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August 3rd, 2012


By Nathan Tucker

The most troubling aspect of Solyndra is not that its collapse cost taxpayers $500 million, but that politicians in both political parties continue to play venture capitalist at all.  In an effort to “grow the economy” and bring jobs to their constituents, politicians mistakenly believe that Solyndra was just a bad bet and that they can do better.

Politicians enjoy playing investor with taxpayer money—whether in the form of direct loans, guaranteed loans, or tax subsidies, breaks, credits, exemptions, and rebates.  They believe that they, as opposed to the free market, know best how to create jobs and spur economic growth.

They too often forget (or conveniently ignore) that government has no money, only people have money.  In order to give money to Company X, therefore, government has to forcibly take it from Taxpayer A.  This perversion of equal protection under the law is what Frederic Bastiat has described as legal plunder—the use of “the law to take from one person what belongs to them, and giving it to others to whom it does not belong.”

This belief that some rights must be sacrificed for the collective good is socialism.  Far too many politicians believe that this sacrifice by employed Taxpayer A is necessary to invest in Company X so that it can create jobs for B and C.  It is nothing less than a desire to produce an equalization of outcomes by government intervention.

This sacrifice is premised on the wholly unwarranted belief that government can put other people’s money to better use than they can themselves.  It is a fundamental distrust of the free market and the decisions people make about how to spend their own money.  Unhappy with allowing individual consumers to unconsciously decide who gets what, when, and how in a competitive free market, they believe that government can do a much better job managing the economy.

To that end, therefore, they want the government to act as venture capitalists to boldly go where the free market fears to tread.  They overlook the simple fact that there would be no need for public investments if private investors believed that the venture was profitable.  Public investments only subsidize unproductive, inefficient businesses that produce goods at prices undesired in the free market.

Socialists always justify their action by bragging about how many proposed jobs a new business will create or how much money a protected industry will allegedly pump into the economy.  While guised in altruism, wealth redistribution simply allows politicians to put more trophies on the mantle in their bid to convince voters that they really know how to direct the economy.

But lost in the glare of these illusionary trophies is the Forgotten Man—Taxpayer A, who remains without his money and whose only return on investment is the hope that his taxes will not necessarily have to go higher because Company X and its employees B and C are now also paying taxes.  Lost in this investment, however, is actual productivity which is the only engine of economic growth.

Because Taxpayer A has less money, he is unable to give it to efficient, productive Company Z (either in purchases or investments) that he believes would give him the most return for his money.  This disruption of supply and demand in turn leads to slowed productivity, innovations, wages, and employment.

What the socialist overlooks is the fundamental principle that government cannot create wealth, it can only transfer it from the productive to the unproductive.  It cannot create jobs, it can only transfer them from efficient businesses to inefficient ones.  It does not invest in the free market, it only picks winners at the expense of losers.

So while the socialist parades his fanciful accomplishments before his constituents, what is forgotten is that they are paid for by a lower standard of living caused by anemic economic growth.  What is not seen are all the jobs and inventions that would have been but for the legal plunder in the first place.

The only guaranteed return on government’s investment is crony capitalism in which free competition and consumer demands become quickly forgotten when government and business get into bed together.  And far too often it operates like a money laundering operation, with politicians giving Company X taxpayer money in return for campaign contributions, or vice versa.  If one wants to get business out of bed with government, one has to destroy the bed.

Plunder, legal or otherwise, only produces a net loss for everyone.

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About the Author

Nathan W. Tucker
Nathan W. Tucker is a Davenport attorney and author of We The People: The Only Cure to Judicial Activism. He can be contacted at [email protected]

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