Inflationomics

Market Demand vs. Government Demand

Market demand is driven by consumers; i.e., people who voluntarily purchase things with the money they earn through their own efforts.  Consumer priorities dictate what is produced in the marketplace. Government demand is driven by politicians and bureaucrats.  Whatever they think the consumer wants or “needs” is produced according to government mandate and enforced with police power.  In short, politician/bureaucrat priorities dictate what is produced for the government and its subjects.
Market demand is satisfied by entrepreneurs taking risks and either successfully delivering what consumers want (and consequently being rewarded) or failing to deliver what consumers want (and paying the price for misjudgment with personal losses). Government demands are paid for by taxpayers covering the wasteful miscalculations of politicians/bureaucrats and their favorite interest groups.  No self sacrifice is made—only other people’s (taxpayer) money is at risk.
Market demand (in the United States) is often regulated by government rules.  Think of the myriad government departments and agencies…purportedly for consumer protection.  More often than not, they hamper the smooth working of the markets, with no benefit to the consumers. Government demand is limited by bankruptcy of the government entity and occasionally by sensible voters.  In the United States, the federal government has lost control of spending.  Click here to see a chart of U.S. government debts and deficits.  How will this end?
Market demand (for food, for example) can lead to revolutions (or at least riots) against government corruption and market interference.  Consider Tunisia, Egypt, and Libya. Government demand (for non-consumer goods like weapons) can lead to revolutions against government waste and corruption for violating basic human rights (to life, liberty, and the pursuit of happiness).  These days, government demands are often supported by other governments (who are equally corrupt).
Market demand creates profitable businesses.  Profitable businesses generate capital and self-sustaining jobs. Government demand creates unproductive jobs; i.e., jobs that consume capital rather than creating more capital.  Government jobs are taxpayer supported.  That means governments must take capital from profitable businesses before they can create a capital-consuming job (or borrow money, thus reducing the money available to businesses).
Market demand rewards productive people for their foresight and fulfillment of consumer demands.  Profits are the sign that they are satisfying customer demands. Government demand rewards lobbyists, corrupt politicians, bureaucrats, and government-catering businesses for their ability to bribe lawmakers (or be bribed).
Market demand requires a stable money and minimal government interference for growth. Government demand requires ever more money printing, borrowing, and taxing.
Market demand needs to be free of government demands to function smoothly.  Consumers take priority in a market-based economy. Government demand grows until market demand is crowded out because government demands take priority over market demands.

Robert Jackson Smith
For comments, suggestions, or replies to the author, please e-mail