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).