Latest posts by Richard Ebeling (see all)
- Interest Rates Need to Tell the Truth - September 13, 2018
- Market Democracy vs. Democratic Socialism - September 7, 2018
- The Walter Lippmann Colloquium and the Meaning of Liberalism - August 14, 2018
We live in a time, as, indeed, mankind has lived already for along time, in which economic delusions, political demagoguery, and ideological deceptions abound due to the power lusting of those who wish to gain control of government to serve their own ends at others’ expense.
Suppose someone were to ask you the easiest and quickest way to drive by car from New York City to San Francisco, California. Since the shortest distance between two points is a straight line, the most reasonable answer would be for this person to take Interstate Highway 80, which runs East-West between these two cities.
Now suppose that this person, instead, starts driving south from New York City on Interstate Highway 95, which would get him, eventually, to Miami, Florida. You tell him that he is on the wrong route; not only will it take him much longer to get to California if he stays on Interstate 95, but he may end up never getting to San Francisco at all.
Rather than thanking you for correcting him and figuring out the best and most timesaving way to get back onto Interstate 80, he accuses you of not wanting him to get to California. He wants to know what you have against him and the people of California. Why are you sabotaging his chance to finally find “happiness” in California?
You assure him that you have nothing against either him or California. Indeed, you explain, you’ve even been to California and it’s a very nice place to visit and maybe even to live. You are just pointing out that he is following the wrong route to get to his desired destination, and in that easiest and quickest way as he had originally asked.
He responds by asserting that you clearly have something against him and have some hidden agenda to prevent people from getting to California.
Accusations Thrown at the Free Market Advocate
A person saying such things would, to most of us, seem strange or even bizarre. It is, however, the way many critics of the free market respond when an economist or some other proponent of economic liberty explains that government intervention in the market, regulation of business enterprises or redistribution of income and wealth are not the best and most efficient policies to provide an economic and social climate most conducive to opportunity, prosperity, and freedom for as many people in society as is possible.
Free market critics frequently assert that the free market advocate “hates the poor,” “doesn’t care for humanity,” is “insensitive to human suffering,” and only wants to help “the rich.” And how can we know this? Because he dissents from the governmental interventionist, regulatory, and redistributive policies proposed to cure the ills of society.
In other words, they impugn the motives and benevolence of the advocate of individual liberty and free markets because of his disagreement with the proposed means to achieve the stated end – improvement in the personal and material conditions of mankind.
Why has this been so frequently the case over the years and decades? Let me suggest some of the possible reasons. To begin with, there are those who may very well confuse a disagreement over means as meaning a disagreement over the desired ends.
What is Seen and Not Seen in Government Policies
This harks back to the argument made long ago by the French classical liberal economist of the 19th century, Frederic Bastiat, when he said that people often only see what is seen and not what is unseen. If the government hires workmen to build a bridge, or repair a road, or to reroof a schoolhouse the jobs created are “seen.” Here are people working on these government projects, earning an income, and able to buy things from others that improves their family’s circumstances.
What is not seen are the jobs that would have come into existence, the income that would have been earned and the improvements in some other peoples’ lives if, instead, the taxes collected to pay for the bridge to be built or the schoolhouse to be reroofed had remained in the hands of the taxpayers.
With more money left in their pockets those taxpayers would have demanded a new pair of shoes for their son or daughter, or used that money to do some improvement around their own home, or, maybe, used it to invest in an existing or new business enterprise. Any or all of these, would also have put people to work.
But in this latter case it would have been work reflecting the private consumer desires and demands of those who had earned that money in earlier productive activities in the competitive marketplace.
Because some people fail to think beyond what is right in front of them, they conclude that the only person who would be against helping people get a job and earning a living are those who callously don’t care about the misfortune of others looking for employment. Why else would someone oppose a humane, government “stimulus” program to put people to work?
They don’t see that either the income earners themselves can use the dollars for consumption or investment activities, or the government can spend them after taxing or borrowing them away from private hands. So either private citizens create a demand for labor, or the government does, but there need be no net gain in jobs opportunities and that is what focusing only on what is easily seen prevents many people from understanding.
