“First do no harm” is a mantra of the medical profession, which is usually ascribed to Hippocrates. The words do not appear in the Hippocratic Oath but do capture its sentiments. It is an injunction that should be a rule to be followed by all politicians who have an urge to tamper with the economy.
Politics and economics are distinctly separate disciplines. Politics focuses on group interests in the pursuit and exercise of power over others. Economics is about human interrelationships as individuals pursue material ambitions to better their lives. When this basic distinction becomes blurred, the socio-economic welfare of a country is affected. This raises the crucial question - what political power over the economy can be exercised without causing harm to consumers?
My firm assertion is that where the exercise of political power curtails or infringes on the liberties of individuals to find employment, better their economic situation and enjoy a productive life that will benefit their families, communities and the country at large, such abuses of power should be rigorously scrutinised and, if found offensive, summarily curtailed.
The Late James Buchanan, Nobel Prize winning economist, wrote “The distinction to be drawn between economics and politics, as disciplines, lies in the nature of the social relationships among individuals that is examined in each. Insofar as individuals exchange, trade, as freely contracting units, the predominant characteristic of their behaviour is ‘economic’….Insofar as individuals meet one another in a relationship of superior-inferior, leader to follower, principal to agent, the predominant characteristic in their behaviour is ‘political’…..Economics is the study of the whole system of exchange relationships. Politics is the study of the whole system of coercive or potentially coercive relationships”.
In the economic sphere, humans are guided by their individual self-interest to pursue their socio-economic aspirations to live progressively better and contented lives. Entrepreneurial individuals engage in business ventures while others seek employment in those enterprises. For all, the motivation is the same – seeking a happy contented life. The fascinating phenomenon is that people are never quite fully content, even when their basic needs are addressed. The poor seek to get rich while the rich want more. No-one ever stops pursuing their quest for a better life on the basis that they have accumulated enough wealth and are, and will be, happy and contented for as long they live.
This restless search for contentment explains the creation of wealth and employment. It is the very fountain of human progress, to paraphrase Ayn Rand. The insatiable appetite for a business enterprise and those employed by it to respectively generate more profits and realise better incomes is predicated on providing goods and services to consumers at better value for money than those offered by their competition, be it in the same industry, across other industries, local or international.
It is a ruthless law that puts business enterprises at the mercy of consumers. Individuals make purchases on the basis of what will best serve their own interests. Appeals to family, racial, ethnic or patriotic sentiments seldom persuade consumers to patronise any particular business or to buy a particular product. It is all about value for money. This is why campaigns for consumers to buy patriotically have consistently proved futile and meaningless.
To satisfy the unempathetic dictates of consumers who object to rising prices, businesses have to constantly work at lowering their cost of production. If the quality and price are good, the greater will be the demand for a product. The more the enterprise produces, the greater the profits and earnings will be for all involved. Consumers, in turn, also benefit as prices will be lower and they will have more money to save or spend on other things. This is the chain reaction that policy makers have to be attuned to. This is the essence of productivity and it occurs, exclusively, in the economic arena.
In the political arena, governments have strayed too far from their original functions of protecting citizens from external aggression; ensuring the territorial integrity of the country; and ensuring that an independent, impartial and objective judicial system is in place. And for a government to carry out its function effectively and safeguard citizens, this all has to occur in a legal environment in which everyone has equal status before the law, where no one is above it, and everyone is subject to the rule of law and not of men.
The coercive tentacles of government, however, extend to every nook and cranny of the economy. Powerful, organised vested interests – whether it be businesses seeking protection from competition, organised labour catering for its formal members, or non-governmental entities promoting their own exclusive agendas - forever seek to court, control, manipulate or hijack government to access state contracts or have government enact coercive policies that advance their interests. Invariably, this is at the expense of the whole country. Governments, in turn, tend to pander to these interests because, in most cases, such corrupt entities reciprocate in some way or another, opening the doors to bribery and corruption. Without hardly any exception, the policies government ultimately implements under such circumstances are at great detriment to the majority of the country’s people.
Those who wield the electorally mandated blank cheque of power to enact policies that impact the socio-economic endeavours of everyone else, tend to be afflicted with an ingrained attitude that the late Friedrich von Hayek identified as the ‘fatal conceit’. This alludes to the arrogant attitude on the part of policy makers and bureaucrats who believe that they know best what is good for everyone, especially in the economic arena. It boggles the mind as to how any group of people, never mind individuals, can ever claim to command the knowledge and expertise that is dispersed among the millions of businesses, formal or informal, big or small, complex and basic, that come in all sorts of permutations, have diverse challenges not only within industries, but within the bigger economy and the wider global context.
It is thus not surprising that the laws such policy makers enact prove to be intrusive, inflict onerous measures of compliance, raise the cost of going into and doing business, and inevitably compromise the competitiveness and viability of businesses.
Juxtaposing economic power and political power is a fairly easy exercise. Whereas economic power is concerned with utilising resources for production, political power, entirely at its discretion, dispenses with the fruits of private sector economic production. An unfettered economy operates on the basis of free and voluntary exchange that does not entail force or fraud. It operates on the basis of freedom of choice, freedom to trade and within laws valued empirically on the basis that contracting parties, producers and consumers, business owners and employees and traders benefit mutually.
Political power invariably is exercised on the basis of pandering to rent-seekers, a variety of interest groups and punitive mandatory legislative measures. If it took a long, hard look at what is required for a thriving economy, it would encourage more government restraint and leave business enterprises to their own devices, as in a free market economy, to allow the spirit of enterprise to kick in with its inbuilt system of rewards for socio-economic endeavours, risks, innovation and ever increasing productivity that will benefit society as a whole.
Politicians and those they ostensibly serve would be well advised to heed the words attributed to philosopher and naturalist, Henry David Thoreaux, that “government is best which governs least”.
Source: This article may be republished without prior consent but with acknowledgement to the author. The views expressed in the article are the author’s and are not necessarily shared by the members of the Foundation.