Today I drove through DC, past a sign which declared that the delays were being caused by roadwork, and then past another sign which said that the roadwork was the result of the government “Putting America to Work” — a phrase which I had kind of hoped we left in the 1930s. Admittedly, roadwork is hardly the pyramids, but it all adds up.
Unfortunately, what it doesn’t add up to is actual economic growth; it just moves money around:
Everyone can be employed in jobs. We can all build pyramids. If the government builds pyramids, there is full employment but real income falls, growth of real income falls, and the general welfare falls. The pyramid building stimulates the brick-making and clay industries and it employs labor at the related chores, but the society uses up its productive capital stock to feed, clothe, and house us. When the government builds pyramids, it transfers capital from productive and potentially productive uses to unproductive uses. The product being produced, the pyramids, is not really in demand, and that is why it is unproductive. The return on the capital, the payback in the form of income, is insufficient to pay back the costs of capital that are being incurred. Hence, the pyramid building destroys wealth. The government may think it is creating wealth because it sees or measures employment and product, but these measures are illusory measures of overall wealth and value creation. There are many pyramids to see, but fewer loaves of bread to eat.
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