What our founding fathers established in the late 18th century was considered very liberal — giving people freedom to determine and pursue their own goals, uninhibited and unaided by the government.
From their own experience, they knew that the more the people demanded from government, the more the government would have to control the people. They learned from monarchies and feudal systems that kept people in poverty in order to make those people rely on the pittance that the kingdom supplied just to keep them alive and working for the monarchy.
The so-called “liberal” ideas our founding fathers proposed — ideas like unrestricted free trade, small government, and political and economic freedom for its citizens — are the foundation on which the U.S. was created. Those ideas are the very reasons the U.S. has gone from fledgling country to dominant world power in 200 short years.
Those ideas are the reason many consider the U.S. to be the best damn country in the world.
But with freedom comes risk. In a free society, you are in the driver’s seat of your life. You create your own circumstances, and whether that’s rags or riches, you are ultimately responsible for yourself. No one else is.
Contrast that with a communist or socialist state like the former USSR, or China or Cuba. In a socialist state:
- You are guaranteed a job (although you have no say in what that job is)
- You are guaranteed a paycheck (although government takes 75% automatically for taxes)
- You are guaranteed food to eat (although it’s never fresh and may be rationed at any time)
- You are guaranteed a roof over your head (although you’ll be sharing it with 6 other families)
Socialism allows you to “outsource responsibility” in your life to the government.
Sounds nice, until you consider the consequences. Yes, you will be able to eat and provide a roof over your head, but you will never have a chance to progress in life because Uncle Sam will take away nearly everything you earn to pay for the next guy’s medical/housing/retirement. You will be at the mercy of the government, who may or may not be interested in you in your time of need. You will have no control over your own life.
This leads to the paradox of modern-day liberal philosophy. Liberals claim to seek freedom from government controls over social issues in their lives:
- Less interference in our personal lives — “Don’t tread on me!”
- Less restrictions on abortion — “We want the right to choose [life or death for our unborn children]“
- Less restrictions on marriage — “We want gay marriage”
- Less restrictions on drugs — “We want marijuana legalized”
At the same time, they are asking the same government that imposes “shackles” on their personal lives to provide them with unlimited services:
- More control of the medical system — “We want free health care”
- More control over jobs and wages — “We want a high minimum wage and salary caps for the rich”
- More control over retirement — “We want Social Security”
- More control over landlords and housing — “We want rent control”
- More social safety nets — “We want welfare for the poor”
- More control over education — “We want better public education”
- More control over the environment — “We want a green society”
How can the same group of people that so distrusts our government ask that same government to provide cradle-to-grave care?
Don’t they know the consequences of asking for everything from the government? Have they studied history? Have they considered other countries that have gone down this dangerous path? The party that seeks these programs needs — requires — people to be in poverty in order to control them!
When I was 16, I got my first car and demanded my freedom from my parents. I argued against a curfew and scoffed when my folks told me who I could or could not hang out with. But out of the same breath, I expected for them to feed me and provide a place to live rent-free. I fully expected them to pay my bills while I ran around being a carefree teenager.
These days I laugh about how immature I was back then. But it’s not so funny when 50% of our country — grown men and women — behave the same way toward the government!
True liberalism is freedom from the shackles of a “nanny-state” government that controls who can progress to wealth or who can start/run a business or travel freely through the country. As stated before, our founding fathers were very liberal in their time. But oh, how the world has changed…
The modern Democratic party has hijacked the liberalism of our government and taken it to an extreme where current social trends and collectivist views define the party platform. They’re fighting in the name of “the common good” to enact the same socialist policies our founding fathers worked so hard to prevent.
Serious academic debate about the economics of socialism ended nearly 100 years ago. How many times are we going to try to make socialism work before we realize it can’t?
You can’t have your cake and eat it too. Either you want more government (regulation, interference, control) or less government (freedom, privatization, risk).
Make up your minds, people. There is no in-between.
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I think one of the biggest misconceptions and sources of confusion in these sorts of discussions is an adequate definition of freedom. It means something entirely different to say you are free to choose how to live your life versus being “free” from hunger.
One variant of the term implies a a forcefully imposed obligation upon another to provide the freedom from hunger, i.e. someone else must provide food. The first type is void of force, and is legitimate freedom.
