The Increasingly Complex Relationship Between Man and State

By Joel Bowman

01/11/11 Buenos Aires, Argentina – “Whatever is true in one form of words, is true in every other form of words, which conveys the same meaning.” – John Stewart Mill
Few and confused are the pundits lauding the vitality of the American economy. Worse still, many and confused are those who offer solutions.
More often than not, situations brought about by the wasteful ineptitude of the state are met with calls for more state involvement, as if a double dose of poison will somehow dilute the effects of its initial involvement. We see this everywhere today, as central banks shackle their present and future citizens with more debt in order to treat a problem caused by just that: too much debt.
We offered a broad-brush overview of the nation’s general trajectory in the Weekend Edition:
“According to the official figures, the national debt currently stands at $14.01 trillion dollars. That’s more than $45,000 per citizen, or almost $127,000 per taxpaying American. If you add in debt held by households, state and local governments and financial institutions, that number (the total US debt) blows out to well over $55.5 trillion, or more than $680,000 per average family. How much in savings does the average family have to offset this amount? $7,918.
“Letting these figures run for a few years,” we continued, “based on their current trajectories, we see that, in 2015, the national debt explodes to over $22 trillion. Per citizen, we’re now looking at close on $70,000, or $184,000 per taxpayer. Total debt, as measured above, has now grown to over $63 trillion and the average family’s share of that stands at nearly three-quarters of a million dollars. Average savings per family, by the way, have now fallen to just $2,791.”
Remarkably, the general consensus on how best to overcome this catastrophic trend invariably involves, in some form or another, additional government intervention and, by extension, spending. The debate appears centered on how best to manage this agent of coercion, the state, rather than on whether we need it at all. Indeed, the mere mention of free-market principals invokes fear, uncertainty and, usually, an abrupt end of the discussion. But look at the facts:
Back in 1903, government spending in the US, expressed as a percentage of total GDP (leaving aside for a moment the spurious nature of that measurement), weighed in at a paltry 6.8%, or $25.9 billion dollars. Although the state’s “mission creep” tended steadily higher over the next couple of decades (with an conspicuous spike circa WWI), that percentage remained in or around the low teens until the Great Depression, when the combined efforts of President Hoover and FDR’s New Deal effectively doubled state involvement. By 1940, government spending accounted for one-fifth (20.14%, or just over $100 billion) of the nation’s GDP. Fast-forward to 2010 and spending by the state had rocketed to over 43% of the nation’s total economic output.
We’ll leave it to the reader to decide whether the nation’s star is today rising or setting, whether her future looked brighter at the beginning of the 20th or 21st century.
Of course, arguments from effect tend to be cumbersome and problematic, due in part to the unreliability (not to mention the sheer volume) of statistics supporting this or that outcome. “Lies, damned lies and statistics,” goes the old saw. For every honest, objective, impartial statistician, there are ten million idiots who believe his lies.

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