Economic Myths #14 – Share the Wealth

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Clement Attlee is, with little doubt, one of the more notable of Britain’s former Prime Ministers. Apart from the long lasting effects of his legacy he was, in 2004, voted the “Greatest British Prime Minister of the Twentieth Century” in a poll of 139 academics. Needless to say, with such a high ranking in academic circles, almost every “accomplishment” of the post-war government that he led (with the possible exception of decolonisation) is likely to be an anathema to libertarians. Not only did he nationalise key industries such as the railways, canals, road haulage, coal mining, gas, electricity, telephones and steel manufacturing, he practically created the “cradle-to-grave” welfare state, the jewel in the crown of which was the now untouchable sacred cow, the National Health Service. Furthermore, he successfully entrenched the “Keynesian consensus”, the idea that full employment would be maintained by Keynesian fiscal policy, that was to unite all parties of any stripe for another three decades until the election of Margaret Thatcher’s government.

With such profound and fundamental changes to British society, many of which are still felt today, it is important to have an insight into Attlee’s motivations towards the legislation that his government passed. His own background, (not unlike that of most left wing intellectuals) was decidedly non-working class. The son of a solicitor, he was raised in Putney, an area of London populated by the professions. He was educated at an independent school and later read Modern History at University College, Oxford. He was not exactly born with a silver spoon in his mouth but neither was he consigned to life working in factories or in the coal pits. According to Wikipedia, his original political leanings were conservative. It was after he spent three years managing a charitable institution for working class boys in Stepney, East London, that he “came to the view that private charity would never be sufficient to alleviate poverty and that only direct action and income redistribution by the state would have any serious effect”. Thereafter, he became a “full-fledged supporter of socialism”. Which such self-assuredness, can we expect Attlee’s post-war government (to borrow a phrase from the infamous Beveridge Report that influenced his government’s policies) to have come close to completely “abolishing want”? Unfortunately, the facts speak otherwise:

  • Coal production in 1947 fell seven million tons below the output of privately owned mines ten years earlier, resulting in a three week industrial power cut in London and the Midlands;
  • The government constructed 134,000 fewer homes per year at a higher cost per unit than were built in either of the two years preceding the war;
  • Wages were frozen to wartime levels while the cost of groceries soared as their supply declined;
  • When US and IMF loans dried up, the costs had to be borne by the British working man, leading to the “taxation and tears” budget of 19491.

And summing up the welfare state:

The [Beveridge] plan merely furnished a thin cushion against total disaster for the most impoverished third of the population. True, every citizen (whether or not he needed it) was entitled to prenatal care, a birth subsidy, hospitalization and medical care of sorts, unemployment insurance, an old-age pension, funeral costs, and an allowance for his widow and dependent orphans. The subsidies and allowances were tiny, and, with mounting inflation, barely sufficed for the poorest – sixteen dollars at birth and eighty dollars for a pauper burial. Medical services were spread so thin that even at the price of nationalizing the existing medical profession, it was impossible to guarantee first-rate care. With food rations hovering near the starvation level, sickness became more frequent and national; production fell still lower. So poverty was not eliminated but increased to plague proportions, and life was a nightmare for everyone but the most dedicated bureaucrats. A man might have “social security,” yet he could not go out and buy a dozen eggs. After four years of Socialist government, he was only entitled to an egg and a half per week, as decreed by Marxist No.1, John Strachey, Fabian Minister of Food and Supply2.

The origin of Attlee’s political views betrays his belief in a common economic error, a belief that can clearly have disastrous consequences if its holder happens to one day become the leader of his country. This view of either private charity or forced redistribution as the solution to poverty is based on the flawed notion that there is a fixed pool of wealth for everyone – that when one person possesses wealth it necessarily results in another person being without it. From this false premise it follows that the alleviation of the poverty of one person requires wealth to be disgorged from another. The solution to poverty, however, is that wealth is created and not simply redistributed – the pie gets bigger and not just chopped up in a different way. Capitalism and the free market, far from creating haves and have-nots, involves the progressive accumulation of capital that produces more products at cheaper prices that everyone can buy. More factories, more machines, and more tools that produce a greater supply of goods for less and less effort serve to alleviate material poverty. All of us become better off as a result. If, on the other hand, wealth is to be confiscated from some and redistributed to others, it retards this very process of wealth creation. While a specific redistribution may allow the beneficiaries to afford to purchase a bit more in the short term, in the long run there will be less work, less saving, and less capital investment and accumulation. The number of products produced will fail to increase and thus their prices will remain high and out of the reach of the poor. Redistribution is, therefore, a temporary solution at best. At worst, it traps the people permanently in the stagnant poverty that you are trying to get rid of.

Let us imagine ourselves, for one minute, as employees of the charitable institution of which Attlee was manager. How do we interpret that which we may see every day? From some kind of absolute standard, the poverty and destitution of the slums in the East End of London may have been “terrible” or “bad”. No one would ever seek to deny this. It is important to realise, however, that poverty, fundamentally, is not caused by humans but by nature. The earth is and never has been the Garden of Eden, full of delicious goodies that are ripe for our picking. The first person who trod the virgin soil of the Earth was in a position of absolutely crippling poverty by our modern standards. All he had was himself and his bare hands – no shelter, no food, no clothes, no tools, absolutely nothing. (Indeed, we might ask, how on Earth would “redistribution” have helped him when there was nothing to distribute!). But from the moment he dug the soil with his hands, from the moment he picked up the first plank of wood to build into a shelter, from the moment he fashioned a tool from basic materials such as a rock and a stick, so began the long, slow process of capital accumulation and wealth creation, a process that only really began to accelerate in the early 1800s. Humans, in other words, have to work to overcome the natural state of poverty in order to build up a civilisation as prosperous as the one we have today. To view a snapshot of this process at any one moment in history and to declare self-righteously that “those people over there are in poverty!” is to judge this march of progress against an ideal – as if earth should be the Garden of Eden. The appropriate standard against which to make a judgement however, is the best that can be done given the eternal condition of scarcity. If one cries “something must be done” it ignores the possibility that something is already being done and has currently reached its best possible stage before moving forward to bring greater things. Wealth creation and capital accumulation takes time – we did not get refrigerators and cars the very moment the first person on earth decided to get off his backside and start working. But this process has caused the percentage of people living on one dollar a day to fall from 85% to 20% in two hundred years – and that achievement has been accomplished while the population has multipled five or six times.

The only way, then, by which we can judge that there is “too much poverty” at any one time is to ask a single question – is there anything that is slowing down or causing an artificially imposed constraint upon the process of wealth creation? The answer can only be what Franz Oppenheimer referred to as the “political means” for an individual to gain wealth – that, rather than work oneself to use unowned resources, or to trade goods voluntarily with others, one confiscates them violently from people who already own them. Although we can see that Attlee’s solution – redistribution through the welfare state – is a major part of this, so too is any restrictive and regulatory encroachment upon private property. In Attlee’s day, we can point to the fact that the decade of his birth, according to historian David Cannadine, marked the peak of aristocratic power and influence in British society. Today, it is the power of the privileged financial barons of Wall Street that benefit from cheap, freshly printed money, robbing the poor of the their purchasing power and ploughing it into assets, causing bubbles, malinvestments, booms, busts, unemployment and misery. If we really want to solve poverty, we should be removing these barriers to wealth creation that favour the privileged elites rather than compounding the entire sorry state of affairs with further economic evils.

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1Rose L Martin, Fabian Freeway – Highroad to Socialism in the USA 1884-1966, Ch. 7.

2Ibid. p. 76.

