By Michael Kleen
To many people, it seems natural to think an elite group of central planners can accomplish more than free people pursuing their own interests. When there is a problem in the economy, they reason, government action is the best way to solve it. This is often called Keynesian economics, after the economist John Maynard Keynes, who believed government should spend tax dollars to stimulate the economy. More than that, this belief embraces the notion that a very small number of politically-connected individuals know where, when and how the rest of us should spend our money as well.
Economist F.A. Hayek called this notion a “fatal conceit,” because no one person or group of people can ever hope to manage the complexities of a modern economy. Unfortunately, the predictable results of government intervention in the economy is that government grows even larger than before, a few well-connected people get rich, public debt increases, and the average citizen is left out of the process. More unfortunate still is the fact that the Rockford political class, and politicians in Winnebago County generally, seem to be enamored with this top-down approach.
One small example of central economic planning in Rockford is an effort by some city aldermen to create so-called “buffer zones” that would prohibit certain types of businesses from opening within a 1-mile radius of each other. These politicians believe they know best when it comes to what kinds of goods and services a certain neighborhood needs, a belief that is based on nothing more than their own personal preferences. The needs and desires of the people who spend their money and support those businesses, as well as other factors that might limit the types of businesses that are willing to locate in those areas, are ignored.
Some examples of Keynesianism in action are the numerous local government projects using tax dollars for “economic development.”
At a time when the State of Illinois has more than $9 billion in unpaid bills and is closing mental health and juvenile detention facilities, it somehow found $8 million to give to the City of Rockford for riverfront development. $200,000 is going directly into the pockets of “design consultants” who will explore the possibility of building another city water park, despite the fact that 2011 was the first year out of the previous four that Magic Waters (owned by the Rockford Park District) turned a profit. $3.1 million will be allocated to building an indoor sports complex. What impact would another taxpayer-subsidized and city-owned indoor sports complex have on private facilities in the area? No public official has bothered to ask.
Another $2.5 million of this public fund is going toward building indoor and outdoor markets in downtown Rockford, apparently under the premise that “if you build it, they will come.” But if this market was such a good idea, why haven’t private investors already seized on the opportunity and put their own money on the line? If the business climate in downtown Rockford was conducive to growth, the economy would already be booming there, but private investors have largely stayed away because they are all-too-aware of the current risks and liabilities. Do politicians and city planners, in their infinite wisdom, know something that entrepreneurs, investors and their potential customers do not?
Businesses fail when the amount of money they take in is not enough to cover their operating expenses. Rockford does not have a thriving downtown because it is either too expensive to do business there, there are too few customers to support any additional businesses, or some combination of the two. No amount of government investment is going to change these fundamental facts. What government should do is make sure the cost of doing business is as low as possible while protecting businesses and their customers from theft and other crimes, thereby creating an attractive climate for private enterprise.
By embracing central economic planning, Winnebago County and the City of Rockford are attempting to pick winners and losers in the private sector while diverting limited public resources away from essential services that government should provide, such as police protection and public infrastructure. Moreover, these efforts are disempowering average citizens and increasing the public debt, all on the gamble that politicians can make better business decisions than people who put their own money at risk in the private sector. It is a fatal conceit.
Michael Kleen is a local author, historian, and owner of Black Oak Media. He holds a master’s degree in history and master’s degree in education.
From the May 2-8, 2012, issue