Not “Seeing” that the Minimum Wage Creates Unemployment
Or, similarly, take the advocate of raising the minimum wage. The proponent looks around and sees that some unskilled or low-skilled individuals find it difficult to get by at the current minimum wage level of $7.25 per hour, and concludes that the way to help such people is to make employers pay them a “living wage.” After all, the employer is making a profit, he’s living comfortably, why can’t we just make him do the “right thing,” and require him to pay at least $10.10 per hour, or even $15 per hour to those people?
What such a person, again, does not see is that there might already be some people out of work and earning zero because the already imposed minimum wage has priced them out of the market. And that raising the minimum wage even higher will only price even more low or no-skilled workers out of the market with these people losing their jobs – or it will result in some people never even having a job in the first place, due to this government “floor” on the wage rate being above what a prospective employer think someone might be worth and not hire him at all.
What is not seen is that the employer has no money to pay wages or to cover any of the other expenses connected with his production activities except what he earns as revenue from selling his product or service to the buying public. He cannot afford to pay more in total costs than the amount of revenues received from selling his product if he is to stay in business and remain competitive with his supply-side rivals also desiring to capture consumer business.
When any of us goes into a store, we never pay more for something than it seems worth to us. That is why, when we look at the price on some items, we leave it on the shelf; we do not think it to be worth what is being asked for it, in terms of what we can afford and would have to forego buying, instead, if we paid that price for it out of our limited income.
The businessman is in a similar situation. He must compare what he considers to be the value-added that a particular worker would provide if he was hired, or does provide if he is currently employed in assisting in producing a product or providing a service in relation to the price that businessman thinks his product may sell for.
If the businessman concludes that the wage rate the worker is asking for or the government dictates he must pay is above, greater than, the value that worker does or might add to the production of the firm, that worker will either be let go or not hired to begin with.
The unemployed worker is the analog of the unsold product that sits on the shelf because the price asked for (or commanded by the government) is higher than the buyer thinks it is worth.
But, once again, this is what is “not seen” and not understood by too many people who do not look beneath the surface to appreciate why such unskilled or low-skilled workers find themselves unemployed.
Nor is it understood that if such workers are to become worth more in terms of a wage rate to be earned, they have to acquire the necessary labor skills (the “human capital”) that would make them more valuable to potential employers in the workplace. As well as from additional capital investment in more and better tools, machines and equipment that would increase the productivity of the worker by increasing the amount of the valued output his labor could help to produce per unit of time.
But because this is not seen or understood, many proponents of the government-mandated minimum wage conclude that any opponents must be dupes or apologists for greedy businessmen who are just too heartless or “selfish” to pay their fellow human beings a “decent” salary.
Plunder-Lusting, Not Just Economic Ignorance
If it was only a matter of economic ignorance and conceptual misunderstanding, then one could hope that better ways of sharing and communicating what are sometimes difficult and counter-intuitive ideas could win over more people to an appreciation as to why such government policies as “make-work” projects and minimum wage laws do not help many of those the proponents say they wish to assist, and in fact end up making the circumstances of some even worse.
However, there are those who may or may not understand the reality of how the market works and that such interventionist policies are false routes to where the policy advocate says he wants to go. They don’t really care.
Their concern is with using the “what is seen” arguments as steppingstones to power, influence, and wealth. They are the policy demagogues, the political opportunists, who merely wish to play upon the fears, misunderstandings, resentments and envies of others in society to acquire government position and authority.
They will lie, distort, manipulate, and confuse as their stock and trade to win elections, gain positions in government, or get on the government gravy train that follows from economic policies resulting in more and more taxed or borrowed dollars being offered at the trough of government spending.
