “going green” and those points will be addressed in due time. To wrap this idea up, I can't help but point out a particularly funny sequence of events in the speech. Almost directly after saying that the state is necessary because without it, markets would fail, she says that the state doesn't just fix market failures. It shapes the market. To which we must say, “Maybe if the state wasn't so busy playing play-dough with businesses, the market could have the freedom to fix it's own failures by adjusting for it.” Nevertheless, we move into the idea that the state is a venture capitalist because it funds new technologies and companies.
You Didn't Build That!
So, here's the question followed by the hypothesis. Why is it that all the “good” high-tech companies such as Apple, Google and Facebook have all come out of the United States? This is not because of a large private sector, but because of a large public sector. The first thing that needs to be pointed out is that good is an opinion. When I lived in Germany, I saw that Vodafone was a damned popular cell phone company. Maybe the only one. Speaking of Germany, what's with those fast cars? I bought a BMW 320i, which is by no means an impressive machine by their standards, but by my standards? Oh my god! I like to go fast! Is this because of the lack of a public sector? Or is it because of culture and lax regulations on speed limits? That is, maybe it is the result of the lack of a state and a larger private sector. Moving along with this theme, how can we not look at Japan and say, “What about those guys?” There is no doubt about Japan's general superiority in the technological realm. This too comes from culture. Now it can be said that the level of free markets in Japan and even Germany are still lower than that of the United States. Of course, according to the Heritage foundation, both Japan and Germany are on the rise while the United States is falling. I'm not one to throw statistics around because, in the end, a point or argument must stand on its own. External facts, separate from the current logic, are only extra sources for help. That being said, the point here is that many countries are doing many things better than the United States. The examples of websites used only show a limited amount about the United States as a whole. As always, economics is a praxeological science, not an objective one. You can not simply point to a few factors and ignore the rest of the world and the rest of all humans. There are too many factors affecting everything to point to one country and say, “This is the best.” It is of course even more ridiculous to say, “This is the best, because of it's large public sector.” Especially when you are talking about a still mostly free market (compared to others) and a government that puts a vast majority of its loot into its military.
Mariana’s argument continues into the elements of the iPhone that was funded by government. Those include the internet, cellular communication, GPS, microchips, Siri and touchscreen. It must first be stressed that these systems were funded by the government, not invented by the government. The reason I point this out is to make sure people understand that government funding just goes to normal people. The government is just a concept that is enforced by a mafia. So, people invented these things with stolen money from the mob. The ideas for these things emerged from normal people. They obtained government funding because those people understood that was where they were going to get the most, and there is the bonus that there are no loans but instead “grants” that don't have to be paid back. Just because something is funded by theft, that doesn't mean theft is superior to the free market. From there, it must be understood that if that funding didn't exist, those people with those ideas would simply have to go elsewhere and maybe have to weigh the risk of the investment when taking a loan. That's it. That's all there is to it. I'm confident that all of those things would exist today if the government had never existed. In fact, I think the technologies would have come into being much sooner because in a free market people are able to think and act freely without intervention or approval. Not only that, but there is no red tape to fight through, just to gain the privilege of doing some research or selling a product. Plus, without government theft there would be more funding to go around due to the fact that there isn't a massive and inefficient bureaucracy to fund. We can think of examples like this all day. It is only a matter of considering as much as possible and considering that praxeology element.
The same logic can be applied to the NIH (National Institutes of Health) which supposedly provides funding for 75% of the “revolutionary drugs”. This is not a great accolade considering the state of the pharmaceutical industry. Drugs and the money from said drugs rules medicine and the health industry. The government knows this, and that is exactly why they have such a high stake in it. War, death and disease is profitable when the organization that creates it is the one that cures its symptoms. While easy cures for the most common ailments exist with little scarcity doctors and hospitals still poke, prod, overtest and run every individual through the wringer just to avoid a small lawsuit. Lawsuits that are made possible by oversensitive government regulation. Government funding for medicine, just like with public schools, drives up the prices of medicine through false demand. This is only magnified by the recent Obamacare which is tripling and even quadrupling healthcare costs for millions of people. All under the disguise of using the government to drive down costs. Yes, the government funds drugs but the kind of drugs that have no nutritional or curing value. When a young boy acts like a young boy the public school calls it ADHD and throws some Ritalin down his throat, destroying his mind, his capacity to think and ability to learn. When the free market is allowed to work its magic, that is, when people are allowed to make their own decisions and support what they see as supportable competition is created, prices are driven down and morality expands. Before the government decided to solve the last healthcare crisis, Americans were allowed to sign up for fraternal aid societies and pay about $30 per year (in today's money) for emergency health coverage. Things like checkups and regular visits were paid out of pocket at very low costs.
