The government itself in USA and Europe is now half of the entire economy. That means one in two individuals, directly or indirectly, are employed by the government rather than the competitive private market.
This state of affairs is unprecedented in the west. As late as in the 1950s, government spending accounted for just 13.4% of the GDP in USA. In UK it reached 20% in the 1920s just as the empire was starting to crumble.
Since then, capitalism has been in only one direction, a bigger and bigger government, to the point in France and Belgium, as well as Greece, Norway, Austria and Italy, bureaucrats now account for 60% of the economy.
The private sector, and thus capitalism, is shrinking by the day as a percentage of the economy and with it, freedom is shrinking too.
That’s because the government now daily picks winners and losers in who it awards contracts, with those that gain such contracts having a decisive advantage.
The government in addition is a monopoly and comes with all the problems of monopolies: poor service at a high cost. That translates to stagnation.
The member states of Europe as well as the United Kingdom, Canada and Australia all have seen zero growth in an entire decade with their economy actually slightly smaller this 2021 than it was in 2010.
That’s a devastating state of affairs, and while USA has doubled its GDP since, that’s only because of five companies that are now worth $10 trillion. If we exclude Facebook et al, the United States has also stagnated.
We can all see this. Houses are too expensive. Having children is expensive. Two parents working still barely provides when our fathers could buy a house as a single earner.
Astonishingly, the current dominant answer to the problem seems to be more government. Taxes are set to go up. The rich are the problem we’re told. They’re not giving the government even more hundreds of millions or billions. They’re not making the public sector even bigger to engulf the entire economy.
At least then we’d be able to actually call it what it is, communism, as we are no longer in a capitalist society but under socialism at best and in some countries verging on communism itself.
That’s because once the government crosses 40%, then the private sector is no longer dominant. At 50%, the government starts calling the shots on the economy. At 60%, the government becomes dominant. Thereafter, that dominance moves towards total.
With so much power, problems arise not just on the economy itself, but also due to an increased authoritarianism from the government as once it becomes more and more economically powerful, it can get away with more.
This leads to stagnation and if it continues, it will lead to regression where the economy shrinks either literally or relatively to more free countries.
That happens to be China on this measure. They were just 20% of the economy in 2010. Now that’s grown to 37% and their government has become more interventionist, so that may change for China too.
Saving Capitalism
The government is more and more funding innovative startups through grants with that being something that finds public support, but that the government has to do it shows there’s something wrong.
The capital in capitalism stands for capital investment. However, capital is prohibited from investing in startups.
We could write an entire book on how this prohibition is at the root cause of all problems because startup ownership is raw power as most will fail yes, but those that succeed have the potential of even revolving the carousel.
As we understand it the prohibition isn’t total in theory. Anyone can invest up to $2,000 without restrictions, but unfortunately they have to do so through a platform, with the platform itself then becoming the bureaucrats.
In practice, the prohibition is total. There isn’t one stock traded product that allows you to invest in entities whose focus is investing in startups, in Venture Capital (VC) companies.
Such VC companies are instead private boutiques of sorts that tend to require a minimum investment of $1 million to $5 million.
So we couldn’t buy Lilium before it went public. We can’t buy Datarobot currently, and are reduced instead to speculating whether it will merge with AGCB.
This is burning wealth through opportunity cost. Multiply that by millions or hundreds of millions, and of people not money, people who may stumble on something, people who are affected by something or deeply interested in something and zoom focus on it. Imagine all those decisions and how much wealth it could create if there is no capital prohibition in capitalism.
We’d lift all such investment prohibitions in their entirety and replace them with a well funded criminal capital office that has the power to put scammers or fraudsters in jail, so turning on its head the current guilty until proven innocent where it concerns capital formation into innocent until proven guilty.
There’s more risk you might say, but there’s also more reward. Why should the government be the one taking the risks through our taxes when we can invest that money ourself and way better since we are legions, rather than some bureaucrats.
Needless to say in this space we have lifted such restrictions in practice. Bureaucrats might bark about it, but we can’t hear them anymore because we think those long dead men of 100 years ago were actually wrong, and worse were self-interested, in placing such investment prohibitions on all but the very rich.
There should be capitalism for all and there should be more capitalism and there is in this space, and there will continue to be because we can ignore them and will ignore them as it’s just too important for freedom itself.
But there are many other fields. In healthcare there is a revolt of sorts through biohackers. As it happens, they were the first to discover a vaccine, putting pressure on corporations which then ‘broke record’ in coming up with one within a year. If it wasn’t for the biohackers, would it have taken the usual two years instead?
Competition keeps you on your toes and the most competitive entity is the startup which translates more to the individual with an idea.
We need a lot more such men and women to both tackle problems and offer pleasures or entertainment. The government can never be a replacement for them because the government tends to care about public opinion and as Ford said, if he had asked the public, they would have wanted a faster horse.
Removing investment prohibitions is thus a low hanging fruit way of returning to the proper growth we used to see before 1933, of 20% or 10%, instead of the zero percent we enjoy.
That can change the balance between the public and private sector in the best way, by the private sector growing sufficiently fast for it to become a bigger percentage of the GDP.
Another way would be reforming taxation so that investment is encouraged, which in combination with capital liberalization can potentially do wonders.
Ironically we think the government should invest more not less, it should put up solar panels on every roof for example, and charging stations in all ways, and should prepare for electric flying cars that now already can go on the air for 150 miles, and should also invest in a lot more trains. But crucially, we think this should be funded by relying on the public to fund the deficit through buying bonds, rather than through taxation, either direct or indirect through printing.
We hold these seemingly contradictory views because we think ultimately the way out of the current problems is through growth which we think is coming because a lot of innovative development in drawing boards over the past two decades is on its way to production.
But we also think seeing the stagnation of the past decade, it is time for the government to become a bit more radical, starting with a review and reform of the many industry regulators that are often operating on very outdated frameworks.
The approach of legislating ones way out of ‘problems’ should also reverse so that the government gets out of some aspects where it shouldn’t really have a say. Investment prohibitions is one we have discovered, but we imagine there’s an equivalent for every industry.
In short, we need liberalism. That’s what gave us growth, that’s what gave us all the nice things, and that is what we know works far better than anything else.
Without liberalism, and if the above steps are not taken, the risk is real of economic regression which will come with very big problems.
Thus all this isn’t an academic matter, but a pressing matter. In this space we’ve had the privilege of seeing it in action too. There was hardly any innovation before ICOs. During the ICO-ing period, there were some problems but with hindsight it is clear such problems were way overshadowed by gains and benefits.
That ICO-ing period never quite ended, it just changed names, because it can’t end and it can’t be stopped. We’ll Nakamoto if we have to or worse, we’ll step aside and let the peasants shoving on our backs march.
And look at this space now, we’re saving even art. This is what’s in store for all industries if they too by hook or crook gain investment liberalization.
Source: https://www.trustnodes.com/2021/11/06/sleepwalking-into-communism-or-saving-capitalism
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