More government interventions hamper capitalism

In his fourth book, What Went Wrong With Capitalism, investor and author Ruchir Sharma eloquently details how advanced market economies for decades have increasingly strayed from the basic principles of market-based competition and pricing, resulting in persistently slow growth which causes many to question whether capitalism works anymore. However, what is often attributed to market failure is often a failure of government.

Collectivists have successfully installed the narrative that the Reagan and Thatcher era in the 1980s ushered in an era of neoliberalism and government austerity. Nothing could be further from the truth. Keynesian counter-cyclical government spending was supposed to support the economy during a recession; instead, it is used to support the economy at every point of the business cycle. At most, the Reagan and Thatcher regimes only slowed the rate of increase of government spending. Combined with a growing public resistance to paying higher taxes, this created permanent budget deficits. Policymakers remain stuck on the stimulus treadmill: former European Central Bank head Mario Draghi recently recommended the EU spend an inconceivable US$900 billion a year to revive its flagging economy.

Moreover, the slowdown in the growth of government spending did little to stop a tidal wave of government rules and regulations, many of which favour entrenched interests and firms. Sharma’s observation that being “pro-business is not the same as pro-capitalism, and the distinction continues to elude us” is especially true for Canada. He documents the increasing use of government subsidies and bail-outs, which helps fuel the growth of so-called zombie firms—unprofitable companies that stay in business thanks to support from governments or lending institutions (who know problems caused by bad loans will be bailed out by government), which prevent labour and capital from moving to areas with better long-term growth potential. Most recently, we have seen governments embrace higher tariffs and industrial policy, notably for green energy projects in Canada and the United States.

Increased government meddling in the marketplace reduces competition and slows the process of creative destruction that is the lifeblood of capitalism by allowing “new firms to rise up and destroy the complacent ones, making the economy ever more productive over time,” according to Sharma. This was most evident during the pandemic, when business failures declined as government hand-outs outweighed the impact of unprecedented shutdown of large parts of the economy. But the decline in business startups and failures has persisted for decades.

Steadily rising government intervention in the economy results in lower productivity and slower growth. This pushes policymakers to resort to higher fiscal deficits and easy money policies in a forlorn attempt to boost long-term potential growth.

It is often said that the recent slowdown of productivity reflects a lack of business investment. That is certainly part of the problem outside of the U.S., especially for Canada over the past decade. However, Sharma notes it is the efficiency and not just the level of investment that is the problem. Pervasive government interventions in the economy distort prices and the allocation of capital, resulting in what the libertarian economist Friedrich Hayek called “malinvestments.” This is especially true for Canada, which for over a decade has shunned clearly profitable investment opportunities in the resource sector while pouring tens of billions into expensive public transit systems, which nevertheless failed to persuade commuters to leave their vehicles at home.

One theme Sharma does not develop is that this growing inability of governments to efficiently deliver results is not due to a lack of resources. Governments have expanded their workforce, their spending, and their regulatory power. Nevertheless, government programs falter because of bad management, chronic political meddling for short-term electoral gains, and a workforce which increasingly serves its own interests and not public’s.

Sharma concludes on both an optimistic and pessimistic note. He examines the ability of capitalism to thrive in countries such as Switzerland and Taiwan by balancing “a business-friendly environment alongside social equality.” Nevertheless, he’s concerned with the “supreme irony: modern voters, particularly the young, now demand that leaders show respect for the fragility of natural ecosystems… [but] at the same time, leaders are riding a popular wave when they propose to intervene in the economy—the global ecosystem in which 8 billion people do business.”

As disillusionment with capitalism spreads due to slow growth, the temptation is to increase government interventions, which only worse the economic outcome.

Author:

Philip Cross

Senior Fellow, Fraser Institute

Up Next

Musk Reveals To Tucker Why He Thinks 2024 Will Be Last Election If Dems Win

Don't Miss

Barron Trump Shut Out by Bank Amid Cancel Culture Accusations

Todayville

Todayville is a digital media and technology company. We profile unique stories and events in our community. Register and promote your community event for free.

Follow Author

Michigan could be a winner as companies pull back from EVs

Business / 5 hours ago

Deportations causing delays in US construction industry

Crime / 6 hours ago

Canadian teacher showed Charlie Kirk assassination video to young students, said he deserved to die

Automotive

Michigan could be a winner as companies pull back from EVs

Published on September 16, 2025

Todayville

From The Center Square

By Elyse S. Apel

Federal deregulation and tax credit cuts are reshaping the auto industry, as Ford Motor Co. and General Motors Co. scale back electric vehicle production and redirect billions into hybrids and traditional gas-powered cars.

Yet, the Michigan automotive industry could see increased investments from those same companies as they reallocate that funding.

While both Ford and GM previously announced ambitious targets to expand electric vehicle fleets over the next decade, they are now cutting back on electric vehicle production.

That comes in response to federal deregulation of gas-powered vehicles, tax credit cuts, and the prospect of slowing consumer demand.

