Governments buy things. They buy all kinds of things. Local governments buy buildings and vehicles, road construction and office supplies. They pay employees to manage it all. National governments buy all of that plus military equipment, ships, planes, and everything else you can imagine. When governments buy things, they spend large amounts of money. That spending creates entire industries just to provide the products and services that your government wants to buy. It encourages people to create those specific products and services that the government is paying for right now. The offer of money for specific products, causes more businesses to start making those products, to get that money. The effect of government spending is an increase in those industries that make that stuff or provide those services. This also discourages businesses from producing products and services that the Government is not interested in right now.
There is a ripple effect. If the government chooses to buy several large military ships, new shipbuilding companies will spring up. They will hire lots of architects, engineers, electricians, plumbers, welders, security specialists and so forth. Seeing the demand in the job force, more young people will then choose careers as architects, engineers, electricians, plumbers, welders, and security specialists. Now the nation will have a larger number of people with that specific expertise. By buying a few ships, your government has just shaped the career choices of a generation.
Even if it is not about the money, government spending can affect behavior. Governments buy impressive military equipment more often to deter, than to start wars. Having a strong military capability deters would-be attackers. So buying that impressive ship has the effect of both encouraging ship building and the associated technologies and careers, as well as discouraging other nations from attacking or engaging in warlike rhetoric. This then encourages fruitful trade negotiations and mutual aid pacts. These trade deals then benefit specific industries and products, which then encourages individuals and businesses to flock to those industries and make those products, which drives hiring and therefore educational choices all over again.
But spending alone is not enough to fully guide individuals and businesses to do and make what they want you to do and make. That is where cheap loans, grants, tax breaks and new taxes come in. We will tackle that in the next money article.