A free society ensures that everyone is equal under the eyes of the law.
I have never even heard of anyone calling for a salary cap for the wealthy. A higher rate of taxation for the wealthy is not even close to the same as a salary cap. To be clear, what is not being proposed is the idea that after a certain dollar figure the government takes everything. Under a progressive tax system, the more you earn the more you have, just not quite as much more as under a flat tax or no tax system.
A social safety net of some sort is of enormous value to society… rejecting it is actually not in any way natural. The idea of government providing some things that it does well (large scale infrastructure projects, environmental protection, a social safety net that protects from the worst sort of falls) while staying out of many kinds of commerce (you can sell whatever you want, provided it meets minimum safety standards) has been the most successful economic force ever. It has proven to be more effective at maintaining a society than laissez-faire capitalism, communism, total socialism, etc. It is however a constant state of tension. Some people will always want a bigger government hand in society, some people will always want a smaller one… and sometimes a bigger hand is needed to correct things, sometimes a smaller one. This means the tension is good, when a smaller hand is needed a lot of people will probably start calling for it and for a bit the government will get smaller, when a bigger hand is needed… etc.
I believe that right now we need the government to put the brakes on society, to reign in the excesses caused by Reagonomics and its subsequent modification, that we are in a time for a bit more socialism (remember, socialism as practiced in liberal democracies actually tends to reduce government spending by clamping down on military spending while increasing taxes on the higher income earners, leading to a redistribution of wealth that favours the bottom earners, given that there has been a major concentration of wealth lately that would probably move more liquidity into the economy as a whole)
Oh yeah, one more thing. Equality of opportunity is something often espoused as part of freedom, but it ignores the fact that Bill Gates did not have equality of opportunity with the child of a garbage man. Bill Gates started with a two million dollar trust fund, something that buys a hell of a lot of opportunity.
Equality of opportunity does not imply everyone starts from an equal position, only that there are no articially imposed constraints to achievement.
That is an opinion. I guess it all depends on how you define equality doesn’t it? Of course, in a mixed market social democracy there is no limit on how far you can go, but there are some limits on how you can go about and a bit of an incentive to share resources.
but yeah, health care is more efficient once you remove the profit motive. Seriously, take a look at Sweden, Norway, Canada, etc. You will discover that our per capita expenditure on socialized health care is lower than that of the US… this is due to people’s willingness to get preventative health care instead of waiting until they need emergency care, among other issues.
I have stated many times that the eventual outcome of an unregulated market resembles feudalism. The arguments against this point of view are generally fairly weak. If the police are private, what is the motivation for them to remain neutral? The typical argument is that they will not get as many customers if they are not neutral, but if one customer has more money available then why on earth would the police care about the ones who haven’t hired them?
If we agree that law enforcement needs to be in the hands of government then we probably agree (for the same reason) that the court system needs to be in the hands of government. If we can go that far, maybe we can see (and there is a lot of evidence to support it) that something like health care… oops, I see you backing away from the crazy commie
I also believe that business (motivated as it is by short term profit under a laissez-faire system) cannot be trusted with the general welfare of both the economy and the populace. Again, not saying communism, merely checks and balances that seem to go beyond what you would put in place.
One of the biggest fallacies of Marxism is that profit is a dead-weight cost to society. Rather, it motivates efficiency. In the healthcare arena, there are multiple variables to consider, such as new product development (there’s a reason why the majority of the world’s pharmaceutical developments have come from America), variable levels of care options and access issues. Depending on how you rate an optimal basket of healthcare products/services, your evaluation of relative merit for each country’s system would differ. One of the biggest issues with collectivizing healthcare is the decision to standardize a set of care options that citizens are permitted to consume.
There are certainly systemic functions that are appropriate for government to control, such as military, police force, judicial system, and a few other limited roles, but the same logic does not hold true for the majority of resource control. A liberal/free society can only exist given a strong legal infrastructure that protects property, enforces contracts, and protects individual rights. This is the role of government in my opinion.
Profit is not a dead weight, but neither is a panacea. I have watched our power system go from a fairly efficient system to a complete joke since privatization. The profit margins go up if the costs go down. The costs go down as a result of reduced line maintenance. Since the infrastructure costs of running new power lines (complete with new poles as our power company owns the poles) if so prohibitive the power company (which built the infrastructure on government dime prior to privatization) is a natural monopoly and thus far unchallenged. The only way to break that monopoly would be regulation, as there is no practical way to make a profit within a hundred years of building the infrastructure.
