The bipartisan sabotage of free enterprise

Proposal would supplant private entrepreneurs with government bureaucrats

By Geoffrey Lawrence
  • Wednesday, April 27, 2011

Unemployment rates in Nevada have remained in double digits for two full years. The latest figures show 179,206 unemployed Nevadans. Tens of thousands more have dropped out of the labor market altogether — too discouraged to even look for a job. Nevadans desperately crave new job creation and the return to prosperity.

Politicians in Carson City have heard these pleas and would like to fix the state's economic woes. Legislative leaders from both major political parties are collaborating with the governor in an attempt to spur economic development through Assembly Bill 449. Among other things, the bill would create a cabinet-level position for economic development within the executive branch. It would also create a "Catalyst Fund" with $10 million in taxpayer seed money from which a new bureaucracy of economic development officers would "make grants or loans to, or investments in, businesses seeking to create or expand in this State or relocate to this State."

This Catalyst Fund, according to proposed legislative language, would operate along the lines of a state-run venture capitalist firm, using public funds to invest in businesses that government officials have determined to be vital to the economic interests of the people. In other words, the proposal — when it comes to economic planning — would place its faith in government bureaucrats and political committees, rather than the freedom that built America.

While lawmakers and the governor's staff appear to believe that they can effectively leverage public funds in order to "create jobs," this government-directed economic planning would repudiate the proven, peaceful system of voluntary, free-market enterprise and instead subject Nevadans further to the reign of political "juice."

Markets, on the other hand, are wondrous systems of voluntary cooperation in which individuals who possess some gift, talent or valuable resource make use of those assets for the benefit of those around them. Individuals with goods trade them for other individuals' services — and vice versa. Individuals who have accumulated savings through hard work advance that capital to individuals who have the talent to efficiently organize resources for the benefit of society. This is the miracle called venture capitalism.

Through studiousness and prudency, savvy entrepreneurs and investors discover the needs of others — as indicated through price signals — and use their resources to provide for those needs. The more an entrepreneur caters to mankind's needs, the more handsomely that entrepreneur will be rewarded.

Throughout history, private entrepreneurs, acting of their own free accord, have proven to be far more adept at providing for the needs of society than any government or other coercive institution.  Because profit opportunities await those who can most efficiently improve the lives of those around them, entrepreneurs have not only devised methods to mass produce consumer goods for mass consumption — making luxuries that were once only enjoyed by the rich accessible to everyone — they have also invented entirely new technologies and brought them to market. Today, Nevadans benefit from refrigeration, air conditioning, microwave and other commercial technologies that make life in the desert possible because past entrepreneurs and venture capitalists staked their personal fortunes in order to improve the lives of others.

The proposed Catalyst Fund would endow government bureaucrats and political committees with the authority to spend public money on their plans for Nevada's economic future. Bureaucrats would decide which business ventures are worthy of receiving capital and would compel taxpayers to provide that capital. The plan would substitute governmental force for voluntary cooperation, depriving society of capital that individuals might otherwise choose to invest differently.

The economic plans made by bureaucrats, no matter how well intentioned, would almost assuredly be inferior to those made by private entrepreneurs staking their own savings. It is impossible for bureaucrats to ascertain and then aggregate the value that every unique individual places on the fulfillment of an infinite array of human needs. As such, bureaucrats cannot know how to allocate resources in concordance with the highest needs of every individual, as markets do. Yet, the economic plans laid by these bureaucrats, relying on coercion, would unjustly compel citizens to contribute toward economic plans likely to result in lower living standards than would otherwise be the case.

And that would be the best-case scenario. If these new bureaucrats and committees of economic planning are anything less than completely scrupulous, Nevadans are likely to see the entire agency devolve into a nightmare of rent-seeking, kick-backs, special favors and other unethical dealings in order for politically connected individuals to gain access to moneys taken from the people.

It's understandable for politicians to want to help those who have been temporarily displaced by the economic turbulence that policymakers at the Fed, and elsewhere, have precipitated. However, Silver State policymakers must not allow fear to trump reason.

To spur recovery, Nevada needs policies that open the doors for real entrepreneurship — not more bureaucrats.

Geoffrey Lawrence is deputy director of policy at the Nevada Policy Research Institute. For more information visit

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