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No, the Government Can’t

Nov 07 2008

No, the Government Can’t

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Op_ed

By Sheldon Richman

Translation

No, the Government Can’t

Barack Obama will assume the presidency on a wave of hope among millions of Americans that he will deliver on promises that countless politicians have made before him. Rising above partisanship and committed to solving long-festering problems, Obama will inspire and unify the American people and, as a result, move the crusty Washington political apparatus to at long last serve the interests of all.

At least that’s the theory and the widely held expectation. The truth is that some political promises cannot be kept because they run up against the wall of reality, namely, the unmalleable laws of economics. The sooner Obama learns this, the easier it will be on everyone and the more good he will be capable of. Because of those laws, which are every bit as real as the laws of physics, government cannot directly do the things Obama wants to do: raise wages, create jobs, provide universal medical care, improve education, innovate on energy, and the rest. But indirectly he can help bring those things about. How? By freeing the economic process of all impediments and distortions, including taxes on production, regulations, subsidies, and guarantees to business. The free market, which consists of free individuals cooperating through consent and the division of labor, can deliver those things and more.

It may seem strange to hear that economic laws limit our options. Obama’s slogan was “Yes we can.” In part he means there’s nothing “we” can’t do if we put our minds to it. And by “we” he means government. All that is holding us back, he is saying, is the lack of will and commitment. We can have all the things he promises if we want them enough and are willing to work together.

But this is naïve. If he said we could repeal the laws of physics if we worked hard enough, no one would believe him. So why believe his suggestion that we can achieve things in defiance of the laws of economics?

It takes a certain humility to acknowledge our limitations. While ambition and audacity are admirable, some things are beyond human capabilities. For example, the laws of economics — which are laws of human action — dictate that all choices have costs and tradeoffs. In a world of scarcity, efforts to achieve A mean abstaining from efforts to achieve B. It’s in the nature of things, and we have no choice about it. Given this fact, it is good that people confront the costs of their actions, for those costs prevent us from achieving the less valuable at the expense of the more valuable.

Government cannot change this law, but government can obscure it by hiding or shifting the costs. For example, subsidies and regulations can make medical care appear cheaper than it really is. When government does this, it upsets the balance of supply and demand, raising prices for the uninsured and creating other hardships. At that point, government will either have to back off or expand its intervention in an attempt to fix the problems it caused. But new interventions will beget new problems, and the cycle begins again.

The upshot is that when government tries to ignore the laws of economics, it throws things out of whack, makes things worse, and provides excuses for the exercise of more power. The results are undesirable from the point of view of most people: fewer and less desirable goods and services, and a shrinking of freedom as government power grows.

It is important to realize that intentions are irrelevant in this regard. The logic of human action operates with implacable regularity whether intentions are good or bad. That logic can no more be annulled than can the laws of the natural sciences.

Barack Obama is no doubt a remarkable political figure. But he’s not that remarkable. If he wants a successful presidency, he’ll have to learn to live with the laws of economics — and liberate the American people from government restrictions on their peaceful activities.

Sheldon Richman is senior fellow at The Future of Freedom Foundation and editor of The Freeman.

Mr. Richman's articles on population, federal disaster assistance, international trade, education, the environment, American history, foreign policy, privacy, computers, and the Middle East have appeared in the Washington Post, Wall Street Journal, American Scholar, Chicago Tribune, USA Today, Washington Times, Insight, Cato Policy Report, Journal of Economic Development, The Freeman, The World & I, Reason, Washington Report on Middle East Affairs, Middle East Policy, Liberty magazine, and other publications. He is a contributor to the Fortune Encyclopedia of Economics. Articles by Sheldon Richman at MWC News http://mwcnews.net/sheldon-richman

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Comments (3)

1. 07-11-2008 09:12

Really?

'Obama’s slogan was “Yes we can.” In part he means there’s nothing “we” can’t do if we put our minds to it. And by “we” he means government.'

I believe, Mr. Richman, that Mr. Obama was referring to "we, the people of the United States," not "we, the government." My interpretation was that he meant that all of us, working together, making sacrifices together, could implement change.

While I agree with a great deal of what you say about eliminating the distortions that have been put into place by people who claim "free market" but really mean, "psuedo free market," I think it is naive to imagine that, absent regulations, people will refrain from harming others in the pursuit of profit, or even that people can be counted upon to act rationally while pursuing profits. The recent debacle regarding derivatives and other financial devices has shown that the lure of short-term gain can inspire people to do incredibly stupid things, destructive to their own long-term self-interests.

