Free Market Liberalism Is Needed More Than Ever

By Richard M. Ebeling

The famous New York Yankees baseball player and manager Yogi Berra is credited with the saying “It's déjà vu all over again.” He is also credited with claiming, “I really didn’t say everything I said.” Never were both of these truer than in our era of reborn defenses of and demands for more government intervention, redistribution, and planning.

Many of us assumed, or at least certainly hoped, that after the disastrous social, economic, and human consequences of centrally planned societies during the 20th century, and the generally abysmal failures of and corruptions resulting from government interventions in the economy, there might arise a reawakened appreciation for and understanding of a truly liberal, free market society.

Over the last several decades, humankind has been witnessing a dramatic and amazing end to poverty in more and more parts of the world, along with the availability of unimagined technological inventions for a growing number of the billions of people on this planet. But instead of an appreciation of how partly freed-up market forces have made this all possible, especially in those areas formerly known as the underdeveloped third world, the counterrevolution against human liberty seems to be picking up steam once again with the call for “democratic socialism,” a Green New Deal, and massive increases in the welfare state’s “entitlement” programs and beyond.

Furthermore, friends of freedom are burdened with a highly successful propaganda campaign by those on the political “left” who have misrepresented the facts and insisted that the economic system under which we all live is one of free market capitalism. In reality, 100 years of continuing growth in and intrusiveness of government’s power and reach long ago transformed the modern economic system into something very different from what the proponents of economic liberty have historically called for and defended.

The Meaning of Free Market Liberalism

Let’s start out with some working definitions. What is a liberal or free market society? Since the time of Adam Smith in the 1770s, it has been generally understood that a free market economy is one based on the recognition of a wide latitude of individual freedom in matters of both consumer and producer choice. These free choices occur within an institutional setting of private ownership of the means of production (land, labor, capital), in which human transactions and associations are based on voluntary consent and mutually beneficial exchange.

The open and competitive interactions of all the participating demanders and suppliers generate the terms of trade for all that is bought and sold. These, in turn, provide the structure of market prices that coordinates the interactions of those multitudes of individual participants in the now-global social system of division of labor. Production is initiated by private enterprisers, by entrepreneurs, who direct their businesses in the quest for profits and the avoidance of losses.

But the only social means at their disposal to do so is to direct the enterprises under their ownership and control into the manufacturing and offering of those goods and services that consumers and other demanders are willing to buy from them, instead of the wares also being offered on the market by their peaceful and competitive rivals who are pursuing positive returns over incurred costs as well.

The Role of Government Under Free Market Liberalism

The primary duties and responsibilities of government under free market liberalism are those of protecting each citizen’s individual rights to their life, liberty, and honestly acquired property, along with the enforcement and adjudication of freely entered-into contracts and guarding the members of society from the aggressions of domestic criminals and possible attackers from outside the country through the defensive use of police and the armed forces.

Free market liberals have debated among themselves about what other roles and duties even a government meant to primarily secure rather than violate liberty should or should not undertake. This has usually concerned government spending and involvement in education, infrastructure expenditures, specific regulatory responsibilities, and certain minimal welfare-related expenditures.

But the underlying premise in the case for the liberal free market economy is that individuals should be considered as ends in themselves and should not be compelled to be the means to others’ ends through the use of coercion or threatened force. And to this end, all avenues for private initiative and voluntary association should be considered the desirable means for solving social problems before any serious consideration of government involvement is ever undertaken. Laissez-faire is the default position, unless otherwise demonstrated with strictly compelling reasons and evidence.

In support of such a “let alone” principle of no government social or economic intervention, since the time of Adam Smith it has been taken for granted that individuals are in general better informed about their own wants and desires and the surrounding circumstances in which they must make their everyday decisions than politicians and bureaucrats who not only lack the totality of all the knowledge possessed by the respective citizens, but have their own purposes and interests that may have little to do with those over whom they rule.

Socialism Means Government Power, Planning, and Tyranny

For most of the last 200 years, a socialist or planned economy has meant a political-economic system under which the government owns and manages all of the physical means of production (land, resources and raw materials, factories and capital goods). The socialist government has responsibility for the planning and directing of all economic activities concerning what goods and services will be produced, where and when, and with what combination of inputs to produce certain centrally planned quantities of outputs. Finished goods and services are to be distributed by the government to the citizens of the planned society in some manner reflecting an asserted conception of social justice and equity.

