In his book, Human Action, Austrian economist Ludwig von Mises wrote, “The idea underlying all interventionist policies is that the higher income and wealth of the more affluent part of the population is a fund which can be freely used for the improvement of the condition of the less prosperous.” Whether we are talking about Obama-care or tax increases, many policies are justified as an attempt to benefit the poor at the expense of the rich. Mises warns that such policies cannot be sustained and inevitably result in more poverty.
Let’s look at what three leading businessmen have said on the subject of increasing taxation and regulation. Last February Subway founder Fred Deluca told CNBC that government regulations are bad for business. “If I started Subway today,” he explained, “Subway would not exist.” Almost two years ago Home Depot co-founder Bernie Marcus made the following statement to Investor’s Business Daily: “I can tell you that today the impediments that the government imposes are impossible to deal with. Home Depot would never have succeeded if we’d tried to start it today. Every day you see rules and regulations from a group of Washington bureaucrats who know nothing about running a business. And I mean every day. It’s become stifling.” In a television interview earlier this year, FedEx founder Frederick Smith said “it’s much more difficult to start an industrial company today…. The regulatory environment is very tough today.”
Government spending may help the poor in the short-term. But it signifies the movement of money from a more efficient operating system to a less efficient operating system (i.e., from the private sector to government). According to Mises, “The interventionist in advocating additional public expenditure is not aware of the fact that the funds available are limited. He does not realize that increasing expenditure in one department enjoins restriction in other departments. In his opinion there is plenty of money available.” Here is the key point: The objective of the bureaucrat is to spend other people’s money while the businessman is spending his own money.
The fact of limitation is uppermost in the mind of the businessman. The fact of limitation is often ignored by the welfare state, which is democratically guided to embrace an ever-more grandiose fantasy. This is the fantasy of the free lunch. If the majority declares there will be money for X, Y or Z, then the money will magically appear (by taxation or borrowing). If the majority believes in free health care then health care will be free. But of course, there is a hitch. Believing doesn’t make it so. Instituting universal health care or raising the minimum wage doesn’t take away the cost that society must pay for universal medical coverage and high-paying jobs for unskilled workers. Yet America is now a place where the majority succumbs to fantasy. As Umberto Eco suggested in his essay, “Faith in Fakes,” America has long been obsessed with simulacra and counterfeit reality.” A self-reinforcing system of economic significations and symbols has long since separated us from reality as it contributes to a bizarre collective schizophrenia in which comforting fiction annihilates discomfiting fact.
Consider the following facts: The national debt is presently over $16 trillion and rising; total government spending within the United States is estimated at around $6.2 trillion; and current-dollar personal income decreased 3.2 percent (annual rate) in the first quarter of 2013. Heidi Moore of the Guardian (UK) says “Don’t be fooled by the false economic recovery.” She argues that the U.S. housing market is being artificially propped up by banks and investors instead of “real buyers,” and consumer confidence figures are nothing to hang your hopes on. Furthermore, the current “recovery” is not the first of its kind to appear and pass away.
It may be argued that we want to believe in a recovery. We are prompted to participate in something that we know deep down is temporary and fraudulent. For the present, belief in a fictitious reality is the only defense against a general unraveling. What we dare not see is a movement away from the free market; that is to say, the collapse of freedom itself. “The interventionist interlude must come to an end,” wrote Mises, “because interventionism cannot lead to a permanent system of social organization.”
Interventionist arguments are not innocent. They lead us away from the freedom. Mises warned that interventionism opens the way to socialism because: (1) Interventionism restricts production; (2) interventionism fails to achieve the betterment of the poor; (3) interventionism exhausts society’s economic surplus. Therefore, stronger measures are required to alleviate a distress that has become universal; and these measures assure complete collapse. The result is a socialist economy with an attached police state; that is to say, an economy with almost no pulse.
How long might socialism then last? According to Mises, “the countries that have discarded capitalism may go on for an indefinite period of time.” He further added that “neither a low standard of living nor progressive impoverishment automatically liquidates an economic system. It gives way to a more efficient system only if people themselves are intelligent enough to comprehend the advantages such a change might bring them.”
Are Americans intelligent enough to comprehend the advantages of the free market? A nation that is addicted to fantasy will almost certainly elect politicians who promise free benefits, even if those benefits continually fail to appear.
