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common-error-no-78

78. "Government investment is vital to protect industry and jobs."

britishleyland.jpgIt’s a matter of historical record that government investment is reasonably fatal to industry and jobs. What government does is to take taxation from those industries which are successful, and redistribute some to those which are not. In doing so, it takes away resources which would otherwise be available for investment in expansion or the purchase of goods and services.

It puts these resources into industries for whose goods and services there is not enough private demand. Government tends to choose industries for political, not economic reasons, and to make bad choices. "Picking winners" means picking losers. For all of the public jobs created by public investment, rather more jobs will quietly disappear from the private sector in consequence.

Government investment in industry involves spending other people’s money on somebody else. Since it is not their own money, the politicians and bureaucrats do not have the same incentive to make good and wise decisions as do those whole livelihood or reward depends on success. They do not have the same drive to ensure that the goods produced will be of the quality and price to hold their own in the marketplace.

Furthermore, government investment is usually called for when private investment has failed to materialize in support of certain industries. There is a very good reason why it did not appear; it is because private investors had low expectation of any returns to be made by doing so. When government does invest, the industries concerned become dependent on continual state handouts and unable to attract private funds in its place. The graveyard of Britain’s industrial history is littered with the corpses of failed state investments, whether in steel, ships or motorcycles. Government investment in an industry is the kiss of death.