As I have gotten older, and hopefully more wiser, I have come to the conviction that as government grows, personal freedoms and liberty diminish. I believe this to be an axiomatic truth. It doesn’t seem to matter which political party — democrat or republican — controls the reins of power, as government grows, personal freedoms and liberty diminish.
One very familiar tactic of politicians to grow the size and scope of government is to point to certain current crises and use them as an excuse for government action. This typically works because the people are too scared or frightened by the current crisis and demand that something be done, and in doing so they open the door for the politicians to impose more government control and regulation in their lives. What usually gets left unsaid is that the crisis the government is responding to is one of their own making. Government intervention in a crisis almost always leads to some unintended consequences, which further lead to some new crisis to which the response by the government is more government intervention. One of many examples of this can be seen in the government distortion of the free market economy.
In a true free market economy, there are two parties who voluntarily agree to the exchange of goods or services. For example, suppose I raise chickens and my neighbor raises cows. We may agree to the mutual exchange of chickens for cows (e.g., so many chickens for one cow). When this occurs, both parties benefit; I get a cow from which I can get milk and my neighbor gets some chickens from which he can get eggs. The price of the exchange (how many chickens per cow) is determined by each party and agreed upon. In a more complex market system, the agreed upon currency for exchange is money (gold, silver, or federal reserve notes). This makes it more easier to exchange goods and services. For example, I may agree to exchange my labor services to an employer for an agreed upon salary, which I can then further use to buy other goods and services from various players in the free market.
Before going into how government distorts the free market, let’s examine what ought to be the legitimate purpose of government in the free market. In a free society, like how the United States was originally founded to be, the government would protect the property rights of individuals and prosecute against theft or fraud. Going back to my chicken and cow example, suppose my neighbor took it upon himself to steal some of my chickens. I then would have recourse to take my grievance to the authorities for adjudication. Assuming I can prove that the chickens were mine, the authorities would order the return of the stolen property and perhaps a small fine on top of that. Another example would be if my neighbor exchanges a cow for some chickens but doesn’t disclose the fact that the cow is lame or sickly; in other words, my neighbor deceived me in the exchange. Again, I would have recourse to go to the authorities for redress. Protecting against theft or fraud is the only legitimate use of government authority in the free market.
Now there are many ways the government can distort the free market economy. The most invasive form is full communism in which the government controls everything and the people have no right to ownership of either their persons or their labor. The famous motto of Marxism goes “From each according to his ability to each according to his need.” In other words, you don’t have the right of self-ownership or the right to any private property. Your services and the fruit of your labor belongs to the State who has the task of distributing it as they see fit; ostensibly to see to the greater need, but as history has proven true, the only thing communism does is distribute despair and poverty equally while those in power get rich.
A less invasive, but equally damaging, government distortion of the free market is socialism. In socialism, private ownership is usually superficially maintained, but the government directs the market forces to achieve certain socially acceptable outcomes. For example, take minimum wage laws. There is a perception of wage inequality in the market; some people in certain positions of employment make high wages, while others make low wages (usually low skilled laborers). The concept of a minimum wage was sold to the people on the basis that people should be paid a ‘living wage’ and that employers should not exploit the working masses by not paying them a ‘fair’ wage. Sounds fair and decent, right? Who shouldn’t be paid a fair wage for a day’s work? The problem with this is that you now have a third party in the free market exchange of wages and services; namely the government who arbitrarily determines what a ‘fair’ wage is.
This is in effect a form of price control that has disastrous effects in the market. Setting a price floor for wages raises production costs for employers, which raises prices for consumers. When prices rise, consumption typically falls, which means less revenue for producers. Less revenue for producers means producers usually have to cut costs to remain profitable; and when that happens, people are laid off starting with the most expendable employees — namely those at the lowest end of the wage scale. It is historically demonstrable that minimum wage laws lead to higher unemployment, especially among low and unskilled workers (historically women and minorities). Because of the high price of labor in the United States, some companies have either began hiring illegal immigrants or moving production outside of the US to countries with lower labor costs. This in turn raises howls of disapproval and protest from government officials, which leads to more government intervention in the market; a veritable never-ending spiral of crisis-intervention.
Wage and price controls are just one way the government distorts the free markets. There are numerous other examples to point to: Tariffs and protectionism against foreign competitors, manipulation in the market to produce certain socially accepted goods (e.g., hybrid or electric cars), tax incentives or penalties to direct the market toward socially approved outcomes, over regulation which raises the cost of doing business, professional licensing which regulates who can or cannot practice in certain fields, and on and on. Another gross distortion of the free market is “crony” capitalism. Crony-capitalism is where the government, through legislation or regulation, favors some sectors of the economy over others. It is the unholy alliance of private enterprise and the State. Because the government has intervened in the marketplace, it has become cost effective to lobby the government for certain favorable outcomes that benefit certain companies over their competitors. Large corporations have the capital to hire teams of lawyers and lobbyists to swing favorable deals with the government and prevent their competitors from gaining a foothold in the market.
The best of government intentions often have the worst results. That’s because the government doesn’t have the right motivation to intervene in the marketplace. The motive of the government is the perpetuation of its own power base. As such, it cannot tolerate a truly free market economy because there is no opportunity to exert control and influence. Political rhetoric has always demonized the free market as exploitive, but it is only in the free market where a truly win-win scenario can take place. When two people (or groups) freely and voluntarily exchange goods and services, there is necessarily a win-win scenario; each side has gotten what it wants at the price it wants to pay. When the government intervenes in the free market, the market ceases to be free! Through the coercive power of the State, the government meddles in the free market to benefit itself and its benefactors. The losers in all of this are “we the people” and honest businessmen who want to make a fair profit by exchanging goods and services.