Capital crimes: political centers as parasite economies.

• Author: Vedder, Richard K.

At the time of the birth of Christ, Rome it was a prosperous, thriving empire, with a standard of living significantly higher than that of any other city in the Western world, if not on the entire planet. Ancient Rome did not become relatively rich through capital formation and technological advance, the usual causes of economic progress and prosperity. It thrived as a government center living largely off the tribute (taxes) of the provinces and conquered lands. An ever-growing share of the income that was earned through the work of people living in the provinces was transferred each year to those residing in the capital. Rome did not produce wealth; its prosperity came at the expense of individuals living in Spain, France, northern Africa, and elsewhere. The parasitic nature of Rome's opulent existence contributed to its eventual downfall.

Is a similar redistribution of income and wealth taking place in America? Resources are being extracted from the general taxpaying public to feed the bureaucrats and government officials who tend, other things being equal, to concentrate themselves in state or national capitals. Moreover, the tendency to enrich the political center at the expense of the rest of the polity has grown over time. America's government centers have become parasite economies.

The U.S. can be said to have a dual economy. On the one hand, there is the private-sector economy, which produces goods and services in response to the wants of consumers and businesses. On the other, there is the government sector, which largely redistributes income. Typically, government is said to redistribute income from rich to poor or from young workers to older retirees, but increasingly there is evidence that individuals use government to redistribute income from the general taxpaying public to themselves.

Of course, not all governmental activity is of a parasitic nature. The protection of rights -- through police, courts, and national defense -- is an essential function of government. Many traditional roles of government such as providing roads and schools do yield benefits to taxpayers, though some of those services might be produced more efficiently in the private sector. Nevertheless, as government has grown larger, the parasite economy -- that is, the people who derive their livelihood from government spending and taxes -- has flourished. The amount of government spending defines the potential "pie" from which the parasites ("rent seekers," to economists) try to siphon off income for themselves.

Regulations that transfer wealth are part of parasite economies. Over the past 40 years, government expenditures (excluding intergovernmental transfers) have risen from less than one-fourth of total output to two-fifths. The growth in spending has been relentless, with government's share of output occasionally flattening, but never significantly declining. Increases in government's share of total output are observed during both Republican and Democratic administrations in Washington.

How much of that spending was of a parasitic nature, enriching people involved in government, rather than citizens who are supposed to be helped? One way to answer that question is to examine how rapidly government centers are growing relative to nongovernment ones.

Although the Federal government has facilities throughout the nation and beyond, the largest single concentration of its resources is in and around the nation's capital. With the expansion of government, many of the most important Federal agencies have moved from the District of Columbia to nearby Virginia or Maryland, and a larger number of Federal workers live in those suburban areas than in the capital itself. Accordingly, a good case can be made that the appropriate definition of the capital is the Washington metropolitan area...