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Disability and the Free Market

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Whenever faced with the opportunity to explain the benefits of the unfettered free market, the libertarian will often find himself cross-examined and required to explain how a political economic system of liberty will handle various societal ills and issues. One of these issues is disability and how disabled persons, inflicted with some kind of impairment that is (usually) no fault of their own, will be able to sustain a quality of life comparable to that of non-disabled persons. For the sake of brevity we will explore this issue here in relation to physical disabilities rather than mental.

The statist solution to disability is, typically, nothing short of rank egalitarianism. First of all, one must define a hypothetically “typical” able-bodied human being and the characteristics of that person. Anyone who does not meet this standard through either the absence of tissue (such as an arm or an organ) or damage to the same that impairs functionality to a significant degree is considered to be “disabled”. The state’s response to this, in addition to disability benefits funded by the taxpayer, is to forcibly require private providers of goods and societies to maintain equality of access for disabled citizens, including the installation of ramps, lifts, disabled spaces on transportation facilities, and so on. Tackling disability, therefore, is a plank of social justice, of redistribution not from the financially rich to the financially poor but from the physically wealthy to the physically deprived. Just like any other arm of the welfare state, one set of people is forced to fund remedies to problems that are borne by another so that the cost of disability is shifted from the disabled to the able-bodied.

A preliminary problem with this approach is defining precisely when a person will be considered to be “disabled” and which characteristics we are examining when we make such a definition. At the extreme, few people can run as close to as fast as Usain Bolt. Should we not consider Bolt and those of his calibre as able-bodied and the rest of us disabled? If Superman appeared on Earth today, wouldn’t we all appear to be chronically crippled in comparison? Shouldn’t Bolt or Superman be required to fund the rest of us with disability benefits? Clearly this would be ridiculous but when we attempt to make a similar judgment against the “typical” human being we see that we all have varying physical strengths and weaknesses compared to other people that make us either more or less suitable to certain pursuits. Indeed the very reason why we have the division of labour is because of these varying qualities, with weaknesses regarded simply as differences rather than disabilities. At what point does a weakness become a disability? While it may be possible in common parlance to state that a man without an arm is “disabled” whereas a person who has a fully functioning arm is “able-bodied”, determining a clear legal definition of disability for cases in between these two extremes will require at least a degree of arbitrariness. What, for example, should we make of a person who has an arm but cannot extend it fully in a particular direction? And if we are talking about typical characteristics, females are generally physically weaker than males – should we regard all females as “disabled” with all males required to subsidise them with disability benefits? Furthermore, simply because a person is disabled in one way does not rule out the possibility that he may excel beyond the capabilities of his able-bodied brethren in another that, in his eyes, more than makes up for any loss of functionality caused by the disability. What is also clear is that, for the most part, we have to consider a not only a “typical human” but also a “typical disability”. While any disability is capable of being “compensated” by tax-payer funded benefits, when it comes to forcing equality of access only disabilities suffered by a small but significant percentage of the population can be considered. The reason why there may be ramps and wide car park spacing for wheelchair users is because wheelchair users form such a minority. If, however, an individual suffered from a really unusual disability that could only be met through special accommodation unique to him is it likely that all businesses and public spaces in the entire country would be forced to cater for this? As with all statist solutions that lead to redistribution, defining the deserving beneficiary will always be haphazard, encompassing some of those whose ailment is little more than a minor irritation while leaving out in the cold those with significantly impacting impairments.

Leaving this consideration aside, however, and taking it as a given that we can define someone as “disabled”, the libertarian response to the statist solution must be that, however awful and debilitating one’s disability, no one possesses the right to shift the cost or the burden of that disability to another individual. Although it may not be the fault of a disabled person that he possesses a disability, neither is it the fault of anybody else and hence there can be no entitlement, enforced by the violent imposition of the state, to have other people fund a remedy or compensation. It will be the case, therefore, that disabled individuals may command lower earning power in the marketplace simply because their productivity is lower. However, this is no different from the fact that a slightly weaker man may have lower earning power than a slightly stronger man in the market for physical work; the difference between the slightly weaker man’s earning power and the disabled man’s earning power is one of degree rather than of kind. Why should the individual with the greater impairment acquire an entitlement to compensation whereas the individual with a lesser one must shoulder the burden alone? In any case, however, a physical disability does not automatically mean that a disabled individual can command lower earning power – if his mental faculties are intact then his productivity in mental tasks may exceed that of the physically able-bodied in physical tasks. Furthermore, a disabled person has no right to enforce private providers of goods and services to provide some kind of equal access to those goods and services – such as the installation of ramps, lifts, wide car parking spaces, etc. Precisely how much access a private provider grants to his goods and services is dependent upon whether the cost of doing so is less than the resulting revenue. Such questions are very broad as well as very narrow. Should, for example, the supplier set up a bricks and mortar store? If so, where should this store be sited? Should the supplier set up a website? Or would sales be maximised by sending individual salesmen round to every door with the very products in hand, ready for the purchasers there and then? All of these are questions of access. If a minority of customers with disabilities are significant enough to make increased access profitable then it will be provided, otherwise resources are diverted from ends which are more urgently desired by consumers. It is important to realise in this regard that shops, bars, restaurants and so on are not “public” premises; they are privately owned premises into which members of the public are invited to conduct trade. It is the owner’s prerogative which members of the public whom he chooses to serve – he cannot be forced to associate or disassociate with any particular customer, regardless of race, creed, or physical ability.

What, then, would be the position of disabled persons in the unhampered free market? Where a person’s earning power is markedly lower as a result of a disability, or where “access” is impeded by the same, we could suggest that private charity would exist to ameliorate the situation – something that is more likely in an economy where people are allowed to keep more of their money. Such charities could, for example, provide disability benefits to those who are disabled and fund the installation of facilities that improve accessibility. However, the essential difference between the free market and the welfare state is that the latter, in all of its guises, is preoccupied only with wealth distribution whereas the free market is the powerhouse of wealth creation. In the first place, it is only because capitalism and the free market has generated so much wealth that the existence of disabled persons in society can be funded. In impoverished past times, if a person could not work or only worked to a lesser ability than the able-bodied he may simply have starved to death, if he was not actively killed beforehand for being a burden on everyone else. Our advance in this regard is solely because even the lesser productivity of the physically disabled is, in the free market, able to afford them a comfortable standard of living, something that would continue along with increased wealth creation. Capital invested on behalf of the able-bodied is also capital invested on behalf of the disabled and the productivity of both is improved with economic growth. Second, it is not true that there would be no redistributive remedy under the free market. The whole purpose of insurance, for example, is to provide compensation for those catastrophic, but unlikely events that are no fault of the victim. Where physical disabilities are present from birth, for example, prospective parents could purchase medical insurance that will promise a certain pay out in the unfortunate event that their baby is born with a disability, compensating them for the additional costs of care and raising a disabled child. Similarly, insurance would cover the incidence of faultless accidents which leave you with a disability. It is of course the prerogative of each individual to purchase such insurance and it is entirely up to him whether he wishes to run the risk of being unfunded after an accident. But this is his choice and such a person cannot be forced to put his money towards an end that he does not deem suitably urgent enough for fulfilment. If, however, you do believe this is a valuable end then you will not left high and dry with the only option to die following an accident simply because the state is not there to lend you a crutch. Third, redistribution by the state to remedy a certain ill completely distorts the incentives that lead towards the occurrence of that ill. If one knows that a disability will be compensated by the state then, quite simply, it reduces the cost of being disabled. Disability with state compensation is relatively a more attractive proposition that disability with no such compensation. Therefore whatever steps could be taken by persons to reduce the incidence of disability will be taken to a lesser degree. Given that ability and disability is intricately linked to a person’s health overall, people will be less careful with their health; they will take more risks with their bodies; they will be involved in more accidents; indeed, even obesity is now, according to the European Court of Justice as of last month, defined as a disability – would anyone doubt that the level of obesity would be as high as it is without government funded healthcare programmes? Moreover, there will be less of an incentive for couples who possess a genetic risk of passing on a disability to a child to avoid giving birth to disabled children. There will, therefore, be more disabled children born. In short, if you confer upon people a right to be paid when they are disabled, you will, all else being equal, have more disability. Fourth, such distorted incentives also perpetuate the accommodation or compensation of physical disabilities ahead of attempting to find long term solutions that would result in their eradication. If the burden of disability is reduced it also reduces the impetus to find a cure. Disability is simply put up with instead of solved. With the free market, however, as the division of labour widens and more capital is accumulated it affords the wealth not only to increase specialist outlets and solutions that may cater specifically for disabled persons, but also it makes possible increased research and development into long term cures for physical disabilities. Imagine if a person without legs could grow new ones, or if a person who is deaf could resolve the problem simply by swallowing a pill? A truly wonderful world is not one where everybody is forced to compensate and accommodate disabled persons; it is one where we have the wealth and technology so that, to quote the prophet Isaiah, “the eyes of the blind shall be opened, and the ears of the deaf unstopped…the lame man leap as an hart, and the tongue of the dumb shall sing”. This is not to imply that there will be no attempt at achieving cures for disability under statist regimes; but with retarded wealth creation and distorted incentives the desire towards and capability of achieving it is greatly diminished. Moreover, with the free market, the point at which a person’s disability is considered a problem worth spending money finding a solution for is determined by disabled individuals and not the arbitrary decrees of the state. Let us therefore banish the statist accommodation and compensation of disability and unshackle the free market so that disabled persons, like everyone else, may enjoy not only an increased standard of living but the possibility of a complete cure for their afflictions.

