Category Archives: Economics

A Hungarian man sweeps paper money out of the gutter

Answers To: “The problem with the Fed is that it’s private”

I hear this argument in most critiques of the Federal Reserve, so it definitely needs to be addressed.

Talking to an anti-Fed person, you may have heard something like “The Fed is terrible, it controls all our money.  And did you know it’s private?!”

The implied or stated proposal being that government should take over the money-printing.  But it’s not the fact that the Fed is partially private that’s the problem – it’s the fact that it’s partially government!  What’s bad about it is that we’re all forced by law to use their currency.  It is a legal monopoly on money, for which there is no ethical justification.

From a voluntary ethics standpoint, no one should be forced to use or not use any money, or prohibited or compelled to issue money.  But even from a utilitarian view, a government takeover of money would not be a very good safeguard against monetary inflation.  Historically, governments have debased their currencies as a means to finance their grand schemes, variations of bombs or bread.  Can you imagine what Congress would do without the admittedly weak restraint of the Fed?  They’d spend into oblivion, even more than now, and destroy the dollar in the process!

The real answer is – eliminate the Fed’s legal monopoly on money.  Let them be a private bank competing in a free market.  Of course, they probably would go out of business, but hey, that’s free market capitalism!

Government supports large businesses against small businesses (with federal contracts)

Continuing in our series on “Government as the cause of capital concentration“, let us look at how the US government supports large businesses in the way it awards federal contracts.  According to the SBA, 22.7 percent of federal contract dollars were awarded to small businesses in 2010 and the rest to large and international businesses.  There is strong evidence this is an overestimate of the actual share, due to improper classification of business size.  Meanwhile, the SBA reports that small businesses accounted for 44.5% of GDP in 2010.  That means the government awarded much more money to large businesses relative to their contribution to GDP.

Federal contracts by business size (2010)GDP contribution by business size (2010)

This is strong evidence that the government directly increases concentration of capital by supporting large businesses vs. small businesses.

Government meddling

Government as the cause of capital concentration

I lay out the following hypothesis: that government is the primary cause of the capital concentration that Marx blamed on capitalism.  I aim to test this by studying the facts of the present day and of history, so this hypothesis may turn out to be wrong or in need of modification, according to the evidence presented.  I also make the following corollary claims:

The hypothesis holds for the United States government of the present day and all similar mixed-market representative democracies.

The hypothesis also holds for governments of all types, past and present.

It is not private property, but the violation of private property, that causes the highest capital concentration.

The regimes implementing Marx’s Communist Manifesto increased the concentration of capital.