It has been reported that in Asia, there is a method of catching monkeys which consists of boring a hole in the side of a coconut and filling the coconut with rice. A monkey will insert its hand into the coconut through the hole and grab a handful of rice. When trying to extract its hand, the monkey's rice-filled fist now cannot fit through the hole. To free itself of the trap, the monkey has only to release its grasp of the rice; but, apparently, this is something monkeys rarely do, and they are successfully caught using this method.

While we humans are capable of higher cerebral capacities, we also retain the instincts and passions of our lesser natures, greed being one of the most powerful, which can intoxicate us and convince us that errors in judgment are, in fact, brilliant choices. Enlightened regulations are put into place in our sober moments to protect us from such choices. Examples from China of melamine in milk and antifreeze in toothpaste show us what the lack of regulatory oversight can yield.

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monadyne@comcast.netNOSPAM! ">Jack

2. 07-11-2008 17:16

Humanity?

Jack your last paragraph was on the spot.
Come on Sheldon, the laws of physics, are the laws of the known universe, set in place by something beyond human understanding.
The laws of economics are not fixed, they are created to make wealth for some, by exploiting situations, people and the so called free market, (check out the corporate world. The laws of economics, has a sinister human face, change humanity and watch the laws change. I wonder if Jesus had a capitalist heart? He was right into free medicine.

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mike keenor

3. 08-11-2008 11:23

What Planet is This?

Sheldon, I\'d have to ask, what planet are you on. Didn\'t you notice over the past 30 years the globalised capitalists have entirely disarmed, de-capitalised and side-lined the governments of nations reducing them to powerless, corrupt spectators of an entirely de-regulated global economy that is run like the wild west?
Almost everyone in the world except Fox News has been saying - \"This is what CAUSED the meltdown\". As in the 1930s speculative capitalism financed takeovers and corporate canibalism to the point where companies of substance that actually contributed production to the economy were either destroyed by incompetent, over-stretched takeover management or could not compete with speculative investors for finance or investment funds. It destroyed the producing foundation of the economy, destroyed the jobs of the people it employed and erased the buying power they had as consumers. That was the free market then. That is the free market now.
But today, rather than borrowing to put buying power back into the hands of consumers, governments are buying to bail out the speculators and keep the merrigoround of speculation going for a few more turns.
What Obama needs to do is let them all collapse and watch the market for good-value banks, insurance companies anything else of use to economic infrastructure (which is the REAL function of government) and buy them up at the point of collapse - after the failed investors have lost almost everything.
The fact is - there ARE NO LAWS OF ECONOMICS, certainly not in the scientific calibre of those of Physics - objectively testable and repeatably observable. Economics is a pseudo-science that has been prostituted to the service of powerful capitalists to create insubstantial theories to give some credibility and moral respectability to the arrangements they want the public to accept, and hiding the fact that they serve only the interests of capital.
If Obama is wise he will focus on the basics and restore the true function of government. He will take money out of the economy by taxing wealth and profit and use it to re-build infrastructure doing it in a way that is environmentally sound and efficient - Public Transport not Roads and SUVs, Health Care that is shifted away from its corrupt drug-oriented treatment methods, education that educates real people for real life, re-structuring cities for energy and goods-distribution efficiency and so on.
By actively re-focussing economic (and social) infrastructure he will kill the speculative and wasteful corporate activities and create opportunities for investment in the economic (and social) activities that really matter and he will put money back in the hands of the people who DO this work to buy their share of the maningful things it delivers.
Infrastructure and the general coordination of economic (and social) activity can only be achieved in an orderly, efficient way by government.
Americans (or at least the affluent middle class among them)have thrived in the chaos of free-market capitalism only because the US has enjoyed a largesse that derives from it\'s militaristic domination of resource-rich parts of the world that are relevant to \"American Interests\" - those days are coming to an end, the planet can\'t cope and the people of the planet are seeing through it. The degrade and occupy game is fast becoming too obvious and the gloves are coming off. Even former allies are feeling threatened by \"American Interests\" and there is great uneasiness.
The free ride on the global wild west free market is history. Americans need to be more real and Sheldon for one needs to grow up and break free of the economic fairy-tales of his youth - the tales of Friedman, the lies of Nixon, the Trickle-downs of Regan etc. It was all an unfounded fantasy and the chickens have come home to roost. We are all hoping that Obama understands this, or will come to. At present it is more tentative hope than calm confidence.

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Allen L. Jasson

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