Why the Market is at a Political Disadvantage

The dire consequences of socialist policies lie hidden in the future where no one can see them until it is too late. The immediate effects of so-called “stimulus” plans are touted while government debt or inflation skyrocket, the harmful consequences of which come later. The political cycles are typically too short relative to economic cycles. The economy of a nation does not usually respond instantaneously to government policy (depending on how radical the change).  Therefore, the electorate can and does get very confused about which political group is actually responsible for economic hard times, sometimes voting in the people who will make things worse.

Moreover the immediate negative consequences, especially the opportunity cost, of government spending are invisible. One cannot easily see all the prosperity that would have been created had the government taxed and regulated less. There are few photos and videos that can capture just how much prosperity and liberty is lost through government action. The left, on the other hand, can take photos and make videos of all the supposed “good” they do, only to have no cameras around when the long-term harm takes effect. Good economics is about seeing what is unseen.

It seems like Americans learn the hard way. It takes the awful pain and misery of a Jimmy Carter presidency for people to finally wake up to the fact that government is the problem, not the solution, to our economic woes. One would think we would learn from history, but the relevant history is distorted or ignored in our schools at all levels, from grade school to the university.

Historic Tax Day Tea Parties

People have often said that the presidency of Barack Obama is historic. It sure is now! When was the last time in American history that the first 100 days of a president provoked a nationwide outcry and protest? Hmmm, maybe he is following in the footsteps of Lincoln….

Elsa Murano, President of Texas A&M University, "brews the IRS"

The Young Conservatives of Texas at Texas A&M hosted a Tax Day Tea Party featuring a game called “Brew the IRS Agent” that allowed students to play a dunking booth on which a student with an IRS T-shirt sat.

Tea Party in Bryan, Texas

I’ve heard various reports of 500, 800, and even 2,000 of these Tea Parties having taken place on April 15. These were ordinary patriotic Americans who had had enough of the increasing control of Washington, D.C. over their lives through reckless taxing and spending. They want politicians to leave them alone, so that they can spend their own money as they see fit. These people are not greedy; they are salt-of-the-earth people who have families and help others in their local churches. But they recognize that the federal government is making it harder and harder for them to care for their families and the needy in their local communities.

How Government Stifles Charity

Before explaining how government (especially the federal government) hampers and prevents acts of charity, let me define what I mean by charity. Charity is voluntarily giving of one’s own time, energy, money, or anything else that one owns to another person. The notion of private property is built into this very virtue. The leftist, who by definition rejects the concept of private property rights, thus banishes are notions of charity. Additionally, the best charity is personal, intimate, and relational.

With this definition in mind, it becomes quite clear from a practical standpoint how the government stifles charity. Everything that the government does to make us less prosperous as individuals also makes us less charitable. Every cent the government taxes is one less cent you and I can give to private charities and causes and is one more cent that has to be earned through time at work rather than in volunteering one’s time to help those in need. Every needless government regulation that stifles prosperity that could be shared generously.

There is also a very subtle but pernicious psychological way in which government stifles charity. Because the government claims to be the Almighty Provider of basically everything, many ordinary Americans who buy into this leftist claim think they can just pay their taxes and not have to worry about anyone else afterward. They think they can pay someone else to execute the charitable duty they have towards others. They think these bureaucrats can actually alleviate poverty rather than make it worse.

Capitalist and Christian Worldview Similarities

There are many similarities in worldview between philosophical capitalism and Christianity. The first and most important of these is the recognition of scarcity and of the consequent need for labor. It is a scarcity of many things: natural resources, products, time, energy, money, virtue, etc. We don’t live in an Eden where our needs and wants are naturally provided for by nature. Human beings have to expend energy over long periods of time to satisfy their needs and wants. It has always been this way, and the abolition of industry and commerce will not change that. Agriculture apart from capitalism still requires hard labor and, if anything, can make scarcity worse because of natural disasters and the absence of storage facilities that arise from capitalist innovation.

As Genesis 3:17-19 tells us, “Cursed be the ground because of you! In toil shall you eat its yield all the days of your life. Thorns and thistles shall it bring forth to you, as you eat of the plants of the field. By the sweat of your face shall you get bread to eat, Until you return to the ground, from which you were taken….” Scarcity and hard labor are a result of the Fall, of original sin. Thus there is a tragic tint to both the Christian and capitalist worldview.

Both the Christian and the capitalist see no solutions to life’s problems, only trade-offs, only cost-benefit analyses. There is no solution to the problem of scarcity says the economist. There is no solution to the problem of evil and suffering (least not in this world) says the Christian. Both worldviews proclaim the limits of the individual person physically, mentally, and spiritually to solve these problems; both reject the Fatal Conceit.

The socialist, on the other hand, somehow believes that government, an elite corps of technocrats and bureaucrats, has unlimited knowledge and ability to create prosperity by legislative and administrative fiat. The socialist believes that evil itself can be eradicated by materialist means, for evil is merely material in nature to him (e.g. a person lies, cheats, or steals because he doesn’t have enough money and thus belongs to a weak, oppressed class).