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Libertarianism – A Utopian Ideal?

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Libertarianism – and any sort of more general freedom from government as advocated by anyone with a pro-free market leaning – is opposed both ethically and economically on a number of substantive grounds. The proposition that without government we would have inequality, destitution for the masses, rampant greed, and so on is a familiar charge. A further point of opposition is that libertarianism, and the drive towards it is simply utopian or idealistic and that libertarians are hopeless day dreamers, lacking any awareness of how the world “really” works. It is this objection that we will attempt to answer in this short essay.

There are two different basic guises of the argument that libertarianism is utopian. The first is that a libertarian world will simply never come about; that government is so entrenched in the world and people are so inherently statist that any hope for a libertarian society will founder upon the rocks. In the first place we might as well point out that libertarianism is a normative theory; just because we live in a society overwhelmed by statism does not mean that things should be that way. The current situation may make it harder to achieve but it does not undermine libertarianism as an ethical theory. But if we ignore this we do have to recognise that much of the fight for freedom will be an uphill struggle – as it always has been in history. The present author does not expect a libertarian world to appear within his lifetime. But from a strictly practical point of view this fight is a lot less “utopian” than many other goals such as the fight against poverty or against disease. These things require positive action and endless patience to wait for enough wealth to accumulate in order to provide some alleviation. Indeed even the most popular ideal in the world today – the so-called spread of democracy – requires armed invasions, active peacekeeping, the setup of institutions for which to hold to elections and the willingness of the population to get off their backsides and vote. This is assuming, of course, that such an ideal is genuine and not simply a veneer for power and control over resources. Freedom, however, only requires negative action – the abstinence from violence against the person or property of another person. Every single individual in the world has the physical ability to bring this situation about right now with no effort whatsoever. Freedom could practically be achieved much more quickly than wealth, democracy, inequality, happiness, fulfilment or any other ideal that one could care to mention. This does of course suffer from the drawback that people need a passion for liberty and a willingness to cease their promotion or tacit acceptance of the ruling regimes. Inducing recognition of the illegitimacy of government on a wide scale is a formidable task for libertarians, especially as it is so radical. But what is truly utopian, however, is the belief that the current situation of debt, spending and kicking the can down the road can ever continue. At the birth of social democracy, Western nations had accumulated several generations’ worth of capital that had raised the standard of living by a significant magnitude. This provided a seemingly inexhaustible fund for politicians to bribe voters, showering them with goodies in the form of retirement benefits, welfare payments, nationalised industries, publically owned infrastructure, and so on in return for their votes. Because politicians like to spend and spend without raising current taxes, much of this spending was fuelled by borrowing, with the productivity of accumulated capital enabling tax revenue to service this debt. The borrowing and inflation has benefitted the bookends of society – the poorest who receive the majority of the welfare payments and the very rich whose assets survive the inflation by rising in nominal value – as well as the baby boomer generation, which has received most of the lavish benefits without having to pay for them. The profligate waste disguised a slow but relentless capital consumption until now productivity can no longer provide for the burgeoning level of spending. Governments today are struggling to even service the interest on debt through tax revenues, having to borrow more just to pay down previously accumulated debt. Particularly now as the aforementioned baby boomer generation has begun to retire, leaving behind it a decimated workforce supporting a heavy generation of retirees, this situation is likely to only get worse. There are three possible options available – to default on the entitlements; to default on the debt; or to print enough money to pay for everything. The first option would cause mass social unrest, the second would cause financial markets to collapse and the third would cause hyperinflation of the currency. This is an unpleasant but soon to be necessary choice. It is precisely because the paradigm of social democracy, its welfare state and social justice no longer appear to be working that liberty (and “Austrian” economics) are beginning to be viewed as viable alternatives. As suggested previously, the view (and hope) of the present author is that this will be a relatively bloodless and un-revolutionary process, taking effect through the simple circumvention of government by people who simply want to live their lives and maintain their standard of living. Regardless of their precise knowledge of the virtues of liberty, a libertarian world will come about by people seeking to assert their individuality. That seems a lot less utopian than desperately attempting to prop up the current, zombie-like system.

The second guise of the argument that libertarianism is utopian is the proposition that non-aggression is counter to human nature and there will always be people who seek to murder, rape and steal. Or, even worse, a free society will just create a society of looters and murderers and the peaceful and harmonious world that libertarians envisage will simply never appear. With government, however, peace is maintained (enforced?) and we have a controlled and orderly redistribution subject to democratic oversight and this is far more in keeping with the nature of humans. First of all, freedom is the raison d’être of human nature and not its antithesis. Undoubtedly it is true that the political means of achieving wealth through theft and redistribution, as well as the abdication of individual responsibility through devotion to a leader, are powerful and attractive propositions that may form part of human nature. But this is simply a part of the universal law of human action that seeks to minimise individual cost and maximise individual benefit. People seek to promote government action because they think it will promote what they want while forcing others to shoulder the burden. They want government to enact their ideas and their plans and for everyone else to march in time. They seldom consider the fact that they may be suffering the costs of implementing somebody else’s plan. As soon as government ceases to serve this function in the opinion of individuals, it will be dropped. It is, therefore, individual freedom and not an automated, robotic adherence to the government that is in keeping with human nature. Second, bearing this in mind, it is far from clear that society would simply disintegrate into murderous chaos if government was abolished instantly. While there may be a transitory period of restlessness, people will soon take steps to privately protect and defend their property, with these private means replacing the monopolistic provision of the state – as happened recently in the riots in Ferguson, Missouri, when police were ordered to stand down. Moreover, there is no reason to believe that the division of labour and social co-operation would suddenly be obliterated overnight. People engage in these things not only because it is the most productive form of organisation but also, and perhaps more importantly, because the number of people willing to commit private murder and theft would still be in the minority. The majority of people abstain from these acts not because the government is preventing them from doing them but because they are evil. Abolishing the state will not change this view. If any proponent of government was to suggest otherwise then it is permissible to ask him what he would do if government vanished suddenly. Would he be among the looters and plunderers? And if not, why should anyone else? Third, libertarians have never made the claim that the world will be completely eradicated of aggression and we do not assume that, once governments and states are abolished, evil people will suddenly vanish from the face of the Earth. Indeed, libertarians do not even have to prove that a world of liberty will be absolutely flawless and totally free of evil and violent people; it simply has to be better than any other option. What we are firmly opposed to is the legitimisation of aggression when it is carried about by an elite group called the government; that if we recognise acts such as murder and theft as immoral and evil then they shouldn’t be done by anyone. In other words, libertarians oppose the legalisation of aggression under any circumstance, applying simply what resides in everyone’s understanding of basic morality to those who are in government. The fact that illegal acts will still be done is fully acknowledged; but allowing a legitimate channel for the initiation of violence dilutes this basic moral understanding and serves as a vehicle for evil acts such as murder and theft rather than for their prevention. In any case, even if libertarians strove for a world of the complete, de facto eradication of all aggression, private and public, then what would be wrong with that? It is not likely, for example, that rape will ever be completely eradicated whatever legal regime is put in place and any person who sets out to achieve such a total banishment would certainly be “utopian”. But we would hardly dispute the honourable nature of his goal, nor would we castigate his efforts to achieve it. Governments themselves participate in causes even more utopian than this, such as the seemingly endless “War on Drugs”. Doubtless many of us would love to have a world free from substance use but, regardless of the ethics of either drug use or the attempts to prevent it, from a strictly practical point of view it is hopeless to attempt to regulate with the force of law what people desire to put into their own bodies.