In August, Ford stated it was canceling plans to build a new electric three-row SUV. Instead, it is turning its focus to hybrid vehicles, including a massive $5 billon investment into a new “affordable” hybrid truck.

GM announced similar plans earlier this month. It will be cutting back electric vehicle production at Kansas and Tennessee plants, anticipating a decline in demand once federal tax credits end Sept. 30.

This all could have a real impact on the electric vehicle industry across the nation and experts are already anticipating that.

A new forecast by Ernst & Young Global Limited now predicts a five-year delay in electric vehicles making up 50% of the new car marketshare. While previous forecasts predicted America would reach that mark by 2034, the new forecast pushed that back to 2039.

“The U.S. faces policy uncertainty, high costs, and infrastructure gaps,” said Constantin M. Gall, the company’s global aerospace defense and mobility leader.

Clean energy advocacy groups are decrying this move away from electric vehicle initiatives, largely blaming the Trump administration.

“The transition to electric vehicles now faces significant roadblocks,” said Ecology Center in an April report. “The Trump administration has rolled back key policies supporting clean transportation.”

It also pointed to a nationwide deregulation of the gas-powered vehicle industry for allowing those to remain “dominant” over electric vehicles.

“These actions prioritize fossil fuels over clean energy, threatening progress toward a sustainable transportation future,” the report stated.

While bad news for electric vehicle supporters, the Michigan automotive industry could be a winner as companies re-shift focus back to gas-powered and hybrid vehicles.

With billions of dollars previously allocated to federal pollution fines and electric vehicle costs now available for investment, GM now plans to increase production at a Detroit-area plant by 2027.

The Michigan-based company also recently announced plans to invest billions into another Michigan plant in Lake Orion Township.

For similar reasons, Ford’s CEO Jim Farley told analysts that the company anticipates monetary savings “has the potential to unlock a multibillion-dollar opportunity over the next two years.”

While Gov. Gretchen Whitmer has long been a proponent for the electric vehicle industry, she did recently emphasize her support for all Michigan-based manufacturing, no matter the type.

“We don’t care what you drive – gas, diesel, hybrid, or electric – as long as it’s made in Michigan,” she said following the GM Orion announcement. “Together, let’s keep bringing manufacturing home, growing the middle class, and making more stuff in Michigan.”

Elyse Apel is a reporter for The Center Square covering Colorado and Michigan. A graduate of Hillsdale College, Elyse’s writing has been published in a wide variety of national publications from the Washington Examiner to The American Spectator and The Daily Wire.

Elyse S. Apel

Business

Deportations causing delays in US construction industry

Published on September 16, 2025

Todayville

From The Center Square

By Andrew Rice

The Trump administration’s immigration policies are leading to worker shortages and delayed projects across the construction industry, according to a new report.

A survey conducted in July and August by the Associated Contractors of America and the National Center for Construction Education and Research found more than one in four respondents said their firms were affected by increased immigration enforcement in the past six months.

Respondents said increased immigration enforcement is making it more difficult for firms to recruit workers. Ten percent of firms reported using the H-2B visa program, which is used for recruiting nonagricultural foreign workers, to recruit salaried and hourly workers.

Congress set the cap for H-2B visa allowances at 66,000 in fiscal year 2026. The program offers temporary work for the first and second halves of the year to foreign employees.

Jordan Fischetti, an immigration policy fellow with Americans for Prosperity, said government allowances for visa programs do not meet the demand of the current workforce.

“Immigration for a long time has been centrally planned, so there’s just not a very strong appetite for letting the market do its work,” Fischetti said.

The report found 83% of firms with craft worker openings reported that positions are hard to fill or harder to fill than one year ago. Eighty-four percent of firms with openings for salaried workers also reported it was hard or harder to fill positions than one year ago.

Five percent of respondents reported their jobsites or work sites were visited by immigration agents and 10% said workers did not report or quit due to rumored immigration enforcement allegations.

Contractors in Georgia, Virginia, Alabama, Nebraska and South Carolina were more likely to be impacted by immigration enforcement, according to the report.

The report found worker shortages were the most commonly listed reason for project delays. Two-thirds of firms reported at least one project in the last six months was postponed, canceled or scaled back. The survey took into account more than 1,300 individuals across various contracting and construction firms.

Michele Waslin, assistant director of the University of Minnesota’s immigration history research center, said the construction and agricultural industries have been deeply affected by the Trump administration’s immigration policies.

“Some businesses really do have a labor shortage, and they’re unable to hire American workers, and they want to hire foreign workers and it’s not that easy to do in many cases,” Waslin said.

A separate poll commissioned by The Center Square found 85% of registered voters think it is either somewhat or very important to create legal pathways for construction workers to live and work in the United States.

The poll, conducted by RMG Research in conjunction with Neapolitan News Service, surveyed 1,000 registered voters in August and found vast agreement across partisan lines, age and race in its support for legal pathways in construction.

Fischetti said both employers and the American public have expressed interest in allowing more flexibility in the immigration system and he wants to see Congress modernize in response.

“We really need to work on providing pathways,” Fischetti said. “I don’t just mean pathways to legalization, pathways to certainty.”