To finish off her ideas on high-tech Mariana repeats the state venture capitalist lines and notes that it is funding new revolutionary things like nanotechnology. Not only is nanotechnology revolutionary, but according to her it is a “hard technology”. All technology is “hard” in its beginning stages, but that is beside the point. Voluntary funding is hard to come by when the average savings rate is 0%. That is of course opposed to the pre-income tax era in which it was 50%, and interest rates actually gave some incentive for investing. The United States government can not afford to fund new technologies, not only because it is $17 trillion in debt but because it owns no money, in fact, the United States doesn't exist. It is defined by an imaginary border. Who can afford to fund these programs? An unmolested public interested in real investments rather than cheap savings accounts that grow 200% times slower than an inflation rate created by the federal reserve. As I noted before, nanotechnology would probably be much further developed considering the high amount of interest and hope in it.
Worship Over Logic
Between making bad arguments Mariana likes to give rants about how much we should love the state and all that it has given us. Scientists generally look at things like religion and wonder why people believe in such things and devote so much time and energy into converting people when they know deep down it is destructive behavior. Unfortunately, many scientists are often closest to and most dependent on the government teat. Today's economists are the worst representation of the social sciences often totally ignoring truth and logic just to keep an unfulfilling job. Mariana says that most people think of the government as “boring” and “necessary” while it stunts the possibilities of private relationships. Yes, yes it does. This is a major and important factor that can not be ignored. The state forces people into unwanted transactions or relationships pretending it knows best and pretending that it can create perfection in a naturally chaotic universe. Most people recognize that they seem to take care of themselves better when they do it. This is for the simple fact that only they know what they need and want. However, most people don't take this far enough. They only think the government is necessary thanks to 12–16 years of indoctrination under a state curriculum specifically designed to create the illusion of necessity. The fact that this takes nearly two decades says a lot about how unnatural this is. Allowing a small group of individuals total control over what you can and can't do is an amazing feat for that small group.
Mariana expands her point by saying that there is an assumption that all the government is doing is taking the risk out of the market and moving risk on to itself. First of all, there is no risk in stealing people's money and giving it away. The government does not earn it's money, it steals. I'll repeat that as many times as it takes to embed it in people's minds. Second, a market needs risk. Risk is a measuring stick that filters out the bad and wasteful projects from the good. Entrepreneurs and scientists need to weigh the risks in order to understand whether or not something is worth it or not. Asking for $1m in loans to build a mud pie company is obviously high risk, so much so that nobody should be putting any money into it or taking it seriously. Nanotechnology, on the other hand, would be a great thing to invest into assuming there were some reasonable estimates and shows of progress, and of course the eventual capitalization of the technology. Today, it is illegal to directly invest in companies if you are below a certain worth. The worth number varies from state to state and project to project but can range from $500,000 to $2m. Things like Angel Investing are thus a special legal privilege for people with a certain arbitrary amount of money. Instead, the normal person goes to things like KickStarter to “invest” in order to get a consolation prize like a t-shirt or DVD. The government is not taking the risk out of the market. It loses most of the money it invests into a vacuum of fake demand and inflation. Instead, it takes away the privileges of its cattle to take calculated risks by their own decisions in the hopes of that turning into a return investment.
Further in the speech the point is made that the assumption that the state isn't good is a self-fulfilling prophecy. Putting confidence in public funding is a good thing. Mankind has been trying government for thousands of years and consistently failing. The assumption that public funding is good is the reason why publicly funded projects are created in the first place. When they fail, and people lose confidence should they just continue to think its all a good thing? If your internet goes out consistently, do you just assume everything will be alright? Do you call them up and offer to pay more money? Or do you find another, more reliable company? The government has had a million second chances. It has proven itself to be untrustworthy and unworkable. The free market, where allowed, has created the growth that it feeds on. When socialist systems collapse, it is normal people who rebuild. It is the sociopaths who then take it over and try to find the new balance where they can live their disgusting lives while allowing just enough capitalism to keep it going so that they may pass it on to the heirs to their thrones. There is no assumption that the state is bad. There is a knowledge that the state is bad. The assumption is in its benevolence and goodness. People like Mariana Mazzucato are like the abused wife who keeps crawling back to the abusive husband, thinking this time it will be different and telling all her friends and family that they are just “assuming” he is a bad guy when he's really not. If public funding has great rewards, mankind has yet to see it. What we see are a few consolation prizes such as pothole covered roads and a total lack of a return on investment.
Only towards the end does Mariana really let her green flag fly. I've already mentioned her complaints about pollution and explained the free world solutions to actual pollution, not the non-existent “general degradation”. While re-stressing that the state can be used as an investor to fund various projects, or to put it in more accurate terms, used to steal money from people to fund what she thinks is super cool, Mariana uses “green technology” as her final and concluding example. She says that if people allow more intervention from the state in things like green technology public schools and Silicon Valley can benefit from this state funding, because they have not. Isn't it curious how the final sentence of this speech totally negates the entire first half? First, government is the reason Silicon Valley technology and companies exist, then all of the sudden, it has not benefited at all, and if it is to benefit, we need more state intervention.
It is sad that people like Mariana have a stage to speak on and are taken seriously. What is even worse is the ever growing queue of items to respond to. As the idea of freedom grows, so does that of tyranny and state worship. It's almost impossible to keep up.