The pharmaceutical thing is a canard by the way. Almost no cures have ever come out of the pharmaceutical industry, but lots of treatments have. All the cures come from university research, and pretty much exclusively publicly funded university research. The reason is that a cure is a low profit item. Treatment is where the big bucks are. Now, I’m not accusing big pharma of anything… they are fulfilling their function, which is to make money. I don’t believe that if they stumbled on a cure by accident they would suppress it or anything, but they do direct research to treatments.
AIDS is a great example. There are a number of promising pieces of research that may lead to cures… and every one of them has come from the public sphere. There is also a perfect treatment now. The treatment prevents the disease from progressing or being transmitted, but it requires you to take the treatment every day for the rest of your life.
Another great example is anti-depressants. University research has revealed that depression is actually caused by physical degradation of neurons, not by seratonin depletion. This research was carried out with equipment developed in the university system but sold by private industry (MRI). The fact that Prozac works is purely accidental and it does so poorly at best. There are a number of methods that actually work, many of which are a more permanent and far cheaper fix, but they aren’t profitable so the research was never done.
Now, the university system shouldn’t be making MRI machines, they are crap at large scale manufacturing, something private industry is good at, but private industry has never been that good at innovation, something that a well funded university system excels at. To my mind by combining the strength of both these systems with good public funding for university and an arms length approach to business (with decent oversight to make sure they don’t breach ethics too egregiously) you have the mixed economy I keep talking about. This is the economy that made the US strong, the one that Canada currently enjoys (although our current government is trying to take us down a different road).
Natural monopolies are a special case where the argument for regulation makes more sense. Still, we must proceed down the path of regulation cautiously. This is particularly true now more than ever given that cost of capital is far different, and cheaper, than it was a century ago when most cases against natural monopolies were formulated. Decreased cost of capital due to unprecedented global capital flows makes long-term investing for profit far more feasible than at any point in history.
There are certainly pros and cons to various systems of resource ownership and regulation. However, it’s exceedingly difficult to evaluate the merits of each given convoluted layers of regulation that obscure causes and effects for outcomes. Healthcare is one of these overly regulated domains where the total picture is too warped to draw many justified conclusions. There are calls for more regulation and government ownership as proposed solutions for fixing an expensive, inefficient system that is likely that way largely because of regulation and government interference.
My experience is limited to a relatively small component of the economy, but I have seen firsthand the inefficiencies and utter incompetence of government work. The incentives and constraints of profit and hence reality are lacking. Profit gets a bad wrap in our culture, but I have first hand experience at seeing the good intentions and competence of many entrepreneurs and business people. I don’t understand why so many people believe bureaucrats to be more capable of generating value than individuals independent of government? Government is not an entity by itself, but rather is comprised of individuals with their own competencies and incentives. Where do you think the most competent and motivated people work?
One my big problems with that is the simple fact that I have worked with some of private industries best and brightest, and found them to be incredibly incompetent (individually they might be competent, but taken together they are not even a little bit competent). I have also worked for government, and they are also incredibly incompetent. In fact the only sector of the economy where I have seen competence and efficiency is in the non-profit sector. I guess that’s what you get from not having a profit motive, but having almost no money…
Small companies are usually good as well. I think most of what you see wrong with government is simply a question of scale. Once an organization attains a certain size it goes right to hell in a handbasket due to the inevitable increase in complexity resulting from the sheer number of interactions and logistical decisions needed.
Amen to your entrepreneur statement! Large organizations certainly lose out on much of that creativity and flexibility. Some of them have their place in this world, others are simply archaic and pending creative destruction by more nimble rivals.
“Once an organization attains a certain size it goes right to hell in a handbasket due to the inevitable increase in complexity resulting from the sheer number of interactions and logistical decisions needed.”
Beautiful!
This is a great article and reads very true. To Traverse Davies: Many are calling for caps on what the rich can make in light of this recent bailout. Also, arguing that the more you make the more you should have taken away from you IS very much the same as a cap. IF one person has 50% of their 41st hour worked that week taken away from them and redistributed, while another person has less than 20% redistributed, we should not be surprised that some people feel limited and choose not to work more. Wouldn’t society be worse off (lower GDP) if the rich person decided to stay home with their family instead of working overtime that week?
