Rothbard on Govt "Investment"

Economics Economics Questions
1

In AGD he writes;

In recent years, particularly in the literature on the “under-developed countries,” there has been a great deal of discussion of government “investment.” There can be no such investment, however. “Investment” is defined as expenditures made not for the direct satisfaction of those who make it, but for other, ultimate consumers. Machines are produced not to serve the entrepreneur, but to serve the ultimate consumers, who in turn remunerate the entrepreneurs. But government acquires its funds by seizing them from private individuals; the spending of the funds, therefore, gratifies the desires of government officials.Government officials have forcibly shifted production from satisfying private consumers to satisfying themselves; their spending is therefore pure consumption and can by no stretch of the term be called “investment.” (Of course, to the extent that government officials do not realize this, their “consumption” is really waste-spending.)

This strikes me as very odd. I would think that if the govt builds, say, a shoe factory with the money, or gives it to GM to make cars, then it is an investment. It matters not that the money was seized, nor why it was siezed, but what use it was put to.

Say a pirate seizes wealth and invests it in some producitve thing, is it not am investment? I would say it is.

Here’s Wikipedia:

Investment has different meanings in finance and economics.

Finance investment is putting money into something with the expectation of gain, that upon thorough analysis, has a high degree of security for the principal amount, as well as security of return, within an expected period of time…

In economic theory or in macroeconomics, investment is the amount purchased per unit time of goods which are not consumed but are to be used for future production. Examples include railroad or factory construction…

Notice that no mention is made of where the money came from, etc.

Is this a boo-boo on Rothbard’s part?

2

I think what he’s saying is that, if there was a desire for a shoe factory to be built, the private market would have addressed that desire. Instead, government goons have seized the property of the people adressing the public’s desires, and “invested” it into other ventures. Sure, shoe making may be something people want, but we can’t know that without free competition and prices. All we can assume is that the funds would have gone to satisfy the perceived most urgent consumer needs, and now they are being redirected into a less urgent need.

3

The annual government deficit, plus the annual interest payment that keeps rising as the total debt accumulates, increasingly channels scarce and precious private savings into wasteful government boondoggles, which “crowd out” productive investments. Establishment economists, including Reaganomists, cleverly fudge the issue by arbitrarily labeling virtually all government spending as “investments,” making it sound as if everything is fine and dandy because savings are being productively “invested.” In reality, however, government spending only qualifies as “investment” in an Orwellian sense; government actually spends on behalf of the “consumer goods” and desires of bureaucrats, politicians, and their dependent client groups. Government spending, therefore, rather than being “investment,” is consumer spending of a peculiarly wasteful and unproductive sort, since it is indulged not by producers but by a parasitic class that is living off, and increasingly weakening, the productive private sector.