Government: The Great Unequalizer

If somewhere you see an increasing disparity between rich and poor, you can be sure that government is involved.

Somewhere, somehow the myth grew up and has become far to often believed that capitalism, or the free market, causes a growing disparity between rich and poor. Perhaps this

Members of free societies are more equal in material things than those who live in non-free societies. This should surprise no one who has been properly educated in both economics and history.

grew out of the lie that the market caused the stock market crash of 1929 and the subsequent economic collapse. A careful study of history will reveal, however, that Federal Reserve policies caused the crash, and that socialist government policies made the economic malaise far worse.

In his book, Free to Choose, Milton Friedman states
Nowhere is the gap between rich and poor wider, nowhere are the rich richer and the poor poorer, than in those societies that do not permit the free market to operate. That is true of feudal societies... It is equally true of centrally planned societies, like Russia or China.
Conservative economists pooh-pooh the fact that now in the United States the disparity between rich and poor is growing.

The biggest problem connected to the fraud of man-made global warming is an economic impact that does not need to be.

They shouldn't. There's a rotten reason for the widening chasm--government is handing out special favors to lobbyists, ethanol growers, pharmaceutical companies, companies with foreign operations, and large farming operations, and many more.

When government controls the economy, the populations of rich and poor may change slightly due to who knows whom, but the disparity between the haves and the have-nots is bound to increase dramatically. It's unfortunate that this simple and repeatably provable lesson of history is grasped by so few.

When force is enshrined into law, two things happen. First, people's values come into conflict with the clearly unnatural law, and respect for the law breaks down. Because the law has become unnatural, more and more people decide that the only way to keep up with the law is to get a handout before someone else does. Second, those who enjoy employing that force begin gravitating towards government. Not so surprisingly, those who apply the force know how to get around the laws, applying them only to everyone else. While the masses of new serfs get their pittance, those at the top of the power chain become fat at the trough of government.

Milton Friedman continues
...all of the great wonders of the modern era have meant relatively little to the wealthy. ...the great achievements of Western capitalism have redounded primarily to the benefit of the ordinary person.
The biggest problem connected to the fraud of man-made global warming is an economic impact that does not need to be. If the policies succeed of those who claim that this chimera is truth, and who therefore want more government control over the environment, millions of third-world inhabitants will be consigned to a forever of poverty.

It is no accident that the members of free

How is it that Americans have become accustomed to expect government to solve problems of economic inequality, when in historical reality government's meddling control always makes such things worse?

societies are more equal in material things than those who live in non-free societies. This should surprise no one who has been properly educated in both economics and history. Societies governed by freedom not only allow individuals to benefit society as a whole by using their own energies to pursue their own objectives, but also prevents monopolists or other government agents from arbitrarily suppressing the freedom of others.

Monopolies are nearly always established through the help of government. In a free society, monopolies fade away. How is it then, that Americans have become accustomed to expect government to solve problems of economic inequality, when in historical reality government's meddling control always makes such things worse?




Comments

  1. Great post, Frank.

    It's amazing to see the prevalent mentality (most notably by those currently in Obama's camp) that "equality" (as it should be - "equality under the law") means "equality of stuff". I've never understood the principle upon which such proponents base their opinion (since the principle at hand is force). Ah, good ol' socialism.

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  2. If I might pose a question...

    Consider 2 administrations:

    The Bush/McCain Presidency, because I suspect McCain will follow along the same path.

    The Obama Presidency.

    Which would be better?

    I would submit that neither believes in the free market. Both would prefer the government control everything.

    The Republican administration would likely not tend towards openly socialist policies, but integrity isn't one of the core values that they hold to. I would suspect that lobbyists and large corporate entities pull the strings and thus destroys the concept of a free market.

    The Democrat administration would definitely institute more social welfare programs, but would be more open about their goals to do such, and in my mind would be less beholden to large corporations and lobbyists.

    Either way the free market system doesn't get a chance to play out. That said though, would you rather have an administration that claims to believe in it, but undercuts it, or one that openly works against it.

    Personally I almost think the Democrats may be the lesser of the two evils. Although neither will likely get my vote.

    Any thoughts?

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  3. I've long thought that (at least on a Federal level) Democrats have been the lesser of two evils, because they aren't stealth socialists like the Republicans generally are.

    With Republicans and their lobbyists and corporate schmoozers, it's a mistake to think that we have a free market, because what we largely have is fascism.

    But neither will I vote for either of the two evils (Obama, McCain).

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  4. It seems to me that in a position where you're presented with what you consider "two evils," and you'd like your vote to actually prop or take down one of them, the best thing to do is to consider each of their non-economic policies- or at least focus on something you agree or disagree with them on.

    I, for example, I really like Obama personally. But I think he's the New Kids on the Block of politics, whose icon status in pop culture will at some point come crashing down. I think his lack of any executive experience, thin resume, and hardly any time in the Senate (143 days before launching his campaign) are enough to not vote for him.

    I question his judgment, his associations, and his sincerity- and we haven't even come to the actual issues yet.

    McCain I can't stand either. But I think he understands the nature of Islamic extremism much better than Obama. His service to this country, while by no means is it a qualifier for the presidency, says something about his character and his feelings for the country I love. He'll be more likely to appoint constructionist judges to the Supreme Court.

    So what it comes down to, basically, is that while I like Obama personally more than I like McCain, I trust McCain more and I agree with him more.

    So if I don't want to throw my vote away on a third party, my choice is clearly McCain.

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  5. I trust McCain more too, but that trust is that he'll keep things much the same as they are with the current administration - Not exactly something I'm wild about considering.

    I'm like Obama personally, like you, but I see him more as a wild card than anything else. Considering the lack of experience and everything else you mentioned, you don't really know what you're going to get. He could be really good, really bad, or just mediocre. For some reason that has a certain amount of draw for me. Perhaps this is just another reason of why I don't think I should ever try gambling!

    Of course there is always Paris Hilton :-)

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  6. Obama vs. McCain. It'll be one of them, for sure, regardless of how I vote. But do I really have to think about that? I don't like either prospect.

    On the experience thing, I am reminded that Lincoln came to the presidency with precious little experience. Two years as a congressional rep and some time overseeing a local post office. In short, I'm not convinced that lack of experience is as bad as it is reputed to be.

    On the other hand, I'm very concerned about some of Obama's relationships -- and how quick he is to toss people overboard if a relationship with them might endanger his public standing.

    And McCain. Well, let's just say that I had valid reasons for voting against McCain in the primaries.

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  7. Reach, remember that Lincoln was not the leader of the free world (as our presidents today are), nor could he have been considered the most powerful person on the planet (as our presidents today arguably are). Consider too that the United States economy back then couldn't hold a candle to today's in both size and magnitude of burden.

    Lack of executive experience might have been ok in the 1800's, but nowadays it's a bit scary.

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  8. OK, you've got me there. But frankly, it's kind of scary to think that McCain's level of executive experience far exceeds his opponent. Commanding a large Naval squadron isn't exactly high level executive experience either.

    At least when McCain says he loves America, you know he means it and you're pretty sure what he means. When Obama says something like that, it comes with lots of qualifiers and it's not exactly clear what he means.

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  9. Frank, first off, this sounds like the sort of free market idolatry, one of completely unfettered markets, which you've previously claimed not to support. Secondly, you are taking on a straw man. Nobody of either major party or any other prominent political thinker in the U.S. is proposing abolishing markets. They may believe in more regulation than you support, but if you do believe in some regulation as you've before claimed, then that is a matter of degree, not kind--as you seem to be suggesting here.

    Furthermore, your argument simply does not make sense. How would an unregulated, unfettered market improve the working condition of the average worker? How would employer be more motivated to maintain safe and healthy working conditions without government regulation? Would Bob Murray have kept his mine safe for his employees if there were no government safety standards? What motive would our monolithic corporations, with whom the average worker has absolutely no leverage in contract negotiations, have to improve pay with no wage laws? What mechanism of the market will prevent industry from polluting the commons we all need to survive better than environmental regulation?

    We need to recognize that while markets are very important tools (again, nobody is suggesting we throw out markets), they also have severe limitations which must be addressed for the good of society. If we, through our government, do not do so, who will? Not to recognize this is myopic and incredibly destructive to our society.

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  10. Derek,

    A quick reply, because I'm leaving for my work team retreat...

    I haven't changed my opinion that we need regulation. What we have too much of in the US now, though, is favoritism. The following snippet hopefully addresses your concern.

    Not so surprisingly, those who apply the force know how to get around the laws, applying them only to everyone else. While the masses of new serfs get their pittance, those at the top of the power chain become fat at the trough of government.

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  11. Frank, however much we may disagree on the style of market necessary, I absolutely concur that crony capitalism is the worst form possible.

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  12. And that, in this case, is the main focus of my article. Regulations need to make sense, and they need to be fairly applied.

    Crony capitalism is just as bad or worse than outright socialism. George W. Bush is a crony capitalist. But so was Woodrow Wilson, and so was Franklin D. Roosevelt.

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  13. Which brings up the following question:

    Does the fact that government inserts itself into markets create the incentive for crony capitalism?

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  14. Outstanding question. I say the answer is YES.

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  15. Perhaps there needs to be some definition of terms. What do you mean by "government insert[ing] itself into markets"? The point of the question and its affirmation seems to imply the standard line laisse faire that government should not be involved in economics at all (excepting property protection and contract enforcement). Then I'm back to asking how such a system will better protect consumers, workers, and environment. So please clarify what was meant by the question.

    BTW, Cameron, wasn't it you who saw nothing wrong with cities giving unique tax breaks for individual companies? That may not be technically "crony capitalism," as the city leaders may not have a relationship with the company execs. But it very much is the same species of corruption.

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  16. You read that series of comments did you? It was a really interesting discussion, one that could have benefited from your input, rather than bringing it up out of context on an unrelated post 3 months later.

    As for the government inserting itself into markets, my definition is any influence government exerts. It's natural for business to interest itself in an entity that controls its decision making, however large or small that control may be. This doesn't mean that there is no place for government regulation, but it does serve as an interesting, and perhaps unintended, consequence of that regulation.

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  17. If you look back at that post, you will see I did make some comments. I did not respond specifically to your points, as Frank make pretty much the same points I would have.

    In any case, I'm not trying to twist your point. It does relate. In both instances, individual corporations are getting special favors, whether from buddies in the "good-ol'-boy" network or from local governments small enough to be bullied and extorted.

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  18. Derek and Cameron,

    I do agree with Cameron on a lot of things, but I have to admit, when Cameron asked the question:

    Does the fact that government inserts itself into markets create the incentive for crony capitalism?

    ...my mind immediately went back to the Wal-Mart/city government discussion.

    I really do think they are the same thing. Whether it is federal or local, it is not the proper role of government to pick its favorite capitalist. I can see why city governments do it--because if they don't some other city will. But that doesn't make it right. This would be a GREAT spot for federal government to insinuate itself into economic fairness by regulation of such dishonest tactics (i.e. ban cities from giving preferential tax treatment to some businesses at the expense of others.)

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  19. Um, Frank, I think my computer is having some display problems. Either that, or I'm delirious. I could have sworn--and you're going to think this is hilarious--I could have sworn that I saw you, a committed old-style conservative claim that something would be a "GREAT spot for federal government to insinuate itself." That would have been the first time such words came from the keyboard of a Reaganite, were I not imagining it...
    ;)

    So how would you define my question and thus (hopefully) avert a deluge of annoying liberal questions?

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  20. Derek,

    I expected a rough response from Cameron, but I'll admit--yours caught me off guard. But that's what makes blogging fun!!

    ;-)

    Reganites are not opposed to regulation--just the unfair/unequal kind. I guess I'm not sure what you mean by "[your] question". At any rate, it is the responsibility of the federal government (Constitution: Article I, Section 8) to "provide for the...general welfare of the United States" by, among other things to ensure that "all duties, imposts and excises shall be uniform throughout the United States" (obviously this is referring to federal taxes, but...) and to "regulate commerce...among the several states".

    Clearly the Wal-Mart situations we have are unfair and cannot be managed except on a federal scale. Under normal circumstances (when the majority of the people and their reps understood the proper role of government) something like this would not need to be enshrined in law, but in the current situation, that's the best way to solve the problem.

    There exists a plethora of government regulations that are terribly unfair, however. These I am opposed to.

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  21. Hey, if I can't do some good-natured ribbing on occasion, life just isn't any fun. I figured we've gotten friendly enough that we can dish out and take some teasing.

    In theory, what you say about regulation may be true (though conventional conservative economic theory--aka the Chicago School--frowns upon any regulation). In practice, I think conservatives tend not to make the same distinctions.

    The question to which I referred was "What do you mean by 'government insert[ing] itself into markets'?"

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  22. Ribbing? But hey, I'm ticklish!

    ;-)

    Nah, just kidding. Thanks for keeping me on my toes.

    I'm not sure, after having read "Free to Choose" by Milton Friedman, that the Chicago boys are opposed to all regulation. I'll find some details, though, when I have the book in hand.

    As for government inserting itself into markets, my definition of correct insertion is much more specific that Cameron's. Government should insert itself in the sense that it makes sure that everyone plays fair. For example, it should ensure that everyone pays sales and property taxes. Where it incorrectly inserts itself is when it gives any kind of favor to one person/capitalist over another, whether it be an oil tycoon, providing subsidies for sugar growers, Nancy Pelosi and T. Boone Pickens in their effort to profit through government favor in the alternative energy market, or Wal-Mart playing different cities against each other for tax favors.

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  23. My initial question was "does government insertion into markets create the incentive for crony capitalism."

    Which basically means that as government influences business, business in turn tries to influence government.

    As I stated earlier, this isn't necessarily an argument against any government regulation, but is merely a...warning, if you will, of the unintended consequences of trying to make everything "fair".

    In other words, if government couldn't control the fate of business, then GE wouldn't have spent $5.4 million lobbying Congress in the second quarter alone.

    As for the Wal-Mart conversation from a couple of months ago, it was fairly varied and rather than just me arguing for tax incentives was more me explaining why it happens and why a city administrator would be justified in doing it.

    However, it does fit into this scenario. The only reason the Wal-Marts of the business world try for incentives is because they are taxed. Remove the tax, and Wal-Mart would have no reason to influence government. Now, before you freak out about "no tax" - as I stated before, this isn't an argument against any tax, it just highlights an unintended consequence of government influencing business.

    If you want to make a federal law making it illegal for municipalities to give tax incentives to anyone, that's fine. But I'll ask now what I asked in the Wal-Mart post. What are the consequences of that action - both intended and unintended?

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