Also, about monopolies: With low regulation monopolies are easy to break, not hard. Higher amounts of regulation increase the costs of entry into the marketplace. Look at the history of regulation and you will see large companies pushing for it and large companies gaining from it.
Andrew:
When you use a straw man or a severe exaggeration to argue against, you weaken your own case. Lets hit the exaggeration first: I have never even heard of a progressive tax system that jumps from 20% to 50% in one step. Here in Canada it does go up to 50% eventually, but at six figures you are still only in the 35% bracket. You have to be well into the millions before you get taxed 50%. There is basically no circumstances where you bring home more by earning less… okay, if you go from a dollar under a bracket marker to a dollar over, but nothing realistic.
Now, you assume a higher GDP is better for the country. Why? GDP is one measure of a society, and many would argue that it isn’t even one of the more important ones. What if our rich person is reducing the long term viability of the economy every hour he works (say by trading in derivatives on the international market while not creating any real wealth)? In that case, he increases the GDP when he works but every hour he works also lowers the GDP from a long term perspective. By that measure, the economy is better off if he stays home that extra hour. What if his attempt to earn more wealth results in children who are complete emotional basket cases who end up incarcerated, costing the government hundreds of thousands of dollars? What if he has a heart attack early due to his extra work? Maybe he earned more money for the economy, but was it worth the cost? In order to make the whole laissez-faire capitalism work, you have to really oversimplify reality, discounting societal carrying costs (otherwise know as externalities) and moving anything that isn’t the creation of wealth to a position of lower importance than creating wealth. Even then, you have to rely on an economic falsity for long term sustainability. That falsity is that you can expand forever and the market will take care of shortages.
As to monopolies… try establishing a competing diamond mine in South Africa in the 1800′s. The complete lack of regulation meant that DeBeers could have you killed (and often did).
Finally, the benefits of laissez-faire capitalism are a theory, and in practice every time you go too far towards it, society suffers (by the way, the same thing applies every time you go too far towards state control). Maybe if you did get rid of all regulation you could have the paradise you people envision, but every time there has been no regulation someone has taken over and imposed regulation. That is because when there is no regulation there is no-one to stop that from happening, and in this world some redistribution of wealth is essential for the functioning of society… and so is some profit motive.
Great article.
To Traverse: Your posts are loaded with baseless opinions which you present as facts.
For example, President Reagan’s economic principles were based lowering marginal tax rates on income from labor and capital, reducing the growth of government spending, reducing government regulation, and controlling the money supply to reduce inflation, so what are the excesses you speak of when referring to Reaganomics? Are you suggesting higher taxes, more government (deficit) spending, more regulation, and higher inflation? Among other problems, Carter left Reagan with 12% inflation rate, double digit unemployment, 21% interest rates, oil shortages, and obscene tax rates (70% for the top marginal rate). Reagan’s conservative policies led to average 4% yearly GDP growth, brought inflation down to 3.6%, and unemployment to 5.8%, created 20 million new jobs and led to the longest period of peacetime economic growth in American history. A funny thing happened that liberals can’t seem to understand, when he reduced the top marginal tax rate from 70% to 28% – by the end of his presidency, tax revenues actually doubled.
You are flat out wrong if you think this is the right time for our government to increase taxes on the rich even more than they already pay – you may not know this but the top 10% of income earners in this country pay for 70% of all the taxes, the top 25% pay for 86%, and the top 50% pay for 97% of the total tax burden. Guess what the bottom 40% pay – a big fat ZERO! Right now more than ever we should be talking about lowering taxes across the board – or better yet, abolishing the IRS and implementing the FairTax.
You also mention that private industry has never been any good at innovation – which is completely false. Most historic innovations in the last hundred years have stemmed from private industry, e.g. the car, the transistor, the telephone, the integrated circuit, the iPod, the iPhone, the list goes on and on. Another example of private industry innovation – Craig Ventor’s small company Celera Genomics deciphered the human genome – the DNA genetic code – in one-sixth the time, one-tenth the cost, and more accurately than the government-sponsored Human Genome Project.
