Searching for Signs

InsideCatholic.com has a good article originally posted in early 2008 on the lack of a real free market in the United States going back to the early 20th century. Here are some key parts of that article:

We live in the 100th year of a heavily regulated economy, and even 50 years before that, the government was strongly involved in regulating trade.

The planning apparatus established for World War I set wages and prices, monopolized monetary policy in the Federal Reserve, presumed first ownership over all earnings through the income tax, presumed to know how vertically and horizontally integrated businesses ought to be, and prohibited the creation of intergenerational dynasties through the death tax.

That planning apparatus did not disappear but lay dormant temporarily, awaiting FDR, who turned the machinery to all-around planning during the 1930s, the upshot of which was to delay recovery from the 1929 crash until after the war.

Just how draconian the intervention is ebbs and flows from decade to decade, but the reality of the long-term trend is undeniable: more taxes, more regulation, more bureaucracies, more regimentation, more public ownership, and ever less autonomy for private decision-making. The federal budget is nearly $3 trillion per year, which is three times what it was in Reagan’s second term. Federal intervention in every area of our lives has exploded, from the nationalization of airline security to the heavy regulation of the medical sector to the centralized control of education.

So, the first assumption that we live in a free-market world is simply not true. In fact, it is sheer fantasy. How is it that journalists can continually get away with asserting that the fantasy is true? How can informed writers continue to fob off on us the idea that we live in a laissez-faire world that can only be improved by just a bit of public tinkering?

The reason is that most of daily experience in life is not with the Department of Labor or Interior or Education or Justice. It is with Home Depot, McDonald’s, Kroger, and Pizza Hut. Our lives are spent dealing with the commercial sector mostly, because it is visible and accessible, whereas the depredations of the state are mostly abstract and its destructive effects mostly unseen. We don’t see the inventions left on the shelf, the products not imported due to quotas, the people not working because of minimum wage laws, etc.

Because of this, we are tempted to believe the unbelievable, namely that government serves the function only of a night watchman. And only by believing in such a fantasy can we possibly believe the second assumption, which is that the problems of our society are due the to the market economy, not to the government that has intervened in the market economy.

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Let’s move to the third assumption that government intervention can solve social and economic problems, with global warming at the top of the heap. Let’s say that we remain agnostic on the question of whether there is global warming and what the cause really is (there is no settled answer to either issue, despite what you hear). The very idea that putting the government in charge of changing the weather of the next 100 years is another notion from fantasy land.

The point about complexity counts against government intervention, not for it. The major contribution of F. A. Hayek to social theory is to point out that the social order — which extends to the whole of the world — is far too complicated to be managed by bureaus, but rather depends on the decentralized knowledge and decisions of billions of market actors. In other words, he gave new credibility to the insight of the classical liberals that the social order is self-managing and can only be distorted by attempts to centrally plan. Planning, ironically, leads to social chaos.

You don’t have to be a social scientist to understand this. Anyone who has experience with public-sector bureaucracies knows that they cannot do anything as well as markets, and however imperfect free markets are, they are vastly more efficient and humane in the long run than the public sector. That is because free markets trust the idea of freedom generally, whereas other systems imagine that the men in charge are as omniscient as gods.

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