MARKETS WORK - GOVERNMENTS DON'T

By James Craig Green


Markets work because they punish failure.

Governments don't work because they reward it.

Governments are more popular than markets, because they make it easier for people to avoid the short term consequences of their mistakes. But, reality eventually catches up, sometimes taking decades or lifetimes.

The ruthless, adverse consequences for mistakes that make markets work (economic losses) are what most people try to avoid at all costs. Like all collectives, governments tend to reduce or eliminate personal responsibility by melding individual actions into the group. As political organizations, this means they focus on short term election cycles, popular opinion, instant news and other political considerations, at the expense of long term prosperity and stability. This unfortunate characteristic is built into government genes, so-to-speak.

Markets encourage production - the source of all wealth - but this is not easy. It requires savings, hard work and risk, driven by the profit motive - the engine of production. Most new businesses don't last a year. The dedication and stress of starting and running a successful business for years or decades is completely lost on economists, politicians, planners, government employees and other beneficiaries of un-subsidized businesses' productive efforts. Few financial analysts have any idea what this takes, or how much of your life it can consume, successful or not. 

As Adam Smith pointed out in WEALTH OF NATIONS, you don't get your supper from the butcher or baker's public spirit, but from his own self interest. This, in a nutshell, is what produces virtually everything useful you have purchased in your lifetime.

Though government can create jobs and produce useful goods and services, it does so at the expense of the productive private sector upon which it depends. On balance, government is a net consumer, not a producer. If it were a business, it would have long since gone bankrupt. This adverse economic impact can only be justified as a cost worth paying for things such as national defense, protection of people and property and an impartial court system. As the American Republic's founders intended, the size and influence of government should be limited to these and a few other things. Even these can only be justified if they are truly for the general welfare of all, and not for the specific welfare of some at the expense of others.

Markets are based on choice. This means both parties to a transaction must agree, each perceiving a benefit, before a deal is made (win-win). This produces a net gain to both, because each traded for something s/he wanted more than what s/he had before the transaction.

Government is based on force. This means one party gains at the expense of another's loss (win-lose). Although this is sometimes considered a wash (or even a benefit) by some, the process of forceful taking almost always produces a net loss. If you want a cheap car, go to a government auction. You win, but taxpayers and the economy lose more, because money taken from them was not as wisely spent as money they spend on themselves. During the Great Depression, the government poured milk into gutters and slaughtered baby pigs to "keep agricultural prices high." This is the chronic insanity of government when it goes beyond its protective role and enters the economic sphere. It destroys wealth while pursuing fools' errands from its extreme economic ignorance.

Please read Lawrence Reed's pamphlet, GREAT MYTHS OF THE GREAT DEPRESSION. If you are a serious advocate of human liberty and believe in the Founders' promise of a Constitutional Republic limited to a few, really important, protective powers, why not purchase a hundred of Reed's pamphlets about the Great Depression and give them to your friends or others receptive to the ideas contained there?

Government can't plausibly bail out bankers and Wall Street investment firms, then claim the free market is to blame, but it can do so politically, which defines the art of providing something-for-nothing at someone else's expense.

The American Republic is in trouble because of too many promises, made to too many people, which the government has no way of keeping due to its unprecedented levels of public debt. Only when it gets back to its primary purpose, to protect individual rights and adjudicate disputes, will it become sustainable, and maybe even worth the money it sucks out of the economy every year.

You can't fool all the people all the time, but you can do it long enough to run a large country. - Anonymous