Government IV: Free Market Economics

I’ve been reading about economics. My original goal was to be able to discuss economics intelligently, but I am failing miserably and I remain confused. I’m pretty sure I understand the meaning of most of the words, but the econo-speak is apparently a dialect that is beyond my comprehension. I think reading economics is like going to an all-night root canal.

Despite my confusion, I have learned a few things. First and foremost, my lifelong faith in capitalism appears to have been well founded. Milton Friedman (he is definitely my favorite economist) sees a free market as the foundation of capitalism and democracy. Even I get the free market thing.

Here’s how it works: I go to the hardware store and I give the clerk money in exchange for a new drill. The hardware store and I both get what we want. I get the drill and they get the money, and we are both satisfied with the deal. If I think the hardware store is charging too much for the drill, I am free to look for a better deal at countless other hardware stores, which doesn’t bother any of the hardware stores, because there are countless other customers who are also looking for a drill. There are only a few requirements for this free market trade to work. First, both me and the store must be free to do or refuse the deal – no one is coercing either of us – and both of us must have other options, i.e., there are other stores and other customers. Oh, yeah, and we need the government to furnish pieces of paper (money) which we all agree to treat as “legal tender”. That’s it. Except for the money, government is out of the picture.

That’s how the free market is supposed to work, in theory - the government has no power to control any part of the deal. Reality, however, turns out to be much more complicated. The free market is really a simple system, but it has been all bollixed up, mostly by the government. In what I choose to believe is an honest effort to “protect” us, the government has inserted the most complex set of regulations imaginable. Just to name a few: OSHA regulations to protect workers; EPA regulations to protect us and the environment; health, liability, and other insurance requirements to protect us from insurance companies; EEO and other labor regulations to protect us from employers; FDA regulations to protect us from nature and mistakes; dozens of licenses and permits to protect us from each other when we seek to construct, open, and operate businesses; and, of course, unemployment, worker’s comp, payroll, income, sales, telephone, excise, electrical, capital gains, real estate, gasoline, and who knows what other taxes to pay for all the government protection. Every one of these regulations is coercive of either me or the store. Individually, none of them may seem too big a problem, but taken together they overwhelm that first principle of free trade – that neither party is coerced.

A retail business falls under the purview of hundreds, if not thousands, of regulations, all of which are coercive to some degree. By the way, most of those regulations also involve fees or costs which are passed on to the customer. Absent the government, that drill would have cost me a lot less than $260. Oh, yeah, add union contracts and negotiations, consumer safety investigations, the ACLU, class-action trial lawyers, and judges who continually bend and distort the Constitution, and I should be grateful the drill didn’t cost $500!

We didn’t always have all those regulations. However well-intentioned, many regulations are based on the outrageous assumption that Americans are too dumb or lazy to take care of themselves. The purveyors of the regulations never acknowledge this assumption, of course. They may not even be aware of it, but it underlies most of the government’s efforts to “protect us”. In fact, free market forces (if you sell a lousy product, people will stop buying it) and/or individual judgment, provide adequate protection. Nowadays, every time someone gets hurt or buys a defective product we pass a new regulation to “protect” everyone else. The government never considers the negative regulatory impacts: increased taxes, increased costs of products and services, government control of our lives, loss of individual choice, loss of freedom, and God only knows what else. Government can’t seem to resist imposing a 100% solution to every little 10% problem. No doubt some of us are dumb and lazy, but most of us get up every morning and go to work, out of which emerges the strongest and most productive economy on earth. Believe it or not, my progressive friends, we really can take care of ourselves.

Americans thrive in the free market. It is government control that stifles our economy. Even though it is impeded and endangered by increasing government intervention, our free market is still hanging on. Whether we call it capitalism, private enterprise, the free market, or we don’t have a clue what it is called, most of us love it.

But, as the old saying goes, “freedom is not free”. There is no guarantee that our market will remain free. There are many among us who would sacrifice our free market in the name of “fairness” or “equality”. Our Constitution guarantees equality, but it is equality of opportunity, not equality of outcome. It does not entitle us to anything - it sets us free to achieve in accordance with our innate talents and willingness to work hard. Our Declaration of Independence proclaims that life, liberty, and pursuit of happiness are rights given to us by God, not the government. Our Constitution specifically limits the powers of the government and places the power in the hands of the governed – us. It protects us from interference by too much government. In many other countries, the government is in control and it is the power of the people that is limited. And here’s the really scary part: every new government regulation takes a little more power away from the people and increases the power of the government. With every new regulation, we get less freedom and more government.

By their very nature, all governments are inclined to grow. Not all of them are threatening or dangerous, but they all have the potential to become so. Nonetheless, we can’t do away with government. Some small, limited government is necessary and beneficial. We need some government to do those things that are impractical for free enterprise and individuals to do, and to protect us from those who would force us to do things we don’t want to do; but, the government should not protect us from ourselves and it definitely should not interfere with the free market. Above all, remember that only we, the people, can prevent limited government from growing into big government and taking over.

Furthermore, it must be the right type of government. The free market only works in a democracy wherein the power of the government is subject to the will of the governed. The people must ensure that the government remains limited and small, less it gain so much power that it is no longer subject to our control. At this very moment, our government has grown so much that it is poised to wrest control away from us. Our Constitution limits the size and power of our government, but the Constitution has been thwarted by guess who – the government and its progressive friends.

My little study of economics has taught me that the free market (capitalism) is messy and often unfair, but it is free, and it works better than any other economic system ever conceived. No one forces you to buy or sell anything. The free market encourages personal responsibility, achievement in accordance with our own talents and willingness to work hard, and cooperation with others – sounds great to me.