Productive vs Unproductive Sectors

Despite what you hear and read, there can be no recovery until the private sector starts growing, and it has not.

The public sector produces no products, gets in the way and generally hinders the private sector from accomplishment. Here is what has happened in the third quarter as reported by Doug Noland: “No encouraging news on the fiscal front.  Third quarter Federal government Receipts were down 11.2% from a year ago to $2.212 TN SAAR. Federal Expenditures jumped 12.7% to $3.555 TN SAAR.  Compared to three years ago, Receipts were down 12% while spending was up 29%.”

Federal Government receipts, down 11.2% over the prior year, indicate a private sector still in steep decline. Federal spending soaring indicates a government out of control or desperate to “solve” or at least “hide” the problem via Keynesian economics. While government spending can pump the GDP statistics (for a while) and create “make-work” projects, this spending does not reflect real value to the economy as it would if it occured voluntarily (i.e., in the private sector).

A better way to understand this matter would be to drop the terms private and public sectors and replace them with productive and unproductive sectors. That would have the advantage of educating the public as to economic reality, which is why politicians will never deal in realistic terminology.

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