Libertarianism will never create a perfect world; but it will create a world that is most in step with the fact that humans think, feel, desire, choose and act as individuals. Undoubtedly, according to some “higher” ideal, the human race is flawed but any practical and sensible political theory has to account for humans as they are, warts and all. It is for this reason that libertarianism, as opposed to its statist and collectivist rivals, is one of the least utopian theories.

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Economic Myths #11 – The Mixed Economy

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The world’s political systems today are, generally, neither fully despotic on the one hand, nor are they completely anarchical on the other. Instead most of us languish under so-called “social democracy”, a curious mixture in which a degree of sovereignty in the form of voting rights reside in the citizenry while political leadership and control remains distinct in the form of various functionaries such as Presidents, Prime Ministers, Congressmen and Members of Parliament. A libertarian might contend, of course, that such a social democratic system is worse for individual liberty than a dictatorship or monarchy, but the important point is that the ideological extremes have been blended into a kind of soup which is, at least from the de jure point of view, really neither total freedom on the one hand nor total despotism on the other. In exactly the same way, neither do our economic systems (which amount to pretty much the same thing as political systems) represent any ideological purity. We are neither fully capitalist nor are we completely socialised but, rather, have to put up with some kind of “mixed” economy with capitalistic and socialistic elements.

Although the relationship between economic and political systems is one joined at the hip, the justification of social democracy on the one hand and of the mixed economy on the other appears to come from different directions. Democracy, rightly or wrongly, is believed to a good and noble thing in its own right – a positive and independently justifiable improvement over any other option. The mixed economy, however, appears to be based on little more than the intellectually slothful adage that “the truth lies somewhere in the middle”. Capitalism, it is alleged, while bringing massive economic growth and improvement in the standard of living, leads to unstable business cycles and encourages greed, selfishness and extensive inequalities in wealth and income. Socialism, on the other hand, may make things “fairer” and more equal yet it totally decimates the productive capacity of a nation and the standard of living stagnates or even reverses. The “correct” system “must”, so the argument goes, lie in between these two points, somewhere that can seemingly take the best of both systems while avoiding the alleged pitfalls. Hence we end up with the mixed economy.

The first question we might as well ask when tackling this fallacy is that if we adopt a position somewhere in between these two alleged extremes what argument is there to suggest that we will end up with the “best” aspects of each system rather than the worst? In spite of the socialistic element income inequality and wealth concentration in the hands of a few elites seems to be worsening, not getting better; and in spite of the capitalistic element we have failed to have any meaningful growth since 2008. May be it is the alleged good parts of each system that are cancelling each other out and not the bad? The fundamental flaw, however, is that the assessment of the characteristics of capitalist and socialist economies that identifies their good and bad aspects are partly wrong and it is the wrongly diagnosed parts that are exaggerated in making the case for a mixed economic system. The good aspects of capitalism, private property and free exchange – such as economic growth and marked increases in the standard of living – are, as we know from “Austrian” economics, true; the bad aspects, on the other hand – selfishness, inequality, greed, the business cycle, and so on – are largely false or misstated. Capitalism does not encourage anyone to be greedy or selfish at all – it just gives you the freedom to be as greedy or altruistic as you like, provided that you fulfil those ends through voluntary trade and do not engage in outright theft or fraud. What opponents of capitalism don’t like is that people, when set free, usually choose to pursue their material welfare as the first priority, while also overlooking the fact that the resulting productivity usually reduces poverty anyway. Even if it didn’t, however, it confers upon people the wherewithal to be more charitable out of choice and it is no mystery that many of the great charitable foundations – such as the Salvation Army, the YMCA, the Scout Movement and the Rotary Club – were founded in the nineteenth century or early twentieth centuries, the relatively most capitalistic period in history. Moreover, the business cycle, as we know, is not an inherent feature of a free market economy, but is caused by credit creation, something that is only sustainable with government and central bank sponsorship. Yet when justifying the “mixed” economy it is these bad aspects that are cited and emphasised in an attempt to cajole people into accepting a blended economic system. Turning to socialism, we know that such a system would obliterate all productivity and the standard of living would sink far below that to which we are now accustomed. Its bad aspects are, therefore, all true. Yet the good aspects – greater equality, fairness, and anything that can be categorised under the current, in-vogue term of “social justice”, are all patently false. Socialism does not create any equality at all; it does not mean that every portion of wealth in existence will be carved up into equal shares for everyone to then enjoy. Instead, it transfers the power over whole resources from private producers, who must maintain their ability to satisfy consumers in order to retain that privilege, to politicians and bureaucrats. Nationalising an industry does not give you, the average citizen, any greater access to the goods and services tied up in that industry. Rather you are left even more at the bottom of the heap than before as the political lords and masters decide what that industry will produce, what prices you will pay, what level of service you will receive and you are stuck with whatever they decide to give you – providing that the inefficiency and waste of state run industries has anything left to give. The very reason why property rights and ownership exist is precisely because there is no agreement on how resources should be used. This problem exists under socialism as it does under capitalism and one person’s decision must, at some point, overrule all others; any equal “voting” influence that you might have in this regard may be restricted to a one off, catch-all election every four or five years and in the meantime you have to suffer whatever it is that the electoral victors throw down from their table. Under capitalism, however, your voting influence is felt all the time in a highly specific manner through your spending habits. If a producer fails to produce what you want at a price you can pay he loses you there and then. Not so under socialism where you have to put up with whatever the upper elite, controlling all resources, decides will be produced. Furthermore, providing social safety nets and welfare states in pursuit of some kind of “social justice” does not result in a society that is more caring and sharing. If anything, the adage “from each according to his means to each according to his needs” completely disintegrates any moral fervour. By separating individual productivity from individual reward, wealth creation is turned into an stockpile to which a person contributes that which he is able according to his “means” then takes out according to his “needs”. Unsurprisingly, every person seeks to minimise the amount he has to put in through toil and sweat and maximise what he can take out in goods and services that he can sit back and enjoy without effort. This results in a population that fails to cultivate its talents towards increasing wealth such as hard work, responsibility and self-reliance and replaces them with characteristics that make them needy and pitiful, with an added layer of laziness, corruption and freeloading. This is precisely the problem faced by our bloated welfare states today and why they are completely bankrupt – demand has swollen to such an extent while supply has been hopelessly dwindled. None of this is exactly the antidote to “greed” and “selfishness” that advocates of the mixed economy might expect. Additionally, the resulting scarcity usually spawns black markets and underground trade, increasing the scope of legally defined criminality and, in worst case scenarios, penalising the population for attempting to acquire what should be every day goods and services.

