Government Produces Nothing, Ever

Can government spending contribute to macroeconomic stability and the higher productivity of labor? Many people say yes, because they believe that government spending can stimulate the aggregate demand and contribute to the accumulation of capital if it finances large public investment projects.

In one of my previous articles I argued (against the still-prevalent view, largely informed by Keynesian economic theory) that government spending, far from being an appropriate means to counteract economic downturns and unemployment, always and everywhere exacerbates the very economic problems it is called upon to solve.

In another article I tried to show that it is precisely the governmentally sheltered fractional-reserve banking system (with or without the institution of central banking) that has always been the source of fluctuations in aggregate demand.

Wladimir Kraus

A lot of good points here. Every refutation of Keynesian economics seems to me to be a good thing.

This quote from von Mises bears repeating:

The conduct of government affairs is as different from the industrial processes as is prosecuting, convicting, and sentencing a murderer from the growing of corn or the manufacturing of shoes. Government efficiency and industrial efficiency are entirely different things. A factory's management cannot be improved by taking a police department for its model, and a tax collector's office cannot become more efficient by adopting the methods of a motor-car plant… [N]o reform could transform a public office into a sort of private enterprise. A government is not a profit-seeking enterprise. The conduct of its affairs cannot be checked by profit-and-loss statements. Its achievement cannot be valued in terms of money.