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August 02, 2010

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Craig Westover

I must note that Dane Smith’s July 30 counterpoint to my assertion that “Jobs don’t come from government" (July 25 Opinion Exchange) appears in the Star Tribune on the same day as an article about the Minnesota “Nice Guys” – a group of men with “clean backgrounds” regarding themselves as “above mistreating women” who “paid well” for high priced prostitutes. One “Nice Guy” even went to his son’s baseball game after a tony hotel rendezvous. Dane’s a counterpoint (“Public sector key to free enterprise”) takes the nice guy position that because “Nice Guy” government sometimes fulfills its obligations and responsibilities well we should excuse its sleeping around with special interests under the pretense of “creating jobs.”

As evidence that government helps create the conditions and investment necessary for progress and prosperity, Dane offers “compulsory, universal and ‘free’ public schooling,” the Erie Canal as representative of “public improvements” in general and government “loans and subsidies for railroad development.” Let’s pull back the sheets on the public/private coupling Dane declares a virtue.

Dane’s first mistake is the assumption that if government didn’t perform some function, it necessarily wouldn’t happen. Children were educated in American long before the progressive era push for government-run education. Education was local – local communities funded schools and teachers and were accountable for student performance. Communities hired and fired teachers and set curriculum. Communities competed for the best teachers. One-size education did not fit all then any more than it does today. What Dane misses is that providing education for all is not the same as educating all. The achievement gap between white students and students of color is the most damning example that compulsory attendance is not the same as providing an education that meets student needs. Education is about delivering knowledge and skills, not controlling the system that delivers knowledge and skills.

The Erie Canal is one of Dane’s favorite romantic fantasies supporting the benefits of government investment. Indeed, there are many “seen” benefits of the canal. But as I pointed out in my piece, there are also the “unseen” consequences, which Dane ignores. The fact remains, to finance the Erie Canal government had to take resources from other sector of the country (and the economy) to the benefit of New York. Somewhere jobs were lost when private sector projects weren’t built. Other private projects weren’t built because capital, labor and material were funneled to the Erie Canal project. And finally, the value of the canal resulted not from simply digging a ditch; the Erie Canal was successful because the private sector created the need and the wealth to support it. A “canal to nowhere” creates the same number of visible jobs as an “Erie Canal” – the seductive illusion that “government can create jobs.” Without private sector wealth backing a project, jobs are simply redistributed, not created. (We saw the consequences of government policy when an over-built housing market collapsed because there wasn't the accumulated wealth to support it.)

Dane’s railroad loans and subsidies example encapsulates all of the points above. While the Union Pacific and Central Pacific were constructing arbitrarily circuitous routes across the continent to take advantage of government mileage and terrain incentives, James J. Hill was building his Great Northern line with his own and investors' capital. Putting his own capital at risk, he built a competing line that survived economic downturns when subsidized railroads failed. Why was Hill able to achieve such success? He capitalized on the pent up demand for Westward expansion. Existing private sector wealth was the engine powering westward expansion – not a late and over budget government project.

Dane is right when he says government is indispensable in creating positive conditions for growth like rule of law in courts, public safety and even creating regulations that ensure transparency and the likelihood that private, voluntary contracts will be honored. Infrastructure maintenance is also a legitimate, state constitutionally defined function. But when "Nice Guy" government, which considers itself above mistreating state citizens, taxes the many to benefit the few, substitutes its expert wisdom for the wisdom of the market, it is not participating in a victimless crime. The context of my piece was refuting DFL gubernatorial candidate Margaret Anderson Kelliher’s “big idea” that government spending willy-nilly can create jobs that otherwise would not exist. It can't -- it can at best only redistribute jobs. That is not “extreme libertarian ideology”; that is fundamental economic principle.

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