Cato Policy Analysis No. 250 February 28, 1996

Policy Analysis

Capital Crimes
Political Centers as Parasite Economies

by Richard K. Vedder

Richard K. Vedder is a professor of economics at Ohio University and John M. Olin Visiting Professor of Labor Economics and Public Policy at the Center for the Study of American Business at Washington University in St. Louis.


Executive Summary

As ancient Rome lived in splendor off the tribute raised in the provinces, so in modern America the political capitals are prospering economically at the expense of the rest of the nation. The productive, private citizens in outlying regions of our nation and states are financially burdened to pay for a parasite public economy of lawmakers, lobbyists, contractors, and bureaucrats in the political centers. Several statistics support those claims:

Average annual pay of workers in the District of Columbia exceeds the national average by 48 percent. Nation-wide, income per person in counties with state capitals tends to be nearly 10 percent higher than in other regions.

The income differential between Washington and the rest of the nation rose from 25.9 percent in 1980 to 32.1 percent in 1990. The poorest states have capitals with per capita income levels about 17 percent above state averages; the richest states show virtually no income differential, which suggests that government income redistribution may contribute to poverty rather than enhance wealth.

Although unemployment in the Washington, D.C., metropolitan area has been increasing, it remains almost 30 percent below the national average. Unemployment rates in counties containing state capitals average about 20 percent lower than in other counties.

That evidence is consistent with the hypothesis that those who make up the "parasite economy" have been successful at improving their economic well-being at the expense of those working in the productive private economy.

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