A further fallacy is the assertion that private enterprise does some thing” better than government while government does other things better than private enterprise and we should look to the “evidence” to decide who should do what. But by what standard do you conclude that something is being done better by one or by the other – and by what standard do we judge whether a certain activity should be carried on at all? Private enterprises make this judgment through the profit and loss test; the quantity and quality of resources devoted to production of a good and service is rationed by its ability to make a profit, indicating the height of its demand by consumers. A service will be of low quality or unavailable to certain sections of the population simply because consumers are not willing to support a more extensive level of production in that particular industry. The reason why broadband internet was not, in the UK, extended to all rural communities without the force of government was not evidence of “market failure”. It simply meant that the more extensive resources necessary when compared to urban areas were required more urgently to produce other goods and services that people wanted to buy. Any “evaluator” who determines from the “evidence” that government is needed for rural broadband cabling is necessarily substituting his own value judgments for everyone else’s, denying them the goods that they really demanded and giving them those that are not. Nor can we fall back on the assertion that government should run “essential” industries for there is no such thing as an “essential” industry. Humans do not evaluate goods and services in whole, homogenous concepts such as “fire services”, “health services”, “utilities” and so on – rather they are demanded in specific quantities in specific times and places. What is most highly valued by an individual changes from moment to moment. While we may think of “medicine” as “important” we can easily imagine ourselves in a situation where we would prefer to do something “unimportant” like watch television rather than produce another bottle of penicillin – and some people may not want medicine at all if they maintain their health. Precisely the point where we stop devoting resource to the production of penicillin and move them towards producing televisions can only be judged by the profit and loss test of the free market. Any other judgment is necessarily arbitrary and at variance with the demands of consumers. In any case, as libertarians, we might also ask if an industry is really critical why on earth would you want it in the hands of the government where it can be royally screwed up? And why would it even need to be? If it is heavily in demand then profit opportunities will abound and private entities will have no problem meeting it – it is the unessential industries with low demand that struggle to stay afloat without government support.

The real reason, of course, why we have ended up with this system is, in fact, pragmatic rather than intellectual. Capitalism is the goose that has laid the golden egg and any decimation of capitalism would very quickly destroy the standard of living of the citizenry, prompting a swift revolution. Yet government yearns for power and control and cannot be content with letting things be; it therefore has to paint capitalism as this necessary evil which, like a dangerous pet, somehow brings good things when controlled in the right way. Ironically, of course, it is government interference in an attempt to provide a socialistic element that brings about the chaos and injustice that is blamed on capitalism. We have boom and bust because of government-sponsored credit creation, and the rich are getting richer and the poor poorer because the government bails out these cronies from the resulting disarray at the expense of the rest of us. Indeed, having a “safety net” against the alleged “sink or swim” nature of capitalism has turned out very well if you are an investment banker. None of this would happen in a genuine, capitalist economy.

The mixed economy is therefore nothing but an unjustifiable charade, built upon alleged weaknesses of capitalism and supposed strengths of socialism that simply do not exist.  Genuine economic prosperity for everyone in a fair and just society populated by morally healthy individuals can only come through unfettered private property and free exchange – not through government’s attempt to meddle with it.

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Economic Myths #9 – Social Safety Nets

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It is often trumpeted as a virtue that “civilised”, social democratic countries offer their citizens one or more types of “social safety net” in attempt to eliminate the most dire effects of, say, unemployment, illness or some other kind of incapacity that could inflict a condition of extreme poverty upon the individual members of the citizenry. The idea is that the most basic wants will always be guaranteed by the state should one be unable to provide them for oneself and no one need have any fear of hunger or lack of shelter – situations that are said to be “intolerable” in a modern, 21st century society.

The first problem with this theory is that poverty is not some selectively appearing disease that crops up every now and then to infect an otherwise healthy and wealthy society. Rather, poverty is the natural state in which human beings first found themselves. When Adam and Eve were expelled from the Garden of Eden they saw the world to be a barren and harsh place that is capable of providing precious little – may be just oxygen to breathe – without the conscious effort of its inhabitants. The only way to alleviate this harsh situation is for humans to work to produce the goods that they need and, eventually, to bring about capital investment in order to expand the amount of consumer goods that can be enjoyed – whether it’s cheap food, housing, education, holidays or whatever – a process that only really got underway in any significant form in the 1800s. If the individual beneficiaries of a social safety net are not able to produce these goods themselves then somebody else must do so. Simply legislating the welfare state into existence does not create the goods and services it needs to dispense to the poor and needy in order to banish poverty and want. Rather, existing goods have to be forcibly confiscated from those who have produced them and dished out for free to those that haven’t. Social safety nets are compulsory redistribution programmes, not wealth creation programmes and any benefit one receives under them will be at the expense of another person.

The economic effects of this are familiar to economists not only in the “Austrian” tradition but of other free market persuasions also. The most naïve error made by any proponent of redistribution is to believe that people’s behaviour is somehow hermetically sealed from the government intervention that seeks to achieve a certain end – i.e. that increased taxes on activity A will not discourage people from carrying out activity A; or increased funding to eliminate a “dire” situation will not, in fact, exacerbate that situation. Whenever a new tax is proposed the estimations of new revenue to be raked in are always based, incorrectly, on the assumption that people will still wish to carry on doing the taxed event just as they did before, as if the tax makes no difference. And if some new programme to be financed by this revenue is proposed, they will calculate the amount of money needed to cure the existing problem without considering whether throwing money at it will make it worse. All else being equal, if you pay people to when they do something they will do more of it; if you charge someone when they do something they will do less of it. In the case of social safety nets, if people are charged to produce wealth in order to fund it the cost of creating wealth is forcibly raised. Relative to other activities such as engaging in more leisure time, the attractiveness of producing more goods, more capital and more resources is reduced. There will, therefore, be less production, less capital investment and fewer consumer goods at higher prices – hardly the situation that one would expect to be conducive to the abolition of poverty. Similarly, if you grant a guaranteed right to be paid upon the occurrence of a bad event – such as sickness and unemployment – then you lower the cost of that event and the relative cost of preventative measures is raised. All else being equal, you will have more sickness, more unemployment and so on.

The focus of many of these social safety nets today appears to be on so-called “hardworking families” – never mind the fact that single people also work hard and struggle to make ends meet. Children, in particular, appear to be little more than a metaphorical blank cheque that the state writes to “protect” them from poverty and hardship. Yet children do not appear out of nowhere and a conscious decision must have been made at some point to have a child – or at least to carry out the act of procreation. The same economic effects will therefore result from any safety net that benefits parents with children. If you pay people when they have children then there will be more children in families that struggle to pay the bills. The resources to feed these hungry young mouths must be confiscated from those who do not have children – either through inability, a lack of desire or good old fashioned financial prudence – and redistributed to those who do.

The running theme through all of this, therefore, is that throwing free money at a problem in which people have at least some kind of influence will only aggravate that problem. Indeed, in spite of more than half a century of the welfare state we in the Western world still seems to be afflicted with the scourge of poverty – although a rather bizarre form of it where those who are poor appear to suffer more from obesity rather than from starvation. One would associate progress with a reducing, not widening social safety net. We might as well also mention the “cynical” view that government prefers to retain people in a state of dependence because it means more reliance upon the state and more votes.

