A critique of statist government “solutions”.

by Danny de Gracia II

“All this talk: ‘the state should do this or that’ ultimately means the police should force consumers to behave otherwise than they would behave spontaneously.”

— Ludwig von Mises


“A ‘planned economy’ destroys Government because when men use force in an attempt to control productive energies, they have no means of knowing real costs, and these costs automatically increase at an increasing rate until the people can no longer pay them.”

— Rose Wilder Lane

These days everyone in government from local city boards all the way up to the Federal Reserve Board of Governors in Washington, DC have a “master plan” for everything. They have a plan to create jobs, provide educational opportunities, increase investment, stimulate retail sales, expand trade, make people skinny, win wars and even land on Mars – but increasingly the more our government plans, the more of their plans fall through. In fact, I can’t ever think of one instance in my entire thirty years when the government promised something and their expected positive outcome actually occurred. In short, big government plans always mean big government failures.

Ask the average Hawaii resident why our government isn’t working and chances are half the responses you’ll get will be either “The party in power is corrupt and has no values, which is why we need to elect my party” or alternatively “The government has too much deadlock and nothing ever gets done.” If only either statements were actually true, we might actually be able to fix the mess we’re in! In reality, the reason our government doesn’t work is because at the root of all government is an attempt to plan the economy (and world) according to the desires of those in power. Our government would like some things to be cheap and other things to be expensive based on what they value and detest but the problem with that is only the market can determine equilibriums between supply and demand. Government plans cause inflation – that is, they cause things to increase in price until the people can no longer pay for government or private services. Said another way, the greatest threat to government services … are government services!

Ever notice lately that nearly each year the government increases fees and taxes but no matter how many times  they do that, they still are forced to cut more services and provide us worse quality for greater price? Just look at our military as a prime example. Minarchists and statists alike advocate for monopoly of security/defense as one of the functions “government does best.” Consider: in 1945 at the height of the Second World War, the United States had more ships, planes, tanks, bases and men than ever before in its entire history and military spending was approximately $64 billion dollars and accounted for 89% of the Federal budget. Today, the military’s FY2012 budget is $553 billion and yet the United States has fewer ships, fewer planes, fewer tanks, fewer bases and fewer men stretched more thin than ever before in the 20th and 21st century’s history – and certainly far less than before September 11, 2001. Americans are paying more money for less military, most of which is aging, outmoded and soon to be paired by China’s technologically advanced military which spends only $114 billion. Our government’s “best service” is, in fact, one of its most inefficient and inflated of all.

Consider by contrast how private industries function. Whereas government increases taxation and fees to compel people to pay for services they don’t want while simultaneously cutting the services people like to “balance the budget” private companies cut the price on services consumers don’t want (or terminate them altogether) and never eliminate the services consumers like best because their profit depends on pleasing the market. Thus, the highest quality of well liked goods and services are always available at the lowest cost from private industries while by contrast, the lowest quality of least liked goods and services in the highest scarcity and highest price from government. The less government plans, the more everyone else’s plans succeed.

Many opponents of the free market model bemoan the failures of so-called “privatization” as supposed evidence that only government can fairly manage supply and demand. We are told shocking stories of government contractors routinely and exponentially overcharging for toilet seats, gaskets and fuel and led to believe that corporate greed is what causes privatization to fail and taxpayers to be impoverished. The truth is “privatization” of government services is not privatization at all but rather merely the outsourcing of statism and the appointment of exclusive market monopoly upon a non-governmental entity. If tomorrow the Hawaii legislature in the interests of “health” were to enact that drinking diet soda was a Class C felony and “privatize” enforcement of the statute by giving a no-bid soda enforcement contract to a PMC named ABC Security Consulting, this action is not a “private” market action at all because taxpayers cannot opt out of funding ABC Security Consulting which inter alia holds the government’s exclusive police power (that is, compulsory territorial monopoly of violence) and is free to hike the prices of their taxpayer funded services because they have no competition. This type of “limited government, cost cutting, privatization” model that has seduced many politicians and academics alike is an evil under the sun which deceives people into thinking the government is downsizing when in fact it is mutating and growing. We economists of the Austrian tradition call that fascism – the merger of private and public entities – not privatization.

The solution to our problems will not come with new politicians and new jingoistic plans with swarms of new bureaucrats to implement them but rather by a free market where consumers, not government determine what is needed most. I believe that there is nothing government does that the market can’t do better. It’s time to recognize that the state means scarcity and failure while markets mean abundance and true progress for mankind.

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Danny de Gracia is the economic policy adviser for Grassroot Institute and is an elected member of the Waipahu Neighborhood Board. He holds a master of arts in political science from Southwest Texas State University. Contact him by e-mail at degracia@fas.harvard.edu.