WHERE I WAS
Government Interference with the Free Market
Government Interference with the Free Market
Many dictatorships create nationalized economies, or create conditions where the free market cannot operate because dictators tend to interfere with the rules of the free market, impose new rules or even act outside the rules.
Most honest and well intentioned politicians see the problems of the nation and "think they know" of a solution. Often they become entangled with a cause, or an ideology. In other cases they maintain their own ideas. Unfortunately, almost without exception, they think that the solution is to create new rules, or pass some legislation to solve a specific problem.
Very seldom we hear of
politicians advocating the deletion of existing laws.
It is so appealing for popular politicians to "think they know" how to create jobs and help the poor, that they start believing in their own solution: that somehow if they had absolute power they would make the economy and the country better. Very often they become so convincing that they are elected with large popular support.
Tyrants are not always evil. Joe Miller states:
"They are capable of great good and small kindnesses. They smile, they laugh and they love their children. But eventually they embrace the evil which defines their tyranny, and then those who gave them their power begin to pay a terrible price.
First a tyrant tells you he cares for you, then he presumes to think for you, then he simply tells you what to do. This is the essence of tyranny."
In spite of the best intentions, once government is way bigger than the optimum, the economic conditions start deteriorating. Eventually, when the economy fails, the most affected are usually the jobless, the poor and the uneducated. Austerity measures need to be put in place, even against the will of the majority. People may be demonstrating in the street because they have no jobs, no supplies, no food, but the people in power know that there is no miracle solution and must continue with austerity.
Here lies the fine line between a well intentioned, popular politician and a statist dictator. The people may try and elect different "personalities" of leaders, until they eventually get stuck with a leader that will not go away. This is how dictators or "presidents for life" came to power: Stalin, Castro, Mao, Hitler, Mussolini, Gaddafi, Chavez, Idi Amin, Milosevich, Saddam Hussein, they were all loved by the people at first. As you can see from the pictures on the side, almost every country in the world has tried a statist "leader", a form of government centralization, government nationalization, dictatorship or centralized power, at one time or another in the not too distant past.
All of them suppressed the economy (increased poverty) and reduced freedom. All of them caused the people to struggle for survival. In some notorious cases (Stalin, Mao, Kim Jong-il) people were reduced to mass starvation.
No matter how many countries experienced government centralization in its various forms in the past and in the present, it seems that people are always willing to vote for a "strong personality", a "good speaker", a "leader" who is willing to "do" something for them. They vote for the perception they have of who this leader is, but how can this person "do" something other than by imposing his views as laws?
Even the most well intentioned laws are never flexible and good enough to substitute the millions of constantly changing individual free choices of the people; the millions of new ideas and ways people can help each other through charity, local associations, churches, and especially through the free exchange of goods in mutually advantageous transactions. Only the two parties in a free, unregulated transaction (without the "protection" of the state) can maximize their mutual benefits: Either the transaction is advantageous to both, or one of the two parties will look somewhere else to find a competing product or service.
The government role in a free market must be limited to the protection of life, property and freedom.
Under a dictatorship the national economy cannot express its full potential. Most people and businesses enter a survival mode, fending for themselves. People do not even feel selfish, because the government is there and it is expected to take care of the problems other people have.
The restrictions and rules put in place by dictatorial governments to "handle the economy" are necessarily centralized. Dictatorships distrust de-centralized decision making.
Cenralization (under any form of government) is the antithesis of the free market. As we just explained, the free market works on the basis of millions of decisions taken by the people, freely allowed to choose products and services according to what they need or desire.
On the contrary, a centralized government reduces the ability for the nation to produce wealth every time it takes an economic decision "for" the people. The image of a friendly government that does things for the poeple needs to be constantly reinforced through propaganda.
Ironically, as the economy gets worse, people are convinced that they need even more government, to solve the increasing economic problems! You can see this happening in countries, states and at the local level (e.g.: Cuba, California, Detroit).