A powerful weapon in the arsenal of proponents of the welfare state is the false dichotomy – that the choice is either between a government social safety net motivated by care and compassion on the one hand or some kind of selfish, greedy, sink-or-swim and dog-eat-dog society on the other. This is plainly ridiculous; the free market exists precisely because people have needs and others are willing to advance the means to fulfil them. The whole purpose of insurance – presently and regrettably distorted by government interference – is to protect from genuinely catastrophic events that are not your fault in return for a premium paid in advance. Furthermore, opting for the alternative of the free market does mean the abolition of care and compassion – rather, it gives people the freedom to be caring and compassionate. Indeed it is such private benevolence that is discouraged by the welfare state as it obliterates the need to cultivate personal relationships upon which you can rely. Real benevolence, selflessness and caring for one another springs from these relationships and from private choice; the forced redistribution demanded by the state, however, leads to the very opposite – bitterness, antagonism and cynicism when your hard earned money is taken to be given to others, all of whom – in spite of whether they are genuinely needy or not – are tarnished as workshy and endless breeders. It is no accident that many of the great charitable foundations appeared in the nineteenth century, the most relatively free and capitalist period in history – and not in the era of the welfare state. As for the argument that social safety nets are necessary for civilisation, what could be less civilised than violently wrestling something you want from someone at the point of a gun?

The social safety net therefore needs to be realised for the destructive force that it is – not as a hallmark of economic and societal progress but as one of retrogression of civilisation and as a retarding influence on the very real cure for poverty and illness – more capital, more production and more goods for everyone to be able to buy at cheaper prices.

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Myths about Freedom

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Libertarian enthusiasts usually take pride in their theoretical understanding of the ethics of liberty and the evils of statism. It is difficult not to read and be enthralled by the works of distinguished authors such as Murray Rothbard, Hans Hermann Hoppe, Walter Block, and from earlier generations the likes of H L Mencken, Albert Jay Nock and Frank Chodorov, before we even mention Ludwig von Mises and Friedrich von Hayek. Nevertheless, it is not likely to be the detailed theoretical purity of libertarianism that will be of much help in persuading the passive majority of the population that a free society is both the most economically prosperous and the most just. Rather, our main concern will be in overcoming the statist-bias that most people hold, a bias induced as a result of their indoctrination by their state school education, mainstream media and the presentation of any political debate as requiring at least some kind of government response. This bias crystallises in a number of myths that serve to put a mental block from any acceptance of a society without government, or at least a society where government plays a minimal role. This essay will attempt to explore and debunk some of these myths, not only to refute them but to do so in such a way as to cause people to realise just how ridiculous any adherence to them is, and that the truth is not only correct but blindingly obvious. Indeed such a revelation needs to be this powerful as that same statist bias usually results in the outcome of any debate concerning the necessity of government to be distinctly unbalanced. It is not enough for us libertarians to explain how the free market may make society better off in ten or twenty ways; for if the person whom we are trying to persuade finds an eleventh or a twenty-first thing that we cannot categorically demonstrate will be dealt with successfully in a society without government, then never matter how persuasive our previous arguments and never mind how much the balance is stacked in our favour, the one perceived failure is taken as capitulation that government is necessary and any hope of a free society needs to be abandoned. New and radical ideas that challenge what everyone has always held to be true are often met with this type of defence mechanism, permitting them to dismiss the new truth and return to the comfort of the status quo. This, in many ways, is the libertarian’s most formidable enemy, may be more formidable than the state itself. Let us turn, then, to trying to shatter some anti-freedom myths.

No one will Build the Roads!

The first myth is what may be summarised as the “who will build the roads?” problem – that we are so used to government engaging in the monopolistic production of certain goods that we cannot imagine a world where government would be absent from that sphere of production. Under this category is included such questions as “who will take care of the disabled?”; “who will supply the water?”; “without the NHS what will happen to you when you are poor and sick?”; and so on and so forth. Aside from pointing out that everything (including roads) that government runs was first, at some point, invented by the free market and not by government bureaucrats, we might point out that the capitalist-entrepreneurs manage to successfully deliver into our hands some of the most technically complex items with components and expertise delivered from a multitude of countries. Refrigerators, television sets, radios, laptops, smartphones, cars, the list goes on. Having achieved all of this, will the prospect of having to take on something as wildly complex and as technically unnerving as laying down some tarmac from A to B strike the fear of God into budding entrepreneurs? Would those that aspire to the fame and fortune of Bill Gates and Steve Jobs be twisting and turning in their sleep from nightmarish apparitions of such a horror? Can these inferiors only be rescued by the boldness and bravery of the elite government bureaucrats who can master this fiendishly complicated endeavour? Clearly this is utter nonsense and any perpetuation of this myth relies solely on the argument from existence. Yet we can easily counter this by imagining what our thought process would be if government had taken over a lot more than it already does. If government had monopolised the smartphone industry, would you be saying “thank God for government! Without them, who will build the iPhone?!” If government took over the stationery stores would you wonder “who will sell me my pencils and pens?!” if government was to vanish? If you could only get clothes from government department stores, would the sudden loss of this monopoly mean that we would all have to go round stark naked?

Libertarians are, of course, always at something of a perceived disadvantage in challenging this myth as we are not advocating any strict, one-size fits all plan like other ideologies do. We intend to leave everyone alone to make their own plans peacefully. Hence we do not know precisely who will build the roads, where they will be, what they will look like and how they will be run. Indeed we don’t even know if roads will cease exist and be replaced by some more convenient method of transport. 2015 is the year to which, in the film Back to the Future II, the protagonist finds himself transported, surrounded by cars that fly and roadways and highways that exist not on the ground but in the sky. And yet here we are, one year earlier in 2014, without anything even approaching that level of technology because government forcing us to pay for their roads through taxes stifles any competitive innovation in that area. Indeed, anything that government touches lacks modernisation and development. Roads, schools, the post office, rubbish collection and so on all carry on with the same monotonous methods, procedures and technology while the free market around them innovates. Government is not only unnecessary for building the roads – it is actively preventing us from developing better methods of transport.

