Malware: How Government Destroys Wealth


From the air, there is no indication that the state of California is in financial trouble.  Flying into Los Angeles one sees the city’s immense wealth: hundreds of factories, warehouses, and stores; highways and bridges; tens of thousands of houses; countless cars and trucks. What cannot be seen from the air is the value that has been torn from all of this capital stock in recent years.  Untold wealth is lost every day as the state government systematically abolishes property rights.  Regulations, environmental restrictions, zoning laws, sales taxes, income taxes, property taxes combine to reduce the value of people’s land, homes, and businesses. Place enough taxes and restrictions on any asset and it becomes a liability, costing the owner more than it is worth. Move that same asset to a place where property rights are protected and the asset instantly regains its value.  So, capital flees the state.  Money, resources, and people are packing up and heading to those states that still respect property rights.

There is nothing wrong with California’s assets–its “hardware.” It’s the software that’s broken. The rules governing the hardware are destroying its value.  Under current rules, government officials regularly deny owners the right to use their property as they wish or they confiscate their property outright. Under such rules, the hardware becomes worth less and with time, worthless.  Change the rules, restore property rights, and the value is restored; the hardware begins generating wealth once more. Continue the same confiscatory rules, however, and eventually the damage will become apparent even from the air.  The capital stock that still retains the potential to create great wealth and lift millions out of poverty will decay, as it has in New York City where rent controls have laid waste to entire city blocks; in Buffalo, where government malware has been running and ruining the hardware for decades, and in the city of Detroit where high taxes, poor services, and little protection from criminals have driven residents away in the tens of thousands. The buildings in the pictures linked to this article were not destroyed by war.  They were not destroyed by earthquakes or fire.  They were destroyed by powerful and voracious governments.  Look at them and mourn the ruined lives and wasted resources that each building, each dwelling, represents.  Mourn as California, that once golden state, stumbles toward the same wretched, unnecessary end.



Richard Fulmer is a freelance writer from Humble, Texas, and the winner of the third annual Beth A. Hoffman Memorial Prize for Economic Writing for his article "Cavemen and Middlemen," from the April 2012 Freeman

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July/August 2014

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