Beneficial Government Spending: An Historical Analysis

Beneficial Government Spending: An Historical Analysis


By Michael Boyajian


There is a great deal of talk today about government spending having a detrimental effect on the American economy.  However, and I think Paul Krugman of the New York Times would agree, there is a historical basis to think otherwise.


All great civilizations remained strong and potent so long as they were engaged in massive building projects that reaped economic rewards.  For instance, the ancient Egyptians spent thousands of years building pyramids, grand tombs and other features of their necropolis managing to prosper and exist for many millennia as a super power.


The short golden era of ancient Greece was marked by construction of the Parthenon and other temples and a huge Athenian navy.  Once however when they engaged in a life sucking war with Sparta both powers declined.  So spending on civil projects is a good thing while war causes decline.  Greece excelled to such a degree in such a short span so as to become the cradle of Western Civilization.


Then there are the ancient Romans.  Though warriors they strived for long periods of time for peace and prosperity, the so called Pax Romana.  Rome remained powerful for a thousand years not because of its huge military, for these armies were in place at its decline, but because of its unsurpassed building projects marked by roads, aqueducts, temples, amphitheaters and coliseums.  So Rome thrived thanks in part to its shovel ready, boots on the ground government building projects.


Even recent history supports this belief as can be seen in the prosperity experienced by New York after embarking on huge building projects like the Erie Canal, the railroads and the Thruway.


The problem one encounters is when there is deficit spending to such a high degree that it effects this formula and nowhere is this more apparent than during the Reagan years when the economy was better than it had been but nowhere as strong as the Clinton year when the country experienced a surplus along with relative peace.


It seems confusing but here is my premise in a nutshell, government spending on massive projects like the space program or super trains is good for the economy as long as the deficits are not too very large and war does not dominate the fabric of our society and you can bank on that, the old fashioned way that is.