Greed and Individualism

The second myth we must tackle is that more freedom encourages greed, selfishness, and an individualistic, atomistic existence in which no one cares for anyone else. Nothing could be further from the truth. Libertarianism is neutral regarding the personal choices that people make so long as those choices are non-violent. Freedom may permit you to make as much money and keep it all for yourself, to shut yourself away from all social contact, to never give anything to charity, or to refuse to help an old lady across the street. But it also permits you to not make as much money as you can, to give as much of it away as you like, and to help as many old ladies across the street as you have time for. It encourages neither type of behaviour. The only reason why freedom and capitalism are accused of encouraging greed and selfishness is because people in free societies have generally chosen the path of increasing productivity, material wealth and the standard of living (ignoring, of course, the fact that while this confers great riches upon the most productive, the living standards of all people are raised far above what they otherwise would be). People who dislike these outcomes attack the system of freedom rather than the choices people make under it because they need to hide the fact that they simply wish to force society away from choosing a path that most people want but that they, the disgruntled, do not want. If they were to acknowledge that nothing about freedom per se encourages greed and selfishness they would reveal that what they are really trying to achieve is to force humanity to conform to their ends rather than what people individually want. It is true that people, as individuals, think and feel pleasure and pain as individuals first, then that of their closest family and friends second, of minor acquiantances third, and for the most part probably do not even care about the billions of remaining people whom they will never meet. Human nature places the individual at the centre of his own life. But not only are humans also sociable and co-operative creatures – the greatest product of this being the division of labour where, as if by magic, the actions of one person, you, could be serving the needs of someone thousands of miles away whom you do not even need to meet let alone care for – it is not the task of political philosophy to correct or otherwise make amends for perceived failures of human nature. Humans are self-interested and act as individuals; it is impossible for it to be otherwise and any political system has to accommodate rather than subvert or alter these facts. It is precisely because freedom is the only political system that does this that free societies have flourished to degrees unobtainable by any other political system. But the greatest irony surely has to be that it is capitalism and freedom that promotes moral fervour, selflessness and care for others, whereas it is any government system attempting to do the same by its usual raison d’être – force and violence – that encourages an individualistic and atomistic existence.   Forced government redistribution of wealth does not cause the donor to become any more moral or selfless; for moral actions require moral choices and if he is simply forced to have his earnings siphoned off into the welfare pot then this demonstrates nothing about his moral character. But further, if anything, having been denied the personal choice to determine which causes are good ones for your money, it is more likely that forced redistribution will instil in you bitterness, resentment and hatred of your fellow humans rather than sympathy, care and a willingness to help. Moreover, it is the existence of generous social safety nets that leads directly to the fracturing of family relationships and friendships and of any need to engage with fellow human beings on a personal and empathetic level. These relationships become most important precisely at your time of need and if the state is there ready to fill your cup in hand on these occasions then cultivating them becomes relatively less important. In a free society however, not only must each person possess a great empathetic skill in order to determine how best to serve everyone else under the division of labour, but the lack of a welfare state means one must rely on one’s friends and family, and they must in turn be able to rely on you. Hence these bonds of mutual care and assurance become stronger under a free society whereas a government-run society all but eradicates them. Finally, the bigger government becomes, the more it leeches from the productive sector, the higher the glittering stack of gold (or paper money, at least) that it steals encourages people to stop producing and to start finding reasons why they should be the beneficiaries of a share of the loot ahead of anyone else. Hence the proliferation of lobbyists, focus groups, think tanks, statisticians, and so on that exist for nothing more than showing why thieved tax revenue should go to one place and not another, and it is hardly astonishing when all manner of alleged societal ills and problems appear seemingly out of nowhere and can be, conveniently, solved by a fat wad of government cash being paid to their sponsors. Big government therefore pits each human against every other in a fight for the loot – it is a contest of who can get everyone else’s money first. If this is not selfish and greedy, then what is?

War of All Against All

Related to the last myth is the allegation that without government every human being would forever be robbing, stealing from and murdering everyone else, reducing humanity to the level of brutal savages and putting an end to civilisation as we know it. This myth suggests that it is an inherent part of human nature to oppose to the death every other human being in a fight for what is a fixed pool of resources, much like animals do in the jungle. If you can’t struggle your way to the top of the food chain in this “society” you will die at the hands of someone else. The first question to ask any advocate of this position is if, in the event that government and its monopoly of security, protection against crime and law enforcement, was completely abolished in a flash, would that person immediately go out and start looting, maiming and killing? In other words, is the only thing keeping you from putting a gun to someone else’s head the fact that government will detect and imprison you? Do you have no conscience whatsoever and are utterly dependent upon government to stop you from turning into a predatory animal? Furthermore, is government the only reason you go to work every day to co-operate with your fellow employees, greet your neighbours a good morning, have coffee with friends, walk your kids back from school, and sit down to a family meal in the evening where you will talk, laugh and joke with other human beings? Will you stop doing all of these sociable activities and engaging co-operatively with other human beings if government vanished? If you meet a friend for lunch is government the only thing stopping you from shooting him and pinching his dessert? The answer is of course no, an answer that is necessitated by the government advocate’s recognition of this behaviour as immoral. Humans possess consciences, moral fervour, and the ability to distinguish between right and wrong. If he concedes that there are some acts that he would not carry out even if there would be no sanction whatsoever, is it not reasonable for our government supporter to expect this of other people as well? At the very least he has every reason to expect the same of every other person with whom he engages in these sociable activities. Indeed, can he name anyone he knows who, absent government, would transform into a criminal, and if he can, do those people form a majority of his friends and acquaintances? Humans not only possess a moral fervour that prevents them from acting wrongfully in the absence of retribution, but they also transcend their recognition of strict moral duty and are, additionally, an inherently sociable and co-operative species. Not only do we form bonds of friendship and kinship far more powerful than any government gun, but, as we mentioned when tackling the previous myth, we have developed a system of co-operation – the division of labour – in which you do not even have to know, meet, like, love, respect or admire any other human being whose needs you serve. Indeed, you may positively hate that person and yet you can still achieve gain through co-operation within the boundaries of voluntary trade – a gain that is mutual and not just for you, where both parties come off better, all in spite of the fact that you do not care a bit about each other. Government was not necessary for this creation – it was truly a “spontaneous” order, spontaneous in the sense that it was the product of human purpose but not of any human’s design. Only a handful of sociopaths and nutcases – a bare of minority of the population – require deterrence in order to prevent them from committing crimes. In addition to private security forces being able to deal with these individuals, there will certainly not be any overnight, societal collapse. Rather, it is government that pits each human against his fellow. Government achieves all of its ends through violence and force – someone gains at the expense of someone else. If you can tap into that mechanism then you can pinch, plunder and pillage from anyone whom you like. But it gets worse than that for government overlays this regime of violence with a veneer of democratic legitimacy, thus weakening people’s sharp, moral distinctions and ennobling anything you do against another human being, however evil and immoral, all OK as long as it was done through democratically elected government. It is worth emphasising this point – not only is government permitting this behaviour but is effectively saying that it is a good thing. It is no small wonder that with such encouragement the war of all against all not only exists under government but becomes prolific.

Companies will Poison our Food!

Our final myth is the notion that private companies, in seeking to maximise their profits, will put poisonous chemicals in our food, will cut corners with safety, our buildings will collapse, our cars will crash, our lives will be at the mercy of these profit-hungry merchants of greed! The obvious retort to this ridiculous assertion is that if a company is expecting people to buy its goods, if it is expecting to outwit its competition, and if it is expecting to make profits, then just why on Earth would it do these things? What advantage is there in creating a product that is going to kill your customers ahead of one that will not and will keep them coming back to you time and time again to keep on purchasing your products with loyalty? As soon as it is realised just how dangerous the goods you are selling are, won’t a competitor leap in with safer products and drive you out of business? At the base of this misunderstanding is the idea that, in the absence of government, regulation will simply vanish and companies will have a free hand to do whatever they like without restriction. But regulation is itself a market activity – not only does it consume scarce resources just like any other but it aims for an end that consumers desire. At the heart of regulation is not the desire to forcibly stop a company from producing in a certain way or from carrying out a certain activity. Rather it is to furnish information to customers so their choices are more informed. Indeed, free market regulators are dealers in the market for information and they need to decide precisely which information is of the most benefit to consumers. Although there exists consumer groups and watchdogs to which people subscribe in order to gain more information about the companies from which they buy, most regulation will take effect as independent certifications of standards which companies will have to achieve. If the standard, in quality, safety, or whatever is achieved then the company will be licensed to advertise the fact that its products have met this standard. Underwriters Laboratories, which regulates product safety, is an example of this arrangement. The regulator too has to judge precisely which standards consumers are willing to pay for. If consumers do not care to know whether a product has achieved a certain standard then companies will not seek certification or accreditation. If the standard is too high then products will become too expensive and the regulator will cease to receive custom from companies and will go out of business. If, on the other hand, the standard is too low then the certification is meaningless as customers are demanding knowledge of a level of quality that the regulator is not setting out to detect. Free market regulation is therefore alive and thriving and it is tied to precisely how much of it consumers demand. If people will not buy your goods because they do not achieve the level that is demanded by private regulators then you will find yourself going out of business.

