Five months ago, in "The True Cost of Government
," I wrote this:
Americans are far less prosperous than they could be, for three reasons:
• Government uses resources that would otherwise be used productively in the private sector (19 percent of GDP in 2003).
• Government discourages work and innovation by taxing income at progressive rates and by transferring income from the productive to the non-productive (12 percent of GDP for recipients of Social Security, Medicare, Medicaid, etc., in 2003).
• Government regulation stifles innovation and raises the cost of producing goods and services (a net loss of 16 percent of GDP in 2003)....
I noted that
the regulatory state began to encroach on American industry with the passage of the Food and Drug Act and the vindictive application of the Sherman Antitrust Act, beginning with Standard Oil (the Microsoft of its day). There followed the ratification of Amendment XVI (enabling the federal government to tax incomes); World War I (a high-taxing, big-spending operation); a respite (the boom of the 1920s, which was owed to the Harding-Coolidge laissez-faire policy toward the economy); and the Great Depression and World War II (truly tragic events that imbued in the nation a false belief in the efficacy of the big-spending, high-taxing, regulating, welfare state).
The Great Depression also spawned the myth that good times (namely the Roaring '20s) must be followed by bad times, as if good times are an indulgence for which penance must be paid. Thus the Depression often is styled as a "hangover" that resulted from the "partying" of the '20s, as if laissez-faire -- and not wrong-headed government policies -- had caused and deepened the Depression.
I should have noted, also, the debilitating effect of labor unionism, which received the imprimatur of the federal government in the 1930s. An article
by Thomas E. Woods includes this estimate of the economic effects of unionism:
The ways in which labor unionism impoverishes society are legion, from the distortions in the labor market...to union work rules that discourage efficiency and innovation. The damage that unions have inflicted on the economy in recent American history is actually far greater than anyone might guess. In a study published jointly in late 2002 by the National Legal and Policy Center and the John M. Olin Institute for Employment Practice and Policy, economists Richard Vedder and Lowell Gallaway of Ohio University calculated that labor unions have cost the American economy a whopping $50 trillion over the past 50 years alone.
That is not a misprint. "The deadweight economic losses are not one-shot impacts on the economy," the study explains. "What our simulations reveal is the powerful effect of the compounding over more than half a century of what appears at first to be small annual effects." Not surprisingly, the study did find that unionized labor earned wages 15 percent higher than those of their nonunion counterparts, but it also found that wages in general suffered dramatically as a result of an economy that is 30 to 40 percent smaller than it would have been in the absence of labor unionism....
Woods's article lays out the argument against unionism at length. I highly recommend it.