Tuesday, 12 June 2012

From bad to worse for France

BBC News reports:

President Francois Hollande's Socialists and allies look set to emerge with a majority after first round voting in French parliamentary elections, final results show.
When you look at the left bloc as a whole, they have more support than the right, they will have a majority in the new parliament and that will ensure that Mr Hollande can force through the ambitious tax and spend policies that he has set out.

I wonder if M. Hollande has even heard of Frédéric Bastiat, who explained the folly of tax-and-spend in 1850:

When James B. gives a hundred pence to a Government officer, for a really useful service, it is exactly the same as when he gives a hundred sous to a shoemaker for a pair of shoes.

But when James B. gives a hundred sous to a Government officer, and receives nothing for them unless it be annoyances, he might as well give them to a thief. It is nonsense to say that the Government officer will spend these hundred sous to the great profit of national labour; the thief would do the same; and so would James B., if he had not been stopped on the road by the extra-legal parasite, nor by the lawful sponger.

Arguments in favour of government spending have become more sophisticated since then, thanks largely to Keynes, but tax-and-spend is still a bad idea even if 'James B.' or 'the thief' are less inclined to spend than their political masters.

For one thing, the government spends money very badly: it gets poor value-for-money on projects that benefit a small minority of the population.

For another, investment is the key to lasting prosperity, not spending. Wealth is generated by developing more efficient ways to produce goods and services that customers actually desire.

For naive Keynesians and socialist demagogues, boosting GDP is all that matters. C + I + G is the magic formula, and it doesn't matter how things are split, as long as the total rises. Ghost cities and military campaigns are just as good as fusion reactors, and much easier to deliver.

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