“State Capitalism” and “Junk GDP”

“State Capitalism” and “Junk GDP”

The following quote is taken from Trickle Up Poverty: Obama’s Attack on Our Borders, Economy, and Security, by Michael Savage.

I quote:

Among the many problems with what historian Amity Shales has called “state capitalism” is that it tends to produce, again in Shales’ words, “junk GDP.” With government dictating what technologies must be pursued and developed, and providing billions of dollars in incentives for their pursuit, we lose the trail-and-error resilience of a free market, the small projects, privately funded, that actually develop the technologies that work and that make our lives better and more efficient.

End of quote.

Wake-up America!

V. Thomas Mawhinney, Ph.D.  1/15/11

Tags: , , , , ,

6 Responses to ““State Capitalism” and “Junk GDP””

  1. Bruce Says:

    Sorry, but I stand by my assertion…that business is profit driven and not innovation purists. Business will innovate only to the degree that it feels will maximize profits. As a matter of fact, sometimes business will buy rights to and squash innovation to prevent competition – in some cases gvt interference will aid innovation.
    I work for a state funded institution. I have several pieces of software I wrote that is not available anywhere else. Those innovations benefit the institution. Those innovations were neither gvt directive nor profit inspired (I assure you).
    Granted I have very little to go on but your single quote, but I have to question Shales methodology to formulate his assertion.
    Free market does not innovate, it exploits the collective brain power of those who do.
    Government does not stand in the way of innovation, it attempts to inspire innovation where it sees gap.
    Innovation is driven by those who have a propensity to do so. And I assure you, a very large percentage of those innovators are pissed off with current affairs. Best think in terms of Atlas Shrugged here.


    • vtmawhinney Says:

      Again, I do not take exception to anything that you have said, Bruce.

      I am sure that there are examples of business working against innovation. I simply believe that they are exceptions, and not the rule.

      Your own sentance is the rule, and I believer it is the predomenant outcome: “business is profit driven and not innovation purists. Business will innovate only to the degree that it feels will maximize profits.”

      It just so happens that businesses that innovate are most likely to win at the game of the rewards of profit. Even, as you point out, to the extent that competing businesses will try to defend themselves against the innovations by buying the innovations of other businesses. Business competition for profits is a major source of innovation and technology. A significant proportion of profits in business go into product research.

      Again, I do not disagree with you on your specific points– only the proportions in your conclusion. VTM


  2. Bruce Says:

    Part II

    I was quite surprised myself to discover just how much technology has spawned from government initiatives. Can you imagine your life right now without nuclear powered energy, cell phones, the internet.





    Another source of gvt sponsored innovation are some advances from State funded Universities. Computer OS systems and other software, your very ability to transfer files on the internet with “clickable” interfaces, sciences, and social sciences all have innovations from Universities.

    With regard to the above, I can cite one case where the free market gets in the way, and that is internet speeds. Did you know that the USA, (who invented the internet), is not even in the top 10 countries for internet access and connection speeds? -why? Because once ATT and Comcast and the like got their hands on it, they drive for profit, not innovation. They want to squeeze every dime out of consumers by charging upgrade premiums for the slightest increment in speed. As such, government entities have been providing their own infrastructure, just to have speeds that the rest of the world has, and ATT & company are suing to try to prevent it, so that they can continue to provide small speed upgrades at premium prices, all for profit.

    Free market is about profit and not necessarily innovation. I think Shales’ theory is full of holes.


    • vtmawhinney Says:

      Very good counter argument, Bruce! Your expertise in computers supports your internet speeds concerns.

      However, I think that governmental support of university research is a good example of support for a diversity of unexpected outcomes and that the support of the scientific enterprise, in countless domains with unpredictable and potentially useful outcomes, is not a hole in Shales’ theory.

      More to your point, America’s space program and governmental war initiatives, to name a couple, have also produced very useful and profitable technological spin-offs. I would like to hear of other examples too.

      But, the main, with regard to free market innovation vs. governmentally dictated innovations, I think Shales’ is spot on.

      Thanks for the interesting perspective, Tom


  3. Bruce Says:

    I can think of several examples that contradict this assertion:
    First, the technological advances of the US’s war machine. Our military technology is well in advance of any other countries, and is a wholly dictated and governmental purchase. The very internet in which you are posting on is because of our government as it was originally developed for military use.

    Second is the significant and large varieties of technologies that have emerged from NASA, which is also a full government operation. (think in terms of communications satellites, dietary supplements, and many many more http://www.sti.nasa.gov/tto/Spinoff2007/tech_enhance.html

    Sorry Tom, but I think Shales is full of crap.


    • vtmawhinney Says:

      Oops! I read part II, an responded to it before I read your part 1. I cannot endorse your “full of crap” assertion. I believe that Shales’ concerns still have merrit and that increasing trends toward central planning and control of the free market will hurt more than it will help in the generation of good things and the good life. My own concern is with the preponderant outcomes and the ideal mixture of centralized vision and free market creativity. Ideally, one would not stultify the benefits of the other.

      Your examples are good ones of some important fruitful exceptions. I will grant you that, as I expect that Shales would.

      Regarding Mr. Shales, it appears that a pithy quote is good tonic for critical thinking.



Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: