It doesn't work

No matter what they claim

Welcome, my dear readers, once more into the asylum. Not all myths are ancient or about heroes and adventure. Most myths are rooted in a truth, value, or lesson that not only serves the culture that spawns them, but also the individual in that culture. They teach lessons on courage, honesty, and reliability, among other things. However, there are other myths that are false and actively harm the cultures they are attached to, providing benefit to the very few.

In our current zeitgeist, two of the most destructive myths that are the strongest driving forces pushing the collapse of our society and culture are:

1. Government spending can stimulate or improve the economy

2. Diversity in and of itself is good, desirable, and a form of strength.

The first is entirely false, and the second has a kernel of truth that has been greatly perverted. The government produces no value in the market, and all of its funds are either taken from the productive populace or created from nothing, driving inflation. Government spending derived from taxed dollars, be it on war materials, grants, education, or anything else, is at best a wash and at worst a net negative. War, especially, is nothing more than a grand example of the broken window fallacy.

The broken window fallacy, first credited to Frédéric Bastiat, goes like this (here):

A shopkeeper has his window broken by an incorrigible youth. This stimulates the economy because in making repairs the shop keeper funds a carpenter to install the new window, the glassmaker to make the window, the quarrier to produce sand, the smith to make the nails, and you can spin this out as far as you want with each tier receiving a smaller and smaller portion of the shop keeper’s funds. In our current mythos, since all of this economic activity was stimulated by the breaking of the window, it was a net positive.

This is false because the economy as a whole has fewer total goods (wealth) than it would have if the windows was never broken. At the beginning, the shopkeeper had a window, which was broken in the middle, and at the end, the shopkeeper had a window again. Even with all of the economic activity that was created to repair the window, there was no growth as the total amount of goods and services remained static.

Had the window not been broken, the shopkeeper would have used those funds himself. Perhaps he would have purchased a new set of clothes and shoes. This would have stimulated the tailor, weaver, spinner, shepherd, tanner, cobbler, and again as far down the chain of supply as you want to go. There is a window at the beginning, in the middle, and at the end. There is a window and new clothing. Regardless of what the storekeeper spends the money on, at the end, not only has there been economic activity, but the total quantity of goods (wealth) in existence has increased, and there is growth.

War is easy to see as nothing but a broken window, resources diverted from productive social use, producing war materials, and then, after hostilities have ended, for repairing all of the damage done before hostilities began. Murray N. Rothbard did an excellent job of debunking the myth that WWII ended the great depression while at the same time demonstrating how government spending on programs to end the depression actually extended and worsened the crisis in his book America's Great Depression (here).

All government spending at all levels is socialism, as the wealth is extracted from society and spent allegedly for the public good. The most extreme example we have of governments spending into the economy is, of course, socialism and its follow-on communism. In every case that these economies of near-total government stimulus spending have been tried, the results are always the same. In the end you have a crippled economy and impoverished population (here, here, here, and here). Here in the western world, while we do not have that level of government economic control, we are ever growing closer to it, with some too big to fail companies saved from their own malinvestment and poor decisions, with funds inflated or taken from the public at large, while other companies are allowed to fail. The bailing out of entire industries as they stumble under the weight of government regulation (here, here, here).

Socialism, like with all things, the poison is in the dose. Europe, while still nominally capitalist, has ingested much more of the socialist poison than we have, and it shows. Almost every country on the continent is an economic basket case, with most economies in decades-long decline (here, here, here, and here). We see all of the same problems here, zero to no growth, inflation, among other things, just less acutely. This is because on the balance we have taken less of the poison.

It doesn’t matter if the money is spent on tanks, medicine, parks, or welfare; all of it is extracted from the productive members of society. This leaves those who pay either directly through taxation or indirectly through inflation, leaving them worse off individually. As a society, there is a nonsensical argument that every dollar of welfare spending generates over a dollar in economic activity (here). Assuming a regulatory and transmission cost of $0, taking a dollar from person A and then giving it to person B when spent still only equals a dollar. In practice, however, ten dollars are taken from person A, then nine dollars are lost to regulation and transmission to give person B one dollar. Worse than that, the fact that welfare subsidizes poor decisions and lack of productivity, the existence of welfare produces more bad choices and unproductive people. This can be shown by the fact that in 1974, ten years after the welfare system was introduced, only 12% of Americans were recipients of any welfare program (here). Today, over 30% of the population receives some kind of assistance (here).

If you include nontypical welfare programs like HUD, FHA, and other government-backed home loans, that number jumps to well over 50% since, from all sources, the government insures over 50% of all home purchases (here, here, and here). This government backing allows otherwise unqualified people to buy homes with zero down, artificially suppressed interest rates, and other perks that ultimately drive the cost of housing up, making it less and less achievable for most people. This, in turn, spurs further government action that ultimately further distorts the market (here, here, and here),

The damage done by this intervention in the market is exacerbated when a government-backed mortgage is defaulted, then it is paid either through tax dollars or fiat currency generation and inflation. These both