Under such a planned economy, by logical extension, the government is the only employer of all those looking for work in or commanded to work in the socialist society. This also includes the government’s determining the location and living conditions for all those employed, since, as the monopoly producer of all things, the government must produce and allocate housing, amenities, amusements, medical and health care, retirement funding, all sources and types of information and schooling, as these end up being incorporated within “the plan” according to some declared notion of social “fairness.”

The 20th century was littered with the tragic reality of socialist centrally planned societies in practice. The real individual human beings became nothing and the mystical collective “masses” became everything. The ever-vigilant secret polices of the Marxist regimes were always on the look-out for imaginary “enemies of the people,” and constantly undertaking paranoid searches for and arrests of anti-socialist “wreckers” and traitors whenever the contradictions, inconsistencies, and failures of the central plan had to be blamed on anyone other than those who were the ruling dictators and social engineers running the workers’ shining utopias.

Roundups of millions of innocent men, women, and children according to central-planning targets to fulfill the needs for slave labor in the gulags that stretched from one end of the Soviet Union to the other; torture chambers and basement execution cells in Moscow and every regional office of the KGB; millions of intentionally starved peasants whose “crime” was unwillingness to give up their private farms to the state. Unending propaganda and indoctrination to make everyone believe the lies of how wonderful their socialist society was compared to the rest of the world and to be obedient and diligent worker bees to serve the needs of the ever-watching and all-planning socialist state. The human cost was somewhere around 150 million people or more killed in the quest for the perfect collectivist world. (See my articles “Socialism: Marking a Century of Death and Destruction” and “Disaster in Red: The Hundredth Anniversary of the Russian Socialist Revolution.”)

The Interventionist State and Pursuit of Privilege and Plunder

The interventionist welfare state is often referred to as a “middle way” between an unhampered free market economic system and the fully centrally planned economy with little or nothing outside of the controlling orbit of the socialist state. Its stated purpose is to take advantage of the innovative benefits of the self-interested profit motive of the market economy, while tempering its effects or consequences through various types and forms of government regulations and restrictions.

Complementing these government interventions is a redistributive network of government programs meant to supply certain “socially necessary or useful” goods and services that the market, it is said, may fail to provide or in insufficient quantities and types. It is also meant to reduce claimed ethically unacceptable inequalities of income or social positions among various designated groups in the society through use of the tax code and selected regulations.

In fact, an interventionist state is merely a halfway house to a planned economy. The very nature of various forms and types of government regulations concerning prices and wages, methods of production, rules for marketing and sales, licensing restrictions and requirements to pursue an occupation or operate a business is to take the peaceful decisions and opportunities concerning all such matters out of the hands of people themselves and transfer them to those in political power.

Such government interventionist and redistributive policies have momentous influence over the economic and social circumstances of virtually everyone who is trying to earn a living or profitably open or operate a business. It should not be too surprising that with the rise of the regulatory state has come increasing special interest politicking for favors, privileges, and protections that carry with them the sickening odor of corruption, whether the resulting influence peddling is within or outside of the legal rules of attempting to “nudge” government policies in desired directions. (See my articles “Public Goods, National Defense, and Central Planning,” “Capitalism and Asymmetric Information,” and “Out of Control Government: How, Why, and What to Do.”)

Big Bucks for Political Influence, and the Burden of Government

Everyone is tempted or incentivized to drink at the government trough to gain favors and privileges or to resist any that may go to others that might negatively affect one’s own corner of the market. That is why, according to Center for Responsive Politics, in 2018, Washington lobbyists spent nearly $3.5 billion trying to move legislation and federal regulations in their preferred respective directions. And together Democrats and Republicans raised more than $2.7 billion during the 2018 congressional primary and general-election campaign season. So, in 2018, a total of at least $6.2 billion was spent attempting to influence government policy or to elect the “right” people for special interest groups to successfully get what they wanted during the congressional session that began in January 2019.

The welfare state redistributes vast sums of taxpayer money in politically determined directions. In the 2018 federal fiscal year that ended on September 30, 2018, Uncle Sam spent a total of more than $4.1 trillion, with 50 percent of it being spent just on Social Security programs and medical and health care costs. According to the Competitive Enterprise Institute, in its 2018 report on federal regulatory compliance costs imposed on private enterprise, businesses incurred $1.9 trillion in expenses in meeting the regulations and accompanying paperwork required by Uncle Sam’s interventionist policies.

In 2018, U.S. gross domestic product (GDP) was about $19.4 trillion. Total federal government spending of $4.1 trillion came to more than 21 percent of GDP. State and local spending combined came to an additional $3.6 trillion, for an extra 18.5 percent of GDP. This meant that all levels of government consumed nearly 40 percent of gross domestic product in 2018. And private-enterprise compliance costs of $1.9 trillion represented 10.3 percent more of GDP.

