The econ­omy of mass pros­per­ity

The next phase of cap­i­tal­ism is com­ing, if its evo­lu­tion is al­lowed

The Washington Times Daily - - COMMENTARY - By Alexan­der G. Markovsky and Her­bert Lon­don

Af­ter propos­ing $1 tril­lion in­vest­ment into in­fra­struc­ture, the Trump ad­min­is­tra­tion is har­ness­ing the brain­power of renowned ex­perts to un­lock the in­sol­u­ble prob­lem of how many jobs will be created for each bil­lion dol­lars of spend­ing. While stress­ing the ob­vi­ous, the ad­min­is­tra­tion is miss­ing the im­por­tant point.

The pur­pose of cap­i­tal­ism is not job cre­ation. The pur­pose of the cap­i­tal­ist econ­omy is to cre­ate wealth. Em­ploy­ment and the sub­se­quent dis­tri­bu­tion of the spoils of an econ­omy are byprod­ucts of cap­i­tal­ism.

Since its in­cep­tion, cap­i­tal­ism has been in a per­pet­ual state of evo­lu­tion, from the In­dus­trial Rev­o­lu­tion that ig­nited an econ­omy of mass pro­duc­tion to the econ­omy of mass pro­duc­tiv­ity to, most re­cently, the econ­omy of mass con­sump­tion. Each sub­se­quent phase of cap­i­tal­ism has been as­so­ci­ated with in­no­va­tion, rise of pro­duc­tiv­ity, and the im­mense cre­ation of wealth.

Our cur­rent eco­nomic pe­riod was fu­eled by a huge ex­pan­sion of credit, which tem­po­rar­ily has taken the econ­omy be­yond its lim­its. Through ex­ces­sive bor­row­ing, con­sumers have spent far more than they can af­ford, and the ex­pan­sion of so­cial pro­grams and fu­tile at­tempts to stim­u­late the econ­omy via gov­ern­ment spend­ing have left the coun­try with $20 tril­lion of debt. At this point the con­sumer is broke, the coun­try is broke, and the econ­omy of mass con­sump­tion is on a res­pi­ra­tor and can­not be re­sus­ci­tated by fur­ther spend­ing. If not the spend­ing, what then, is the cat­a­lyst that will take cap­i­tal­ism to its next phase of evo­lu­tion?

A host of very sig­nif­i­cant de­vel­op­ments over the past 20 years in­di­cates that we are wit­ness­ing the dawn of a new phase in this evo­lu­tion: the era of mass pros­per­ity.

What dis­tin­guishes this phase from the pre­vi­ous ones is that enor­mous sums of money have been ac­cu­mu­lated by cor­po­ra­tions and pri­vate in­vest­ment funds. Amer­i­can cor­po­ra­tions have amassed tril­lions of dol­lars on their bal­ance sheets; Ap­ple alone has more than $200 bil­lion in its ac­counts. This mass of liq­uid­ity look­ing for mar­kets to in­vest in has set up an in­ter­est­ing dy­namic.

Un­til re­cently, only the gov­ern­ment could han­dle projects on the scale of the Hoover Dam and the in­ter­state high­way sys­tem, but now large cor­po­ra­tions and in­vest­ment funds have suf­fi­cient re­sources to build projects on any scale. Hence, there is no im­per­a­tive for the gov­ern­ment — fed­eral, state or lo­cal

— to fi­nance and main­tain mod­ern in­fra­struc­ture when pri­vate cap­i­tal is avail­able to do the job.

Pri­va­ti­za­tion of the in­fra­struc­ture will open a new, mul­ti­tril­lion-dol­lar fron­tier for cap­i­tal­ism, and its ef­fect could be mas­sive. It has the po­ten­tial to cre­ate a long-term eco­nomic ex­pan­sion that will dwarf the scale of the Pa­cific Rail­road and Na­tional In­ter­state and De­fense High­ways acts com­bined.

The pri­va­ti­za­tion should in­clude sell­ing the ex­ist­ing as­sets and cre­at­ing an en­vi­ron­ment con­ducive for pri­vate en­ter­prises to BOO (build, own and op­er­ate) new and ex­ist­ing roads, bridges, tun­nels, treat­ment plants, air­ports and other fa­cil­i­ties. Tolls will be col­lected to de­fray op­er­at­ing costs and re­tire debts. Rev­enue from the sale of ex­ist­ing as­sets can be used to re­duce the na­tional debt. Pri­va­ti­za­tion would re­lieve, in large part, fed­eral, state and lo­cal gov­ern­ments of the bur­den of fund­ing, con­struct­ing, op­er­at­ing and ad­min­is­ter­ing the in­fra­struc­ture, thereby re­sult­ing in smaller gov­ern­ments.

Just as in any field of en­deavor, bring­ing com­pe­ti­tion into a sec­tor of the econ­omy cur­rently mo­nop­o­lized by the state and lo­cal gov­ern­ments will spur in­no­va­tion and re­sult in greater ef­fi­ciency in pro­ject de­vel­op­ment and lower tolls and taxes. Gov­ern­ment-run projects have no in­cen­tive to keep costs down and are no­to­ri­ously de­layed and over bud­get.

Pri­va­ti­za­tion of the in­fra­struc­ture is a prod­uct of the spon­ta­neous evo­lu­tion of our eco­nomic sys­tem and, there­fore, is a his­tor­i­cal in­evitabil­ity. In­evitabil­ity, how­ever, some­times re­quires hu­man in­ter­ven­tion.

We should al­ways re­mem­ber that the gov­ern­ment’s job is to en­force the law and spend peo­ple’s money in a man­ner con­sis­tent with the per­ceived na­tional in­ter­est. It can­not pro­duce wealth, em­ploy­ment and the other at­tributes of a free so­ci­ety. That is the job of cap­i­tal­ism. Hence, we do not need to bor­row our way into pros­per­ity; we just have to let cap­i­tal­ism work. Alexan­der G. Markovsky, owner and CEO of Litwin Man­age­ment Ser­vices, LLC, is the au­thor of “Lib­eral Bol­she­vism: Amer­ica Did Not De­feat Com­mu­nism, She Adopted It” (Dog Ear Pub­lish­ing , 2016). Her­bert Lon­don, pres­i­dent of the Lon­don Cen­ter for Pol­icy Re­search, is the au­thor of “Lead­ing From Be­hind: The Obama Doc­trine and The Re­treat From In­ter­na­tional Af­fairs” (Lib­erty Is­land Me­dia, 2017).

IL­LUS­TRA­TION BY GREG GROESCH

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