When the economy continues to fail, jobs are scarce, people begin to seriously suffer and are close to starvation and rebellion, only then a change of attitude takes place. Most churches, lobby groups and unions, who initially may have supported more government programs (to help the economy, the poor, the seniors, for a specific sector, for the environment, against racism, for a minority group, for the underclasses and for every conceivable cause), become the worst enemies of the statist regimes. As a consequence dictatorial governments either close down or take over, local associations, unions and churches in an effort to quench all opposition.
When finally the dictatorrship ends, many people still do not grasp the reasons why the country was in such a bad shape. They understand that dictatorships are bad and attribute the problems to the person, the well intentioned politician who became a harsh dictator.
The irony is that the well intentioned politician did the damage to the economy when he was a well intentioned ideologist! Of course he had to constrain the people later on, when the people reacted to a deteriorated standard of living, the impositions of more rules, the austerity regime and the loss of freedom.
Ironically again, some people recognize the "good" that some dictators have done for the country during their autoritarian regime. Even without a strong economy on their side, and without the former popularity, some dictator never lose their "good will" towards the people and the good of their country.
dictators have added murder to injury. Not only they ruined the
economy and the well being of their country, but their
imposition of rules became ruthless. In some notorious cases,
this led to injustice, terror, and the death of millions of
Common to all centralized regimes is the unwillingness to de-centralize economic decisions:
- They do not allow the people the freedom to choose for themselves what to buy, what to sell, how much to pay and how to pay;
- do not allow employers to choose whom to hire, how much to offer and what to expect;
- do not allow employees the freedom to choose where to work and how many hours to work;
- do not allow the people to start their own small business in a garage or in a basement, hire other people, buy and re-sell products and create wealth;
When such free market activities take place, centralized regimes intervene and quench private initiative, usually in the name of "the law", "the environment", "equality", "fairness" or some other good sounding word.
In today's society we have an information and education problem. People do not know where to find good information (the truth) and often listen only to the most accessible media. We also have schools run by teachers who have been educated in those same schools.
Out of our information and education systems, people have not yet been able to grasp that a controlled economy will fail. Pretty amazing, after so many examples!
So, what do we do in "democratic" society? We take the middle of the road approach: we allow our country's economy to be, at best, semi-controlled. At best, this allows for a very limited economic expansion and a meagre standard of living for the people.
This happens in two ways: Government interference and unfair government competition.
We allow our food to be distributed privately (albeit with safety controls), but we allow the government to take over the health insurance business.
We allow some industries to invent, design, develop, produce and sell what they want, but we allow the government to give tax "incentives" or increase taxes to other specific industries (e.g.: solar, wind, car, agriculture).
We allow food production, but only under certain conditions.
We allow energy production, but then we heavily tax their products.
We buy products from abroad, but we deter industries from producing abroad. We want industries to start up and crete jobs in our country, but we deter them with corporate and employment taxes.
The examples abound. In essence, we are not free from government interference in economic decisions.
Unfair Government Competition
The other way we have not experienced the full benefits of a free market is because the government has appropriated so much of it (products and services) and competes unfairly with industry, in some cases forcing private corporations to switch to another niche market or go bankrupt.
The government can set the rules of the game and change the rules when it wants: Company ABCD may spend time and money in R&D for a truly innovative product, but the government picks and choses (and finances) the "winners", forcing company ABCD out of business. Later it is discovered that the chosen "winner" is also forced to go into bankruptcy.
The government can create monopolies, for example in the utilities field.
The government can provide "services" that by law must be bought from government and charge an arbitrary fee for them, such as licences, prescription drugs, or the money supply.
The government can pay salaries that are not affordable by the private sector.
The government can impose the use of a particular product on the general population (such as smart meters, curly light bulbbs, etc.)
The government can set the price for a particular product, or minimum wages.
The government can provide its services without paying corporate taxes, but private industries pay corporate taxes that go to government.
Finally, government extract taxes from private industries and people to pay salaries to their employees, including the tax portions that these employees pay back... to the government!
In addition to government interference and unfair competition, in recent decades we have experienced an oversized government, as explained in the main section of this web site.
No country in the world has ever experienced a truly free market. Isn't it time to try?
WHERE I WAS