For a benchmark for comparison, in 1913, the year before the start of the First World War in Europe, the combined levels of government in the United States siphoned off less than 8 percent of national income. Or, in other words, 92 percent of everything produced and earned remained in private hands to use as those people found most advantageous and profitable. In 2018, that came to less than 50 percent, free and clear, of all that government took for its expenditures and the costs of fulfilling regulatory rules and requirements. But according to the critics of “capitalism,” we are living in a liberal, free market society in which “business” does anything it wants and government is “starving” for the needed money to do good things!

Alas, No Apologies for Defending Socialist Tyrannies

In spite of all that has happened over the last century, the advocates of and apologists for socialism and interventionist big government shrug it all off. They repeat the same tired rhetoric about greedy businessmen, selfish individualism, shortchanged social needs, selfless political officeholders only desiring to do good for others — with other people’s money! — and only wanting power to regulate and plan everyone’s life for the betterment of humankind. Yogi Berra knew what he was talking about when he said, “It's déjà vu all over again.”

Where are the confessions of guilt and the apologies from all those on “the left” who are old enough to have dreamed of a Soviet America, or who rationalized away the betrayal by all those who were Stalin’s spies, agents, and fellow travelers, not for money, but because for them socialism in Russia was the model society of the future that needed to be protected from capitalist Amerika? Or what about those who asserted that those who somehow had succeeded in escaping from the Soviet paradise were all liars with anti-socialist axes to grind or apologists for “business” when they told about the prison house that the Soviet Union really was?

And what about all of those on the political left not old enough to remember those “happy days” when Stalin lived and was the “best friend of every Soviet child,” whose mass murders and imprisonments turned many of those children into orphans branded with the label “children of the enemies of the people”? What about those, in other words, who looked for socialist utopia in other places: Mao’s China, Castro’s Cuba, Ho Chi Minh’s Vietnam, the Sandinistas’ Nicaragua, or Hugo Chavez’s Venezuela?

Have they owned up to the flowery rhetoric, the poetic prose, and the euphoric exclamations with which they heaped praise and ideological love on the tyrants of these socialist regimes? Or the cruel policies those governments implemented with all their human costs? Or have they admitted the disasters of the socialist central-planning practices in these countries, or the systems of privilege and power that those who ruled and ran these socialist regimes unhesitatingly bestowed on themselves?

There have been a few honest souls who have confessed their ideological sins and attempted to atone for them by talking and writing truth about the nightmare socialist experiments. But for the vast majority it has all gone down an Orwellian memory hole — never said, never endorsed, never fawned over, never rationalized, and never justified. In other words, all these collectivists have been experiencing a collective amnesia. What was that other line of Yogi Berra’s? Oh, yes: “I really didn’t say everything I said.”

New Dreams for the Democratic Socialists and Progressives

Instead, it’s as if it’s all just a clean slate. It’s the cruel and unjust reality of evil free market liberalism versus a beautiful, virgin-like dream of hope and possibility that if we only implement “our” version of this freshly minted “democratic socialism” or if we enlarge “progressive” welfare statism with just that much more tax money and social and economic control, the new dawn will have arrived and a world of social justice will be in reach.

The political and economic system under which we live is not free market liberalism. It is a twisted and corrupted system of privilege, favors, plunder, and power lusting through special interest politicking for economic or ideological purposes. It is what is sometimes called crony capitalism, but should be better called political cronyism, which is the essence of the interventionist welfare state. (See my articles “Free Market Capitalism vs. Crony Capitalism” and “Crony Capitalism the Cause of Society’s Problems.”)

What we need, and I would say even desperately, is a reawakened understanding of and desire for the free and prosperous society that, in fact, can only come with free market liberalism and grounded in a social philosophy of individualism and voluntarism. Otherwise, history, in a slightly different form of the same collectivist theme, will repeat itself here in America and many other places around the world, as whatever remains of degrees of individual freedom and free enterprise is swallowed up in a new Leviathan state.

That is the case if the new democratic socialists and the collectivist race and gender warriors have their way. But they need not. Various political and ideological trends have often seemed inevitable and irreversible — until they have changed! And it can happen again — if only friends of freedom at least try.

Sign up here to be notified of new articles from Richard M. Ebeling and AIER.

Richard M. Ebeling

 Richard M. Ebeling, an AIER Senior Fellow, is the BB&T Distinguished Professor of Ethics and Free Enterprise Leadership at The Citadel, in Charleston, South Carolina. Ebeling lived on AIER's campus from 2008 to 2009.