Our politics are divisive, but the underlying debate about the role of government in the market is as old as the hills. Although most can agree that at some point the government becomes too big (North Korea) and that at another point the government becomes too small (Afghanistan, Lagos), the exact dividing line isn’t clear. 

Why? Because most countries of the world are running a mixed system of government and the market and the data is either nonexistent or difficult to interpret.

But those who believe in an absolutely free market should take a look at the building and living conditions in Lagos, Nigeria. And those who use government as an ersatz religion should remember how well it worked out for the Soviet Union and the tens of millions who died under its authoritarian rule.

So what can we do? We can take a look back into history at some of the views of some famous thinkers.

Science is great, but when you don’t have data on certain questions, we have to fall back on old-fashioned human Reason. Scary, but sometimes we have no choice.

Let’s take a look back at some fundamentals of public policy.

Ronald Reagan and Margaret Thatcher in 1988. The U.S. president argued that the government was not the solution to problems, while the British prime minister fought against socialism.

Flickr: UKBERRI.NET Uribe Kosta eta Erandioko agerkari digitala

First, why do we have private property?

There is an idea, now called the “tragedy of the commons,” which goes back to Aristotle’s “The Politics.” The idea is simple: If you own something, you have an incentive to take care of it and make it productive. If everyone owns a plot of land, nobody takes responsibility for it.

The other function of private property is that it creates an incentive to work hard and accumulate more wealth. If you ever talk to someone who was born and raised in the old Soviet Union or its communist satellites and who came to America, they will tell you that the problem with communism is that it gives you an incentive to do nothing.

Why Do We Have Government?

Now, a key clarification about definitions is in order.

The word “communism” means that the government owns or controls the means of production. In other words, private business doesn’t exist. Conversely, “communitarian” means a concern not only about individuals but about the community and the relationship between the two. A communist by definition would be a communitarian; but many communitarians are not communists.

Second, why do we have government? To provide rules of the road, to keep people from harming each other, to try to do some thinking about the common good, and to do things that individuals and the market can’t do for themselves. In addition, government spending is part of our calculation of gross domestic product. No sane person opposes all government, but at the same time, no sane person would advocate for unlimited government either.

Because government raises revenues by taking money from the private sector, if it gets too big, the parasite will eat the host. As Margaret Thatcher put it:  “The problem with socialism is that in the end you always run out of other people’s money.”

Frenchman Frederic Bastiat wrote a book called “The Law” in which he takes the view that government is a giant rip-off organization. Ronald Reagan’s famous aphorism was that “government is not the solution to your problems, government is the problem.”

A bit hyperbolic (in all three cases), but you get the idea.

Thomas Hobbes believed that life in the state of nature was “nasty, brutish and short.” He therefore advocated a “Leviathan” government to squash bad human behavior. Theodore Roosevelt championed big government because he saw it as a counterweight to big business. We should bear in mind that the businesses that existed in Adam Smith’s day were mostly sole proprietorships — the butcher, the baker, the candlestick maker.

No sane person opposes all government, but at the same time, no sane person would advocate for unlimited government either.

Today we have mega-corporations and many of them are multinationals with a global perspective. As the facts and context changes, some adjustment in our ideas may be advisable. Calvin Coolidge believed that there should be a strict line between business and government to avoid corruption of one by the other. Today, everybody and his sister are talking about public-private partnerships.

Our founders believed in government, but only one that did not overly concentrate power. They adopted Montesquieu’s idea of the separation of powers and checks and balances.

But at the same time, our founders, like every political thinker since democracy was pioneered in the Athens of Pericles, also feared the tyranny of the mob. That is why the U.S. Constitution establishes a republic, which means a representative democracy. As Coolidge put it: “Sometimes people want things they ought not to want.” While crowds can sometimes make good judgments, herd behavior can be dangerous.

In the end, we must strike a balance between government and the market and the case differs depending on what is at issue.

Is Hawaii Socialist?

The biggest problem we have today is that people are willing to lie to achieve their goals (or at least peddle half-truths). Let me suggest that building public policy on a foundation of lies isn’t going to work as a practical matter and lying doesn’t help your credibility as an advocate anyway. If we lie less, then our government may get better.

I have heard a few people call Hawaii “socialist.” Possibly.

But every state is different and ours is demonstrably different because so much of our money comes from outside its borders from spending by tourists and the federal government. And because we have roots in the paternalism of Christian missionaries, plantation owners, the “Big 5” corporations and Hawaiian and Asian cultures, it may not make sense to try to turn us into Texas or Utah.

Still, we should stay within the American tradition by remembering the fundamentals of public policy outlined in this essay. 

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