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The Proper “Balance” Between Public And Private Sectors

We hear this term used a lot by fans of big government and it portrays the lack of even a basic understanding of what is really going on.  They look at the private sector as being some kind of necessary evil that should be tolerated but carefully regulated so it doesn’t get out of control.  It never occurs to them that the public sector would not exist at all without the private sector.  Every single thing that the governments do down to the last pothole repair, everything……. is done with the wealth created by the private sector.  And the more the private sector has of it, the more it can produce for us.

In a free market, profits send a signal that an enterprise is doing the right thing.  The profits are newly created wealth.  This wealth, or capital, is then used to enable the company to do even more of that right thing.  This is how an economy grows.

But if a company is losing money, that means whatever it is doing is bad and that it is destroying wealth.  It has to either change or stop.  It is shrinking the economy.  Of course with the government the losses are 100%.  Some of it is necessary of course, but keep in mind that all of the capital that is appropriated for use by government is no longer available to be used to produce more of the things we really want.

I look at the economy as being like an animal and the government as being like bacteria.  Animals require certain kinds of bacteria in a limited quantity to help digest their food and keep them healthy.  But too much of the wrong kinds of bacteria will weaken, and sometimes kill it’s host.

Every year the Heritage Foundation releases it’s Index of Economic Freedom.  In it we can look at 177 different “balances” tried by all the countries in the world.  This year the five that have their balance most heavily weighted in favor of the private sector are Hong Kong, Singapore, Australia, New Zealand and Switzerland.  The five that have their balance closest to the public sector are North Korea, Cuba, Zimbabwe, Venezuela and Eritrea.

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