2013-07-18

Changing Arguments For Market Intervention

In the old days, interventionists typically cited the supposed dangers of an unfettered free market as justification for government intervention. The old 20th Century progressives used such arguments to advocate for what we now call "the social safety net," which includes such things as minimum wage laws, Social Security, unemployment insurance, bank deposit insurance, workers' compensation insurance (gosh, a whole slew of things that have the "insurance" moniker), and so on.

Under the old argument, which was steeped in the prevailing Marxist dogma of its day, a free market was essentially a bad thing because the powerful were able to exploit the weak by depriving the weak of what they deserved. The market was supposedly set up this way by design. In short, what the "capitalists" called a "free market" was nothing more than a political scheme in which the few were allowed to take advantage of the many by deploying economic arguments against them.

Some modern-day leftists still adhere to this view. Most, though, have evolved. The modern leftist far more readily embraces the language patterns of the free marketeer. Today's leftist readily concedes that free economies produce more favorable outcomes than command economies. In the mind of the modern leftist or progressive, government intervention is not an alternative to free markets, but rather a supplement.

We could probably discuss and debate at length whether this modern view is a genuine evolution of thought or merely a change in rhetoric. It is not clear to me whether today's leftist truly thinks differently than yesteryear's socialist, or whether they have merely changed the structure of their message so that it will appeal more broadly. To a certain extent, it doesn't matter. The phenomenon itself explains why today's leftists take offense to being called socialists. Whether or not their meta-beliefs have changed, the way they view their own beliefs is simply different today than it was a century ago. We had all best embrace this fact.

The reason I bring this up is because over at The Civic Arena, a conservative blog, Jeff Rutherford puts forth an account of how conservatives differ from liberals with regard to economic policy. The part that caught my eye was this:
Every dollar taxed from the private economy is removed from the production-investment cycle.  While some government infrastructure strengthens society, it shouldn’t exceed 19-20% of the total economy, or the economy’s power is sapped.
I am sure that regular Stationary Waves readers and other free-market sympathizers can see Rutherford's point. However, it struck me that Rutherford's conservative argument somewhat ignores the new perspective that most modern leftists have now taken.

To wit, a modern leftist would argue that tax dollars that are reinvested in the economy at large are not, in fact removed from any sort of production-investment cycle. The modern leftist would - quite correctly - argue that money is being pulled out of what they see as "unwise" or "unsustainable" investments and redirected into investments that they feel are more economically beneficial.

Thus, were Rutherford and other defenders of free markets to stick to the "Rutherford argument," they would be thoroughly defeated by an equally convincing - maybe even more convincing - leftist argument that contains all the trappings of capitalism with the added bonus that a supposed improvement has been made.

If one really is convinced, as I am, that free markets lead to better outcomes that government intervention, one needs to say more than "liberals are socialists," or its more refined version, "government spending crowds out private investment." Considering the fact that the modern leftist is now providing a justification for government intervention that dodges both the "socialism" moniker (at least, in its crudest form) and the "crowding out" concept, we defenders of free markets should find a more convincing way to refute their claims.

One possible contender here is the assertion that public subsidies of one particular good or service make the market for that good or service appear more profitable than it otherwise would be. A leftist could counter that, indeed, this is the whole point: "we" prefer to invest in green energy and public school teachers rather than oil derricks and iPads.

In reality, the best argument against modern leftist market intervention is the sanctity of consumer demand. What I mean is that what I consider to be my own best interests is a more accurate view of those interests than what some leftist assumes "our" interests are. So while the leftist may rank green energy high on her list of priorities, I might have an equally compelling and greater interest in the maximization of food production. Both are ethical values. Both have environmental and economic implications. Under free market conditions, I can embrace my demand for more efficient food production by purchasing the lowest-cost food, while the leftists can embrace her demand for green energy by buying a Prius (or whatever). My demand won't adversely impact her, nor will her demand adversely impact me.

But when we get government involved, then the leftist will want to take some of my money via taxation, and divert it away from food security, and toward green energy. Whatever the comparative merits of those issues, the fact remains that in absence of government intervention, more money would go to food security than green energy. The people would thus determine which is the more urgent need; and this could potentially change at any point in time. If the leftist has her way, though, the force of government nullifies my priorities and doubles-down on the leftists.

Perhaps a leftist would again say, indeed, and this is the point; if you don't like it, then you change the government the way you want it to. But all this really means is that the leftist is more comfortable participating in the political process than she is participating in the market process.

Perhaps this is the real difference between free market advocates and their opponents.