The Proper Role of Government in the Market Place (Part 1/2)

Almost everyone agrees that the Govermment has far too much control in the Marketplace.  Whether it’s the federal reserve adjusting interest rates to give people incentive to buy homes at astronomically high prices (housing bubble), whether it’s a politician making a back room deal and accepting lobbyist dollars in promise to vote for a corrupt bill in return (oil industry, auto industry, communication industry), whether its using tax payer dollars to bail out big business (banking industry, mortage industry, auto industry), or even your local mayor approving a corporate construction zone near your neighborhood to make a few extra bucks – Government corruption and market intervention are rampant – we can all agree there are some problems.

What is the right amount of Government?

Government has two basic roles when it comes to business.  Enforcing Contract Law and protecting personal property rights.  Enforcing contract law basically involves upholding any contract made between two concenting adults.  This is necessary because if there is a disagreement the two parties may have a judgement made based on the predetermined agreement.  So if I agree to sell you my house for $200k, but never move out after you’ve paid me – then legally the Government should help you enforce the agreement.   Contracts are important to business as they are the foundation of confidence between two parties.  If two parties feel they cannot in good confidence make agreements they will not do business or the more powerful of the two parties will almost always abuse the weaker when it is advantageous to do so. 

The second role of Government in the marketplace is the protection of personal property rights.  That is the guarantee that one businesses actions do not interfere with the personal liberty of other individuals.  For example, a business can’t start a nuclear testing facility next to your neighborhood.  Though they certainly have the right to have their business the consequences faced by the individuals (radiation) is a violation of property rights.  (You can do anything you want as long as you don’t violate the liberty of others.)

Those two roles of Government applied fairly throughout the market place virtually guarantee a productive and fair place to do business.  So a drastic, not absolute, reduction of Government is necessary. 

Local vs. National Government

The constitution does an excellent job of providing what role the national and local governments would play.  Local governments have the ability to cater to local needs and perferences.  Local governments give people choice move to an area that better suits their needs.  Hypothetically 99% of issues would be decided by local and state governments.

National government is reserved for issues that involve the international community or cross state lines (per the constitution).  For example, a conflict by two companies in different states would involve the national government.  A nuclear facility’s radiation spreading across multiple states would be a federal issue – and so on. 

Today, due to juducial activism (the interpretation of interstate commerce, mostly) and enforcement by the executive branch the federal government has grossly overstepped its bounds.  This has made corruption among politicians and corporate bodies far easier – especially since the best interest of the people in the local communities mean almost nothing. 

To solve this we should revert back to a stronger local government.

Why Abolishing Government is a Bad Idea

I am a strong advocate of allowing the market to sort things out.  99.9% of the time that is the best thing to do.  However, the market can only work effectively if their is a fair playing field.  It’s important to remember that Government is not the only body of power that has the ability to artificially influence the free market.  So ideally, a just Government would stay out of the business of Market manipulation – and make sure others stay out of it too.  The Government must be non-biased, elected, and have no coflicts of interest to do this effectively (of course that’s not happening today).

Right now its very difficult to imagine a Government that would work.  The Government is so closely linked to business that we have a virtual oligarchy.  Big business sees fit that the right politicans are elected and corporate media ensures that the people agree to it.  Meanwhile, politicians are getting fat off our tax dollars AND corporate kickbacks.  It’s broken.

A system in place with the ability to enforce property rights is necessary though.  Without it we will have the same problems we have now.  Resources people need to survive and have a civilized standard of living (i.e., Medication, Metals, Food, Oil) all have the potential to be utilized for the greed of a few at the expense of many.  Without the enforcement of property rights the strong and wealthy will always be able to take advantage of the weak and poor.  It is the flawed nature of men – an empathy gap between those who are well fed and those who are not. 

We can see prime examples in the diamond fields of Africa where the corrupt rich rule the dying poor or the oil Shieks in the middle east.  An agency of justice is necessary – to lovel the playing field, ensure a truly free market exists, and allow everyone to compete.  Government should be a referee, not a participant.

The Folly of Impossibility

Free Markets or full government control – no matter your poison of choice – there is one major problem.  Men are flawed.  Some men will always exploit and desire to rule over others.  It doesn’t matter if they are in the form of a President or an Oil Tycoon unfair play is inevitable. 

Free markets with a dash of Government refereeing, I believe, give the people the best chance of success.  A free market gives people the opportunity to vote with their wallets and pocket books – to stop businesses who do bad and reward those who do good.  I think we’ve all had enough of these back door deals and lies by our “leaders”.

(Check out Part 2 where I will examine a few examples and discuss the data.)

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5 thoughts on “The Proper Role of Government in the Market Place (Part 1/2)

  1. jon

    What an impressive piece.

    You mentioned the idea that
    “Contracts are important to business as they are the foundation of confidence between two parties. If two parties feel they cannot in good confidence make agreements they will not do business or the more powerful of the two parties will almost always abuse the weaker when it is advantageous to do so.”

    This reminded me that there was a book maybe 10 years ago called “Why Capitalism Triumphs in the West and Fails Everywhere Else” — and the bottom line, as you point out, is that in order for capitalism to work, you first need a well-developed legal system so that it makes sense to enter into contracts. Otherwise, it’s hard to get things going – since no one really has the confidence to lend money.

    The other thing that really resonates with me:
    “Today, due to juducial activism (the interpretation of interstate commerce, mostly) and enforcement by the executive branch the federal government has grossly overstepped its bounds. This has made corruption among politicians and corporate bodies far easier – especially since the best interest of the people in the local communities mean almost nothing. ”

    I was reading from a book called “Republic, Lost: How Money Corrupts Congress – and a Plan to Stop it” — i think you’d enjoy it a lot. One of the (many) things the author brings up is that congress often times passes legislation that is favorable to a particular group, and gives it a sunset clause so it needs to be renewed by another congressional vote, say, a year later. Reagan did this for a good reason – to make sure it had positive consequences. But what happens is these types of laws never become permanent – they continue to require renewal after renewal. Why? In this way the interested parties are required to give campaign contributions to congressman in order to make sure that the law gets renewed. Once it’s become permanent, congress loses its leverage. This is just one of many examples of how the current system is structured in a way that makes corruption the status quo. Not the old type of hard-corruption (which occurs rarely, $$ hidden in a congressman’s freezer) – but the current pervasive corruption of the system, where congress’s dependence upon the electorate is overshadowed by their much greater dependence upon the interested few. As you say “where the best interest of the people means almost nothing”.

    Reply
    1. Atticus Finch

      Thanks Jon! I’ll have to check out those books you mentioned. Also great point about the type of corruption we see in congress – especially pointing out the issue of renewing laws constantly to ensure lobbyist are ready with their paychecks.

      Reply
  2. jon

    One of the interesting things about the government corruption issue is that it’s one of the few things (and a really big one) that both the left and the right should be able to agree on.working to change. (Change here would be huge, but really hard).

    Reply
  3. Pingback: Best of 2012 – March « BlogTruth

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