In response to a newsletter from a thinker I respect, I was moved to reply and it turned into a mini-essay that I felt had some valuable insights.
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One of your comments struck me as almost accurate and I thought it worthy of a response.
o Also, note that government doesn’t produce anything but simply redistributes capital from producers of capital to consumers of capital.
o And while government has an important role to play in a thriving economy, it is one of facilitating the production of wealth, not creating it.
o Therefore, the larger the government, the greater a drag it is on the productive capacity of the economy.
One of the obvious differentiators between Objectivism (which is a full philosophical system) and the economics-focused Libertarianism we commonly see is the role of government in a proper society.
Libertarians fall into a range of camps that include Anarchy, Anarcho-capitalism, Minarchy, and related ideas. According to Rand, these are all anti-concepts that attempt to fuse a negative into a positive, thus destroying people’s ability to properly conceive and consider the positive. Anarchy is the absence of a central government. Anarcho-capitalism is the worst because it names the positive and then destroys it. Minarchy generally means the smallest government necessary and might be the closest to a proper formulation, but unnecessarily clouds the issue by creating a new term for what is simply capitalism.
The positive is capitalism, the political and economic system where all property is privately owned and government is created to protect the rights of every individual citizen to life, liberty, and property. So long as the individual does not violate the rights of others, the government has no role, no policy, and takes no action.
In a free society, government is an unalloyed good, an absolute necessity. Such a government is generally very small, but it may expand sometimes if needed to protect the country from external threats. Such a government is not good because it is small – size is not the standard of value – but because of what is does: protect rights from internal and external threats.
The first bullet could be improved by stating that through economic policy and the resultant use of force against innocent citizens, the government seizes the capital of producers and gives it to those people and groups favored by government policymakers. Some of those receiving the favours are also producers.
Your second bullet is almost perfect but can be improved by reformulating it as “A free society requires Government to play an essential role in the economy by protecting the rights of producers and consumers, creating the optimal conditions for production and trade.”
The third bullet is the weakest because it implies a negative correlation between government size and economic productivity. This is contradicted by Objectivism. A better formulation would be that since government is essential, there is a Kuznets curve something like this:
The introduction of a government that starts to protect rights enables a sharp increase in production such as seen in the transition from the Enlightenment re-discovery of the power of reason and the consequent introduction of rights through the Industrial Revolution. In the U.S. and other relatively capitalist countries this persisted into the late 19th century and economic growth was 6% or even higher for long periods.
Once the government started to adopt and enforce policies that did not protect rights, but violate them, the rate of economic growth started to decline. Controls, regulation, tariffs, taxes and other types of non-objective law are all forms of rights violations. The decline side of the curve is much more gradual than the increase side because it still contains significant rights protection, and these are usually gradually eroded. Because all the infrastructure created during a period of rights protection is difficult to destroy, both physically and intellectually, it is possible for a fascist government to commandeer production yet not rapidly destroy it. I think a good case in point is Argentina, in the news these days due to the election of a relatively free-market figure, which was once among the wealthiest of nations but then suffered a slow decline as collectivism became entrenched.
A proper formulation of the third bullet point would thus be: “Once a proper, rights-protecting government has been instituted, any further growth of government will of necessity be rights-violating and thus lead to lower economic production.”
All this started with just the idea that the third bullet point was weak, but I am very happy with the thoughts that emerged, particularly the shape of the graphic, the form of which I have not seen before.
