by Alasdair Macleod, Silver Seek:
Feudal and mercantilist economic systems were characterised by the lower orders of ordinary people being enslaved by, or subjected to, the commands of an elite.
Beyond basic subsistence, serfs and slaves were not enabled to consume other goods, nor were they given the means to do so. Communism was hawked as handing power to the serfs, or workers, united in and by the state. But again, it meant that workers remained serfs, employed and commanded by a state set up in their name. Freedom from the bourgeoisie became subjugation by the state. Only capitalism, founded on free markets and freedom of choice for all, held the promise of freeing the masses from a life of drudgery and servitude.
This was what the industrial revolution in Britain was about, particularly after the Corn Laws were repealed, and also the basis for the opportunities offered in America for refugees from European feudalism and mercantilism. And as the benefits of this freedom became enjoyed by those that were freed, so the abolition of slavery followed. A minimalist enlightened government based on democracy guaranteed property ownership and ensured that individuals’ rights were enforceable. These were the simple conditions of free markets, the conditions where the lowest consumer is the master of the mightiest producer, who endeavours to serve him. These are the conditions that led to a dramatic improvement in living standards for everyone in only a few decades, an improvement that had proved impossible in all the history of feudalism, mercantilism, and communism. It was the unique achievement of Anglo-Saxon laissez-faire.
But empires strike back. Just as communism enslaved the workers in their own name, so democratic states in the name of capitalism find ways to bind their own electors. Freedoms taken for granted by the British and Americans were never fully adopted by more socialistic states, and even the Anglo-Saxons have been slowly compromised to the point where their democratic systems are now breaking down.
Central to the loss of freedom, the road to serfdom as Hayek put it, is the creation of myths. The myth that the state acts on behalf its people, when it always acts to protect itself. The myth that the state knows better what its electors want than the electors themselves. The myth that only the state has the impartiality to right all wrongs. The reality is the exact opposite. The state intervenes to prevent people from deciding the matters that directly concern them. The middle classes have been taxed in the name of redistribution to the poor, and the poor themselves in turn have been relieved of the value of their earnings and savings by monetary debasement, always in the interest of the common good.
There is something in the human psyche which denies economic truths. The explanation as to why free markets work is logical and simple to understand. The contrary evidence, that statist attempts to interfere with Adam Smith’s invisible hand always fail, is irrefutable. Yet the blame for failure is always laid at the door of capitalism. The few of us that persistently insist that right is not wrong and wrong is not right attempt a seemingly hopeless task of persuading the unwilling.
Of course, the spectrum of human understanding of economics is never black or white, and within it there are degrees of illumination and deception. The luminaries are mostly ignored, but it is wrong to say that all deceiving economists, who have come to believe that their science is somehow separated from the actions of individuals, are evil or conscious deceivers. Their fault is to lack dispassionate analytical capacity. Their observations are one-sided. They are confident that a proposed redistribution of wealth from the rich to the poor will help the poor, because it is a direct and visible policy. This is a favourite topic of Methodist socialism, espoused by good, caring people. What are not visible are the hidden consequences of state redistribution. The redeployment of resources from producers is wasted in unproductive bureaucracy, tying up administrators better employed in more productive activities. The ability of the wealthy to provide productive employment for the unemployed, or business for tradesmen, is also impaired through the loss of their wealth. To maximise the benefits of a free-market economy the efficient deployment of all resources is required. It is a fair bet, that all told, the hidden costs of state redistribution often exceed the benefit.
There is no area of economics where one-sided observations are more distorted than when dealing with the subject of money. The state’s desire to control the issuance of money is as old as statism itself. The granting of power to the state over money is an invitation for it to act dishonestly, and to indulge in covert theft from its own subjects.
When the state finds it has to meet an excess of payments over tax receipts, it should borrow the difference, but it is always tempted to finance the difference by issuing currency. After the First World War, both Austria and Germany attempted to discharge the balance of their national obligations in this manner, leading to a complete collapse of their currencies. In the twentieth century, some fifty-eight episodes of price hyperinflation have been listedi. In all cases, it was the eventual consequence of governments financing deficits through the expansion of unbacked currency. Financing trade and budget deficits by currency debasement is commonplace, yet no mainstream economist worries about the inflation risks.
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