Many on the left accuse Americans of just not being generous enough, of having a greedy, individualistic character flaw. From this “fact,” they deduce the cause of poverty. The problem with this view is that it ignores a crucial lesson of history and plain observation: poverty is the default, the norm of human life, whether it is material or spiritual poverty.

But there are ways to combat both material and spiritual poverty though not completely overcome them. Capitalism is the best response to material poverty; Christianity is the best response to spiritual poverty. The two together are the best response to the tragic existence of life.

Taxing Our Wealth Only to Give It Back Us?

At least since the Raw Deal of the 1930s, the federal government has been doing something that any person with common sense ought to recognize as silly: taking our money through taxation only to give it back to us to supposedly “stimulate” the economy.

Isn’t this merely a political shell game? Why on earth should we believe that the economy will improve merely because the government takes our money and then gives it back to us? The government has no money of its own; that money always comes from us, whether through taxation or inflation by overprinting money. Moving money around is NOT the same thing as creating wealth.

Furthermore, the process is even worse than merely moving money around because the government always takes a cut of the money for itself to build and maintain fancy buildings in D.C. and to waste money on the salaries of worthless bureaucrats who have never even met the people they are supposedly “helping.”

No, it really doesn’t take an economist to understand that government spending and control cannot create increasingly widespread wealth and prosperity but rather only increasingly widespread misery and injustice.

No, the real reason that the regressives want the federal government to tax and spend at ever greater levels is for the purpose of equality, social engineering. It is “unfair” that some Americans are more valuable to others  in the market place than other Americans. Thus the talented and productive must be punished for rising above the others.

The Delusion and Harm of “Economic Equality”

The society that puts equality before freedom will end up with neither. The society that puts freedom before equality will end up with a good measure of both.
-Milton Friedman

The contemporary tension between the principles of equality and liberty is the fundamental characteristic of American politics. This tension cuts across virtually every issue in one way or another, but it comes to the forefront in discussions of political economy. Discussions of equality and liberty take on concrete clarity when money is involved since wealth is easily quantifiable.

Collectivists of all stripes, including the leadership of the Democratic Party, want “economic justice” by which they mean “economic equality.” Notice how justice is equated to equality. But are they equivalent? What do these people mean by “equality”?

Well, it seems quite clear from their rhetoric that by equality they mean equal wealth distribution among everyone in society. That is why they rail against the rich and have stylized themselves as the champions of the poor. They believe there is something inherently wrong, even evil perhaps, if someone receives or saves more money than someone else (often except for themselves, the equalizers). These statists seem to believe that a person’s wealth is ultimately and inexorably determined by random chance. Even the valuable skills, attitudes, and hard work of the successful are the result of a good upbringing and education that not everyone had the opportunity to have. And money is power, and it is not right that some have more power than others. Of course, the only way to rectify this, in their mind, is through government intervention, through taxation and redistribution either directly through welfare and other direct payments or through government-run programs and services. The “fortunate” must be forced to give to the “unfortunate.” The “oppressed” must be “empowered.”

Of course, the statists are fundamentally right in one key respect: there is no such thing as equality of opportunity. Every person is significantly shaped and molded by his or her early experiences in family life, which by their very nature are extremely difficult, if not impossible, to replicate for every single child who comes into this world, at least not without even more government control over family life (or completely assuming the functions of the family, which have their own terrible consequences). Moreover, one cannot ignore the contribution of genetics as well to the fortunate circumstances of some. Do we really want to live in the dystopia of Gattaca?

What the conservative appreciates and accepts is that this fundamental inequality, even of opportunity, cannot be rectified and that any and all attempts by government to create greater equality, especially economic equality, are doomed to fail and cause even more misery and often more inequality. This combination of impossibility and harm convinces the conservative that economic inequality should not be a concern of government.

In a free enterprise system, the wealth that a person has is a reflection of how valuable that person’s goods or services have been to other people or how valuable members of that person’s family were to other people in the case of inherited money. Lottery winners and thieves seem to be the only people who gain wealth without providing value to others (and many politicians these days). A person’s salary, in a free market,  is a reflection of how valuable a person currently is to others.

Moreover, different people provide different levels of value to other people. A person who sells their physical labor provides less value than someone who sells medical knowledge and expertise. Most people can  do physical labor on their own; not everyone has the expertise and training to provide services that can save or dramatically improve the quality of one’s life. Hence, the latter service is more valuable.

But the inequality of the value of skills is not the only inequality that has an economic impact. Personal character, including moral character, varies from person to person. Some people are more virtuous than others: more honest, more charitable, more hard working, more wise and prudent, etc. Virtue is valuable, marketable to some extent. Those who are deceitful, ill-tempered, lazy, or reckless ultimately will have very little value to offer anyone in the marketplace, which demands a certain moral (Christian) framework from its participants.