You say that the only place you see competence and efficiency is in the non-profit sector? What about Toyota, Google, Apple, Sony, Microsoft, Walmart, to name a few – all profitable companies that are extremely competent and efficient at bringing products to consumers like you and I.
You may want to do a little research before you post your opinions as facts.
The only truly liberal ideology is libertarianism: maximizing freedom on all fronts. Conservatives want more economic freedom but less social. Liberals want the opposite. Libertarians recognize that BOTH are important. True Goldwater conservatives, named after the real catalyst of the New Right Barry Goldwater, believe in true limited government, not limiting spending or taxes but trying to control people’s personal lives or behavior. The government should not be in the business of moralizing. I don’t need the state to tell me what is and is not right. Simply put, you can’t legislate morality. The first major politician to say this in recorded American history was a CONSERVATIVE (Barry Goldwater). He wasn’t some hedonistic liberal.
And btw, legislating morality isn’t constitutional either, just like the welfare state.
Please note heavy sarcasm proceeds.
What we are lacking in America is individual responsibility. We want to do whatever we want without having to accept the consequences. Unfortunately, the majority of Americans feel that it is the governments responsibility to pay for the consequences with the wave of the magical wand… It’s what we deserve right:)…we’re Americans
Presently, Americans are beginning to unveil the the fairytale for what it is. An epic tale. Someone is going to have to pay for the rest of society to exist at their current status. Since the 51% cannot, the remaining 49% are being cast as the crucified Jesus, Persephone, etc..whomever you prefer .
There is no magical wand and we are knee-deep in debt.
@Mandi Harper – Looks like the magical wand isn’t really magical! The economy is crumbling and with it our empire will follow.
Sad that Americans fell down the trap of populism, entitlement, apathy, and soon the other consequences of Socialism and empire.
@Rob Viglione –
Exactly Rob and such a state reminds me of the words of Alexander Tytler—
A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves a paycheck from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship. The average age of the world’s greatest civilizations has been 200 years.
Great nations rise and fall. The people go from bondage to spiritual truth, to great courage, from courage to liberty, from liberty to abundance, from abundance to selfishness, from selfishness to complacency, from complacency to apathy, from apathy to dependence, from dependence back again to bondage.
The question left to be answered is : What can we do?
If it is easy to do the wrong thing, and the majority wants to do this easy-wrong thing…what can you or I do?
@Mandi Harper – What can we do? We can adamantly oppose any expansion of government, fight to keep politics constrained to Constitutional limitations, and campaign against all foreign military adventures.
Since America’s course is pretty much set, there’s not much we can personally do. We can try. There are some great people out there fighting daily to maintain the Republic, especially Rep. Ron Paul. But in the end I think the lifecycle of civilizations is on course to unfold.
Be that as it is, you need to look out for yourself and your family. Plan for the economic consequences of the great unraveling, prepare physically for disaster, and consider long-term flight as a contingency plan.
Timing is everything with investing, so I’m not advocating betting everything you have against the system, but allocate a decent chunk towards precious metals, real assets, gold, silver, oil, natural gas, foreign currencies, and short Treasuries, particularly the 30-year maturities. Start moving capital out of the country, set up bank accounts and buy real estate in safe countries. Set up brokerage accounts in several foreign markets and buy corporate stocks and bonds for companies that derive little business from the U.S.
Physically, develop an escape plan. If the system collapses there could be a period of abrupt violence. Store enough food and water to last 30 days, consider firearms, emergency supplies, keep cash and gold on hand, and make sure you have your passport ready to go. Plan escape routes if you live in an urban environment. You may also want to look into residency and/or a second citizenship abroad.
Crazy enough of a response?
@Rob Viglione – Maybe I should watch “Red Dawn”… it may have some great tips
No, it’s actually not crazy it’s using your frontal lobe cortex. It’s anticipating and planning for possibilities in the future.
My main focus in life has been to enjoy my life in the arts…without concern for finances ( as long as ends were meeting)and not focus on money earned and saved, but I may have to take a break to save up for tragic possibilities.
@Traverse Davies – “I have never even heard of anyone calling for a salary cap for the wealthy.
Know your history— FDR tried to implement a program that was like the Minimum wage only it was the “maximum wage”