Time to
address one of the critiques laid against any promoter of freedom, any defender
of capitalism, any advocate of free markets. We’ve all heard it:
What about the poor? The Sick?
“In your
society the poor and weak would be exploited, forced to work for essentially no
wages, have no health care, die of lung diseases at 35 because of crappy
non-regulated air, and never get any education.”
Obviously,
if that were the case – then yes, I finally understand the “YOU’RE A HORRIBLE
PERSON” reaction to any mention of Freedom or Anarcho-Capitalism. And I’d
agree: anyone who profes such a society is indeed an awful person.
Luckily,
this isn’t the case. Far from it.
Just to
start off with a few explanations; what happens in western Welfare States today
harms the poor a lot more than the rich; inflation hurts their savings,
reducing purchasing power and real value of their salaries (especially in
third-world countries); VAT taxes, income taxes and payroll taxes (some 75% ofall tax sources where I come from) are predominantly payed by poor people;
Corporate welfare, including bailouts, subsidies, kickbacks, regulations or tax
breaks moves money from poor people to wealthy corporations and their leaders.
This is
what we see today. And it hurts the poor. If you associate anything above with
“Capitalism” or “Free Markets” you’re dead wrong and your hostility towards
Capitalism is comprehensible. Inaccurate, of course, but comprehensible.
If you do, however - THIS IS YOUR LUCKY DAY!
All of the above are effects of government. Of Politicians. Yes, sometimes business leaders and lobbyist can distort the economy by influencing politicians enough to gain personal benefits at the expense of other groups in society - something economists call "Rent Seeking"; Luigi Zingales does a great job explaining this. But this can only occur if governments have power to do such things. In a minarchist state, for instance, such actions wouldn't have much effect - simply because the state isn't allowed to have influence over subsidies or particular regulations or tax breaks.
This leads
us to the ONE pre-requisite you’ll need to follow the reasoning below: The
Broken Window Fallacy. You can ignore me, hate me, detest my ideology, horror my convictions and mock me all you want but if I can ask you one thing only, it would be to learn what the Broken Window Fallacy is.
Explained a few hundred years ago by Federic Bastiat, it
has followed economics since that day. Don’t be discouraged, though, most PhDs in
Economics today are probably unfamiliar with it (
Art Carden, 3 minute youtube explains the key element in terms of destruction - but it is equally applicable for any action).
"That which is seen - That which is unseen":
Roughly explained: Whenever you do something (spend money, tax people, subsidise activities etc), we can perhaps see the effects of that. Say, if we subsidise farmers to grow crops, more crops might be grown by farmers. This we see. What we
don't see (=the UNSEEN) is what that money would've done
in the absense of such a subsidy: build house, buy books, produce shoes. These things we
don't see, because they were never created. Essentially, Bastiat points to the
Opportunity Cost of any action.
This applies to all of the topics dealt with below: If the Government taxes some people in order to provide health care for others, we can see the health care provided but we cannot see the damage from taxation as vividly. What would have been done in the absense of such interventions? Maybe the taxed money would have gone into research, finding a cure to cancer. Maybe they'd set up a charity providing free health care to anyone... or maybe they'd produce amazing tools that reduced production costs of current health care by say 50%?
The point is that we
don't know what we're losing out on. Because of taxation, regulation etc these things, inventions and productions never come into being. They constitute
that which is unseen, just like the non-produced tailor services in the video above, or books or shoes in Bastiat's original example,
which can be found at Bastiat.org.
(To be fair,
any future description of economic realities lack for knowledge, in the very
same way the spectators of ‘Broken Window Fallacy’ can’t see the unsold books,
unproduced shoes etc; they simply never existed, thus cannot be seen. I cannot
know exactly how people would react and organize their lives if I change major
variables such as the composition of the State - but we can however make educated guesses and have a hunch.)
I have organised these to form part of a series, so every topic is dealt with in its own post. All of them can be found below and they will probably be extended whenever I find entertaining objections to other topics Enjoy!