It is impossible for the government to have complete control over human beings from womb to tomb such that they will truly be equal in regards to skills and character that will eliminate market competition by creating equal competitors. But the real question is not whether such a utopia can be achieved but whether government should even strive for such a thoroughgoing equality.

No, it shouldn’t. Government can only achieve equality by levelling the successful and excellent down to the level of the unsuccessful and mediocre. It is not very good at building good skills and character in people, especially the more distant and impersonal the government is. People of value to others in the marketplace are formed through intimate interactions within families, churches, and locally- and parent-controlled schools. These are the institutions that build people up and thus create an equality by moving the bottom up rather than by moving the top down. An equality by means of government that enforces equal misery for all at the bottom is tyranny.

Executive Bonuses: How Liberals Make a Problem, Then Complain About It

The top story today was President Obama and other liberal Democrats railing against the bonuses being paid to AIG executives. But this is just a prime example of liberal politicians creating problems with their policies and then complaining when the perverse effects of their policies manifest themselves, rather than taking responsibility for their harmful policies.

Though it is being reported, the fact that is not being emphasized enough is that AIG is contractually obligated to pay these bonuses. Would liberal Democrats have AIG violate its contracts? Would that make the situation any better? AIG seems damned if it does and damned if it doesn’t.

But you know what, this situation didn’t have to happen. If our elected officials would have stopped granstanding and giving these bailouts, then entities like AIG would have had to file for bankruptcy. When that happens, guess what: virtually all contracts are null and void! Those bonuses would NOT have had to be paid out!

See how our market system, which includes Ch. 11 bankruptcy, works well without government interference?? If well-intentioned liberals would just let incompetent businesses fail, we would all be better off.

Group Projects & Socialism

How many times have you heard a student complain about being in a group project in school? Throughout my years of schooling, from grade school to college, I’ve heard a lot of people complain about such projects. I can’t recall a single instance when someone talked about how great an experience group projects are.

Why is it that group projects are a source of complaint? In almost every case, the refrain is familiar: “I ended up doing all the work while everybody else did nothing!” Depending on the nature of the project, it seems that the work is often distributed unevenly yet everybody gets the same grade.

Before college, when we were allowed to form our own groups, I remember how everyone quickly tried to attach themselves to a group with “a smart person” in them to ensure that they got a good grade. Diligent students don’t like to do all the work for a school project, yet they have little choice if they don’t want their own grades to suffer. They are forced get a good grade for those parasitical students who would not otherwise get a good grade on their own.

What can this common, unpleasant experience with group projects teach us about politics and political economy? Quite a bit, for the dynamics of basic human nature are no different in the marketplace.

Clearly, this illustration teaches us that the individual responsibility of the free market is almost always preferable to shared or communal responsibility of government action. Just as the individual student should be rewarded with an individual grade based on his or her individual work, so the individual worker should be rewarded based on the individual contributions that he or she makes to the end product. When responsibility for a task is not clearly delineated among multiple parties so that those responsible can be justly rewarded or punished, that task is likely not going to get done well or at all. Assertions of collective responsibility with regard to economic matters (i.e. virtually all matters) almost always result in collective irresponsibility regardless of intentions. Sooner or later, those of ability will rebel or remove themselves from the situation as best they can (e.g. brain drain emigration).

At least in the private sector, we are free to choose what mission we want to work toward. We may never be completely free to choose the members of our team for tasks that require teamwork, but at least we are assured some degree of adherence to a sense of common purpose. Unlike school group projects, most private entities create their own hierarchy or chain of command that naturally assigns and enforces responsibility for tasks.

Cooperation is necessary for many tasks to get accomplished. But cooperation is best accomplished and most successful under a system of free enterprise, which entails voluntary cooperation and just rewards based on individual merit. Socialism, or a system of coerced cooperation that upholds equal reward for unequal output, is doomed to create conflict and fail.

Creating a Moral Health Care Market

“Expanding government control over medical care would result in greater disservice to the common good,” says Dr. Donald P. Condit. “Experience has shown that good morality is also good economics and makes for good society.”

A moral market in health care in one in which the market is allowed to act more freely than it does currently. Government-created barriers to competition among health insurance providers and health practitioners  should be removed. We must move away from an employer-based system that ties people down to their jobs or leaves them uncovered when they lose their jobs.

86% of health care is paid by a third party with the patient only paying 14%. Again, a system in which someone is spending someone else’s money (at least in part) on someone else is going to be an inefficient system. The natural information that the price system coordinates is being disrupted. Health savings accounts that give people more control over their money and how they spend it would help correct this problem.

Worst Recession Since When??

President Obama has said over and over again that we are in the worst economic crisis since the Great Depression. Journalists and pundits, even on the political right, have re-echoed this claim. But is it true? No.

Somehow I find it hard to believe that we are worse off than we were under the horrible economic situation under President Jimmy Carter in which stagflation, previously an economic impossibility, came into being.