Capital employment

“If the Federal government gave us even half of what they give to Israel,” said Former Finance Chief Antonio R. Cabrera, “everyone here would be driving around in a Mercedes Benz.”

The United States gives Israel more than $3 billion a year. The CNMI’s Gross Island Product is not much more than $1 billion. The federal government probably gives the CNMI no more than $30 million a year. We pay Social Security taxes; the Israelis presumably do not pay any such taxes. To most CNMI political observers, it might appear as though the CNMI could use more federal funds.

Indeed, some local politicians seem almost ready to sell their souls for federal CIP (capital improvement project) funds. Bureaucrats from the Arts Council, the Public School System and other local agencies are eager to collect federal grants as well.

There is one truth that our local bureaucrats and politicians consistently fail to understand: Capital, to long endure, must be properly–and productively–employed. Government spending is next to useless; indeed, it is often downright harmful (in the market distortions it tends to create).

Look at Japan, for example. For the past ten years, the Japanese government has engaged in Keynesian pump priming. It has done so without a shred of success. For all the government stimulation of the economy, Japan is now officially in yet another recession. In fact, Japan’s economic troubles are primarily due to government (and government-directed) “investments.”

Look at all of the U.S. government aid poured into such areas as Africa, Russia, and the former Yugoslavia. Precious American tax dollars have been squandered–poured down a bottom-less pit of rampant corruption, complacency and neglect. Billions have been lost in Russia and Bosnia. Pouring government money into a non-capitalist economy–where it cannot be properly employed–is a crime against humanity.

Ask yourselves this question: If the United States government poured $100 billion into the Bangladesh economy, do you really think it will make a long term difference? Would it be likely to have a lasting impact?

The Commonwealth Utilities Corporation is currently bankrupt, burdened by millions of dollars in debt. If the CNMI government bails it out, would that solve the problem? Or would CUC eventually find itself in massive debt–financially insolvent–again?

Government funds, whether from within or from without, rarely ever create enduring prosperity. Luring private investments–not matching federal funds or grants–should always be our primary concern.