Would we have political liberty we must first have economic freedom, for the form of government is determined by the form of economic organization. At first blush the opposite would seem to be self-evident; i.e., that our form of government determines all else, including our economic structure. But Mises advises otherwise. In his magnum opus Human Action, (page 283 of the Mises Institute’s scholars’ edition), Mises explains thus (my emphasis):
Freedom, as people enjoyed it in the democratic countries of Western civilization in the years of the old liberalism’s triumph, was not a product of constitutions, bills of rights, laws, and statutes. Those documents aimed only at safeguarding liberty and freedom, firmly established by the operation of the market economy, against encroachments on the part of officeholders.
Likewise, in The Law by Frederic Bastiat, (page 53 of the 2012 Laissez Faire Books paperback edition), Frederic Bastiat has this to say (my emphasis again):
A science of economics must first be developed before a science of politics can be logically formulated. Essentially, economics is the science of determining whether the interests of human beings are harmonious or antagonistic. This must be known before a science of politics can be formulated to determine the proper functions of government.
The insights of these two titans of liberty are vastly important to those of us who value our liberty and wish to maintain what we have and expand it in the future. It counsels us that attempts to pass laws or even constitutional amendments to ensure our political liberty will be wasted as long as our economic freedom continues to be usurped by government. In other words, limited government will fade in the face of the modern regulatory state, and no laws can protect us from its deprivations. Economics not only trumps politics, it determines its very form.
The root cause of economic interventions is the fallacy that government can improve our lives by making decisions for us. But this is impossible. As I explained in an earlier essay, by their very nature economic interventions by government are not something that we desire voluntarily. Cooperation under the division of labor is non-coercive and requires from government only access to an honest criminal justice system to enforce contracts and protect property rights. However, government mandates require government coercion for their enforcement.
An example is the mandate that everyone contribute to the government’s Social Security and Medicare programs. Although the public requires no government mandate to buy any of the wide ranging retirement savings and health insurance products available on the free market, government must force us to participate in its Social Security and Medicare schemes. Absent the mandates no one would participate. The systems are fatally flawed transfer taxes, Ponzi schemes of sorts, posing as retirement savings and healthcare plans. There are no real profit producing assets from which to pay the plans’ distributions, merely the promise by government that it will continue to force others to pay you in the future as it forces you to pay others in the present. The programs can be maintained only by the police power of the state. What may appear to be widespread acceptance of the Social Security and Medicare mandates is the vociferous support of those receiving benefits and the completely rational desire of those paying to stay out of jail. Social Security and Medicare have replaced our freedom to dispose of our own money as we choose with the compliance apparatus of a police state. This is not limited government, and no constitutional amendment can alter this fact.
The more government meddles in the economic sphere–which should require no regulation at all, since it is completely voluntary–the more police power is necessary to force us to comply. All government agencies possess huge enforcement mechanisms that not only can confiscate our property but take away our freedom. The Occupational Safety and Health Administration (OSHA) is little more than a government supported extortion racket, finding nebulous health and safety violations in the workplace that apparently do not concern the actual workers themselves, who haven’t been chained to their machines for quite some time now. The Environmental Protection Agency (EPA) shuts down businesses and threatens entire industries for violations of arbitrarily established environmental standards that are of little concern to the people affected. Smokestack emissions and the like are purely local environmental issues for which one would expect a wide variety of standards across the nation. Undoubtedly the people employed by the giant steel mills of Gary, Indiana tolerate smokestack emissions that Beverly Hills residents would find unacceptable. These arbitrary EPA standards are depriving Americans of the opportunity to work at higher paying jobs. Their freedom to tolerate more pollution in order to enjoy a higher standard of living has been usurped by government.
Speaking of jobs, just try practicing some profession that requires a government issued license, even if the parties using your service do not care whether you have one or not. Better yet, employ someone who is willing to work at a wage rate below the proscribed minimum or who is willing to work without healthcare or family leave benefits. The police power of the state will descend upon you, even though there is no dispute between you and your employee. Want to reclaim discarded furniture, refurbish it, and sell it out of your house? Better not try to do that without a business license and a store front in an area that is properly zoned. Do you want to hire “an able bodied man” to do some heavy lifting at your place of business? Oh, oh! The discrimination police will put you in your place, which may be a jail cell if you cannot pay their fine.
No truly limited government can perform these police functions, so expecting one falls into the category of a cognitive dissonance. In laymen’s terms, we are just kidding ourselves that we are a truly free people with a government that is subservient to our wishes and exists primarily to protect our life, liberty, and property. Keep this in mind the next time you hear that some new economic regulations have been proposed or implemented. Concomitant with these regulations comes an ever more powerful and coercive government.
The lesson is clear: Where the state expands liberty retreats.