Related to this notion is the myth that profit seeking will cause a relentless quest by greedy businessmen to deplete the resources of the Earth and after an extravagant party everything will be used up and the world will be left as a barren wasteland. This idea overlooks the fact that profits are determined not only by revenue but also by costs. Just as companies seek to maximise their revenues in order to be profitable so too must they decrease their costs. They are under constant pressure to achieve more output with less input. There is, therefore, an inbuilt incentive towards conservation in a free market – using less, and not more. If resources become depleted then their cost begins to increase so companies have to pay more to use them as inputs, squeezing profit margins and encouraging the switch to less scarce materials. Thus not only is the endangered resource preserved for only those ends which need it most desperately but the increased price induces the production of substitutes or fresh discoveries of the virgin material that were previously unprofitable to harness. As we have explained in detail elsewhere, the very resources that are in danger of depletion today are precisely those where the pricing, profit and loss system has been restricted and replaced by government licensing. Rainforests, fish stocks, and endangered animals are all examples of where ownership has been overridden by government fiat. As they are ownerless the use of these resources is not regulated by the cost of their depletion so there is every incentive to consume them now until they waste away. If this should be doubted then why are elephants, tigers and whales in danger of extinction whereas dairy cows, chickens, and sheep are not? How come the evil profit-seeking capitalists have not, quite literally, driven lambs to the slaughter until there are none left?

Conclusion

These are just some of the main myths which libertarians might encounter when trying to promote their vision of a free society. No doubt there will many more of them that crop up as a result of the statist bias that is inherent in most individuals. Libertarians face an uphill struggle in this regard, but hopefully what we have determined above goes some way to showing how ridiculous clinging to government really is.

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The False Dilemma

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Current, conventional thinking about social, political and economic subjects typically narrows the options available to a set of policies advocated by two, may be three political parties or scarcely dissimilar ideologies. Consequently any genuine radical or lateral thinking about these topics is abandoned and it is assumed and accepted that the fundamental questions of the state, the government, and of tackling the biggest societal problems of the day are already settled. Seldom are alternatives to these entrenched matters – such as whether the state should have any positive role at all in anything – given the light of day, let alone the opportunity of being debated. This phenomenon, which presents a distinct challenge to libertarians, is known as the “false dilemma” – the illusion that the only choice is between a very constricted range of possible options, preserving the status quo in favour of the state and its cronies while at the same time bestowing the illusion of control on a gullible electorate.

In the UK the “false dilemma” is playing itself out in such a way as to completely obliterate one of the basic truths (understood by Austro-Libertarians) that all humans can flourish and co-exist peacefully. Those on the ideological right such as supporters of the Conservative Party believe that business should be helped in order to boost economic growth, while cuts should be made to welfare and to public services in order reduce the government “deficit” (a much overused term given that the overall debt and not the deficit is the real problem) and to slim down the cash cow that the benefits system has become to the allegedly lazy and unproductive. Those of the ideological left believe that a strong welfare state, heavy taxes on the wealthy and increased government spending are needed to end the scourge of poverty. Both of these ideologies contain kernels of truth and genuine, honourable concerns that make their particular preoccupations seem plausible. It is true, for instance, that business needs to flourish if there is to be any economic progress at all, and that government needs to reduce its profligate borrowing, taxing and wasting with all due haste. On the other hand, it does not seem fair that a society should allegedly produce vast wealth for a few while leaving others to languish in stagnating poverty, nor is it necessarily true that wealth creation is “top-down”. The continuing result of this for UK politics seems to be that political action is becoming a choice, or a very false dilemma, between two broadly defined groups of people in society – a choice between those who are “rich” and those who are “poor”.

This impression is exacerbated by the fact that the political parties whose rhetoric represents these ideologies never achieve their aims, or never really carry them out. “Austerity” is proving not to boost economic growth nor help the plight of the poor simply because government spending is not, in fact, decreasing. Bank bailouts and cartelisation of businesses will not do the same either as they simply perpetuate malinvestment and economic waste. They do, however, save the politically connected rich from the consequences of their actions while leaving everyone else to foot the bill. On the other side, increased government spending and a burgeoning welfare state only siphon funds from the productive sector to be consumed and wasted by government. Both sides, therefore, in failing to ever be able to achieve their stated aims provide plenty of ammunition for the opposition, ammunition that is fuelling this apparent basic choice between “rich” and “poor”.

If we are ever to have any hope of recovery from the current economic malaise we must seek for a repudiation of this false choice and a restoration of the understanding that both economically and ethically the rich and poor can prosper side by side. At the heart of the problem, the false axiom accepted by each ideology, is the notion that government must help somebody in order to create a better society. There is curious mixture of economic and ethical arguments that are used in order for each side to select whom government should help and to whom it should deny the same. Take, for example, the supporters of big business. They will say that it is right to use taxpayers’ money to bail out the banks in order to avoid a complete financial meltdown. Conveniently “their chums” in the city will reap fat rewards from doing so. But they then deny this very same method – the diversion of taxpayers’ money – to welfare programmes to help the poor because people should work for what they earn without leeching from the productive and the so-called “benefits scroungers” should get off their backsides and find a job. In other words they are using primarily economic arguments to justify bank bailouts while using ethical ones to deny welfare spending. Their “lefty” opponents will argue that throwing cash at the rich who made mistakes is unjust and that they should be left to foot the bill for their own mistakes. Yet they then state that welfare spending is needed to eliminate poverty and fuel growth from the “bottom up”. So they too, deny the flowing of taxpayer’s cash to certain groups based on ethical grounds but then promote it to others based on economic grounds. Each side, will of course, pepper their ethical arguments with economic ones and vice versa – the right, for example, will, as we have said, argue that welfare spending needs to be cut in order to reduce government outlays, and the left will argue that alleviating poverty is a just and noble cause. But the main thrust of each side’s opinion cannot be denied.

If we unscramble all of this and look at the ethical and economic arguments separately we will find that there are no grounds whatsoever for any state involvement. If it is unjust to violently confiscate tax revenue from innocent citizens to fund the lifestyle of bamboozling bankers then it is equally unjust to do the same to fund the lifestyles of those who are poorer. The difference is one of degree rather than of kind. Nobody, whether he is a prince or a pauper, a saint or a sadist, or a capitalist or a labourer has the right to wrestle away the property of other people for his own benefit. And from the economic side, bailing out bad business will simply perpetuate the moral hazards and malinvestments that need to be eliminated, while continuously funding the poor through welfare spending will only exacerbate poverty as it makes being poor relatively more attractive, reducing any incentive for people to do more to lift themselves out of that position, while squeezing the role of benevolence and charity for the genuinely needy. Furthermore, government would do a lot more for the poor if it stopped interfering in wealth creation in the first place with all of its burdensome laws and regulations that make the exercise impossible but for a few large and politically connected corporate favourites.

The real choice is not between “rich” and “poor”, “left” or “right”, “Conservative” or “Labour” “employer” and “employee”, and whatever other faux selection that the establishment throws at us. The real choice we have to face is, on the one hand, whether we want to continue with a political and economic system that, whomever’s interests the particular delegates of the day purport to promote, will only result in a parasitic existence for the politically connected at the expense of the stagnation of the standard of living for the rest of us. Or, on the other hand, we could choose a system where nobody has the violently enforceable right to live at the expense of everyone else and that everyone is free to trade and produce whatever he wants with his property, a system that will raise the standard of living for everyone and not just a select few. Only by considering radical options and overcoming the assumption and acceptance that the fundamentals of our society are beyond debate can we hope to build a world that is both truly just and economically prosperous.

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