The Plunder-Lusters Offer False Policy Elixirs
They are like the huckster in the old west who stood on the back of the wagon promising the naïve and gullible listeners in the crowd that the “magic elixir” that he was holding in his hand would cure their rheumatism, make hair grow again on their bald head, guarantee they would be more attractive to the opposite sex, and slow down the aging process. “And, yes, my friends,” the huckster assures the crowd, “this can all be yours for a only a mere $2 a bottle. And, my friends, if you buy more than one bottle, I will also sell you for the low price of ‘four bits’ this diving rod that is guaranteed to find water under the ground where it has never been found before.”
The only difference between the old west huckster and the modern-day democratically elected politician is that the huckster would clear out of the town as soon has it had gotten people’s money for those phony bottles of colored and scented water before they figured out the truth of how they had been taken in by “the con.”
The democratic demagogues not only don’t leave town, they stick around hoping and planning to keep fooling the naïve and gullible voter so they can be elected again and again, rationalize bigger budgets in the government departments in which they are employed, or keep the government subsidies, contracts and regulatory benefits continuing and growing over time for their special interest purposes at taxpayers’ and consumer’s expense.
These democratic demagogues have their task made that much easier precisely because the untrained eye can be fooled into thinking and believing that there is only “what is seen” in terms of the apparently beneficial and immediate effects of the snake-oil economic policy elixirs promised and imposed by government.
The free market opponents of these policies can be tarred and feathered as either themselves ignorant or the paid apologists for “greedy businessmen,” the “one-percent,” or the “selfish and profit-grabbing,” who care nothing for “the people.”
Far Worse are the Collectivist Ideologues
But worse are the ideological demagogues. They are the ones who hate freedom, despise the free choices of the ordinary citizen, who have contempt for the individual, and believe all should be made to submit to a greater design and plan for humanity which they see, consider good, and know they are called to impose on all in society for the well-being of mankind whose real and true interest they just know they know.
They are the philosophical and political collectivists. They want to rule and control. They want all to submit to their power and will. They are the face of evil. They are “Big Brother,” who is not only to be obeyed but also worshipped, as the secular divinities, the elect and the elite, to whom all in society are to submit and praise as their saviors and paternalistic good guardians.
Theirs is the personality of the psychopath and the sadist, who really cares about nothing other than their own desire for power and enjoy it, like it, that all others must bow and grovel before them.
And just like many psychopaths and sadists they are able to successfully hide their perverse power- and pain-giving lusting behind a mask of crusading for “social justice” or desire to “serve mankind,” and wish to “give back to society,” by accepting the “sacrifice” of holding political office or governmental position for the betterment of their fellow men.
To return to the original analogy about the traveler claiming he wanted to go to California but set out on a route going to Florida, neither the democratic demagogues nor the philosophical and political collectivists want to reach the destination to which they publicly give lip service – a “free, just, and prosperous society.” They are merely using the words as the rhetorical means to their actual power-lusting and power-abusing ends.
This is what makes the task of the friends of freedom so crucially important. Our fellow citizens must understand that what they are being promised cannot be achieved with the means offered by those pursuing their own ends in government.
Bastiat’s insight and lesson about “what is seen, and what is not seen” must be explained, persuasively clarified and applied to all of the current interventionist, regulatory, and redistribution policies in place and being advanced. More of our fellow citizens must be made to see them for the snake oil and phony elixir that they all are.
Equally if not more importantly, the friend of freedom must challenge others in society to ask why they should have to sacrifice their life, their liberty, and their pursuit of happiness for illusionary and vacuous assertions about a collectivist “common good,” or “general welfare,” or “national interest.”
By what right does the collectivist assert that the individual cannot peacefully and productively live for himself in his own way guided by his own reason, values and beliefs? By what right does that collectivist claim to know when and how that individual should be required – even compelled – to sacrifice his own dreams, hopes and valued purposes for those of the group, tribe, or “society” that the collectivist says he speaks for and represents?
At the end of the day, the collectivist’s claims lead to nothing but political nooses around the necks of the citizenry with the end of the ropes in the hands of the political charlatans and psychopathic power lusters who want to break the spirit of the free individual and make him the implicit slave to self-selected “demigods” wishing to rule over mankind.
[This first ran in Epic Times]