Rational Capitalist on Facebook

Tuesday, September 23, 2008

Separating Economics and State

Mark wrote the following comment after my last post and I thought the subject deserves its own post:
many argue that the American government has spent more money on 'socialism for the wealthy' than entitlements for the poor- I wish I could sell worthless goods (bad mortgages, etc.) knowing that the American taxpayer will bail me out. It is important to point out that the function of government should not be to redistribute wealth, but you seem to focus on non-businessmen at the expense of where a huge portion of redistribution is actually directed. Also keep in mind that JP Morgan and other successful bankers played a large role in the creation of the Federal Reserve Act... the real monster in our arbitrary monetary system. Businessmen are not always 'forced' to protect themselves from government force. At times, they are leaders in its expansion. The forces that contribute to the expansion of government power are varied and diverse.
Note the following passage in my previous post:

"Because capitalism entails a wall of separation between economy and state, their path to power is cut off. In a capitalist society, no businessmen or lobbyists would be skulking around Washington in search of favorable government interventions—whether subsidies for themselves or shackles for their competitors—because the government could not intervene in economic affairs."
I couldn't agree more with your point that it is usually corrupt businessmen that seek favors and handouts from the state. In fact, in Ayn Rand's magnum opus, Atlas Shrugged, the main villains were not the "proletariat" but businessmen such as Orren Boyle and James Taggart who sought favors and handouts from their cronies in Washington. Another recent example is the usage of the anti-trust statutes by Microsoft's competitors to force the company to act against its own interests. But, of course, there are hundreds of examples, but such examples are not instances of capitalism but its antithesis.

It is a common misconception that "capitalism" somehow means state intervention on behalf of business. (I believe this misconception derives from the historical fact that in America the state has constantly intervened in business and America is most associated with the concept of "capitalism".) It is vital that those who advocate capitalism understand that a free market means separation of economics and state and that the government's function would be only to protect individual rights. If the government were prevented constitutionally from intervening in business then no one, including businesses, could use the state to grant it special favors. Today, the state has the power of life and death over every business in every industry. Under this system, businesses must legitimately lobby (bribe) politicians in order to protect themselves. Naturally, in such an environment, unscrupulous businesses will attempt to use this power to their advantage. Again, one of the arguments of the last post was that true capitalism (government limited to protecting rights) would deny the ability for would-be crooks to use the state in this way.

My last point is that the question of who uses government force (businessmen, artists, the poor, the handicapped, the third world, etc.) is not as critical as understanding why the state has been allowed to intervene. Whether it is businessmen seeking taxpayer subsidies or the homeless seeking welfare, the justification is always the same: "the common good." We are told that it is in the "public interest" to bailout corporations, build football stadiums for billionaire businessmen, inspect meat, subsidize artists, fly to mars, write social security checks to the elderly, build housing projects, provide aid to Africa, and on and on and on. In order to stop this, we must challenge the premises under which statists justify their intervention. The premise that must be challenged is the idea that it is necessary and moral for an individual to sacrifice for the so-called common good. We must replace this evil theory with the morality of rational self-interest, i.e., the idea that the purpose of an individuals life is his own happiness and that government's function is to protect rights which includes the right to own property and to trade with others. When a politician can publicly argue that social security and every government intervention that expropriates money from one group for the sake of another or that prevents individuals from freely entering contracts is not only impractical but immoral then we will win. When those who advocate for true capitalism take the moral high ground away from the statists, the advocates of capitalism and freedom will be considered "idealists" (instead of the Obama's of the world) and we will win.

No comments: