Today I shall set forth the reasons why markets are superior to governments in creating and distributing wealth. In no way does it suffice to say, simply, that markets are “perfect” and that the invisible hand will bring about spontaneous order. Yes, all of this is true, but if people have to be convinced of this, we need to put forth a more fundamental analysis. This analysis, must begin with an understanding of human nature.
We are naturally self-interested. This has and always will be a necessary trait for the survival of a species. However, humans have become increasingly social beings, which means that our existence is tied up to and determined ever more by the actions of others. Obviously, most people do not go out and hunt their own food anymore. Most people would rely instead on finding a job, or starting some kind of entepreneurial project.
Having said this, we have to appreciate that it is out of our self-interest that these voluntary systems of cooperation emerge. In the words of Adam smith, the breadmaker does not bake his bread out of benevolance, it is out of his own interest to obtain other goods, like the tailors clothes. In acting “selfishly”, both the breadmaker and the tailor benefit from the labour of the other.
In the truly Capitalist market, there is no room for true “selfishness”. In the presence of law and clearly defined and protected property rights, one cannot simply take from another. If one wants to succeed to fulfill his personal ambitions, he will have to do so by gaining the approval of others. Self-interest and general interest are, and always will be, under a free system of interactions, tied together. There is no way out of this.
The amount of profits that a Company produces, is nothing but a measure of the value it is creating to society. We mustn’t look at high profits with envy and zeal, but rather with admiration. In fact, those who make the most money, will ultimately be the ones whi have contributed most to the well-being of society. It is fallacious to say the opposite.
Having said this, I shall now explain why a centralised body of power will inevitably turn our “selfish” nature against us.
If in a market power is obtained through people voluntarily giving up their money to buy your product, the opposite is true of government. Governments obtain their power from elections. The thing is, once a political party is in power, it will retain and hold this power regardless of its actions, except perhaps for very extreme cases.
Therefore, governments are not subject to any market force. Even with widespread discomptent there is no way to remove the power from this body. On the other hand, it is incredibly simple to bring down any firm if consumers so wished. The consumer is the ultimate king of the market, the voter, is not. The consumer may exercise his power of choice everytime he buys something, while the voter may, at most, have the chance to vote once in a while.
So the actions of government are not likely to be determined much by what “society” wants.
This means that we have now set in place some very perverse incentives to use and abuse this power for private benefit; be it the politcians, the lobbies, or any organization which extracts resources from the government.
As I explained before, under a truly Capitalist regime, our selfishness will bring about higher social wellbeing. But when you put governments into the ecuation, you open the door to true selfishness. The kind of selfishness where some win and some lose. Where the powerful can use their influence to shape things in such a way that will benefit them exclusively. It is a perverse system which has us all fighting against each other for a part of this power that we have put in the hands of a few.
This is no wealth creation. It’s wealth destruction and time wasting. Countless hours and efforts are put on a daily basis, not to satisfy consumers, but to somehow profit from the existence of this centralised power holding agency. The examples are countless. From passing laws to increasing benefits to certain groups, we all play this immoral game where our selfishness truly does bring about the worst in all of us.
Because we have created a system where power and wealth are for sale. Because we allow governments to do things no citizen would be allowed to do. Because we believe naively that our leaders will have our best intrests at heart. Nothing is further from the truth. Politicians will act as any human, and use the power bestowed on them for their own private benefit.
In politics, however, selfishness will not bring out the best in us, only the worst.