January 7, 2014

Must We Pursue Efficiency?

By In Economics, Politics

First we start with the official narrative; the one that we are required to believe lest we be labeled conspiracy theorists.  The narrative is this: GOP is for limited government and Democrats are for socialism, this is the grand ideological battle of our time.  The solution to this battle is for the two parties to come together for the sake of the “American people” and for “freedom.”  At least, this is what we are told.

However, in reality, “limited government” has never been pursued by a politician (with about five exceptions) in the previous (or this) century and in fact both parties are socialistic.  The problem in our minds is that we tend to associate “socialism” with Marxism, without realizing that Marxism is only one type of socialism.  But if socialism is simply the economic aspect of the broader sociological umbrella of “collectivism,” things suddenly become more clear.  Both parties are largely collectivist and in fact the entire sentiment of “going out to vote” for “our” leaders (sic for rulers), is a logical extension of a collectivist mindset.

All that said, we often hear, correctly, that the establishment in Washington wants to keep spending, borrowing, wasting money, growing its size and influence, and become more and more involved in every aspect of the global marketplace.  Against this trend come some well-meaning and self-described conservatives who have as their aim to make “government more efficient.”  That is, we are told, the “leaders” ought to run DC like a business!  “No more wasting money!”

If you ever hear someone, usually coming from businessmen like Herman Cain and Mitt Romney, claiming that the way to “fix” this broken government is to run it like a business, realize one thing: their entire goal is to perfect government operations and “save” the government which has in the past been mismanaged.  Now, we must tread carefully here.  The problems with this sentiment is not that business is bad, that capitalism is problematic, or that rich people ought to be ostracized.  The problem with the Cains and the Romneys of the world is not that they are free-market oriented.  The problem is that they are too socialistic.  For if government is the problem in our modern economy –and society –then our goal should never, ever, be to make it stronger and to “fix” it.

What we must realize is that for all the talk of “fixing” Washington, there are much fewer objections stating that Washington is a parasite which leaches, and sucks the blood from, the true economy of productivity and growth.  In other words, by “fixing” the government to make it run better, the continual down spiral of the American economy would be inevitable.  We should aim to fix the economy, not the government.  And how should we fix the economy?  By making government smaller, not by making it better!

Making government more efficient is troubling for three primary reasons.  First, it is the means by which government is strengthened and made better at what it does.  Government is the means by which the economy is hampered and squelched.  When the government becomes better at what it does, this means that it will be able to do the things it has always done, but with a more harmful effect.  For example, if there are twenty percent of the taxpayers that are not paying the full amount of the taxes that they supposedly owe simply because the government cannot keep track of everybody in society, this means that the private economy gets to keep more money than it would if the government was able to do its “job” (expropriation via taxation) more effectively.  But if the government hires a consulting group to come in and fix the IRS systems so that it could better do its “job,” what would happen?  Perhaps the group of people who were once unable to be expropriated would move from 20% of the taxpaying base down to only 3%.  This means that there is a large collection of money that moved from the private economy to the government black hole of spending.  Any free-market proponent would realize the detrainment to this development.  Of course, there is so much more that will happen as a result of this “fix.”  For the new money collected by the government is no longer going to be used for capital investment by the private owners of that money, but rather, it is going to be immediately consumed.  Resources in the economy will now go to different ends as the government will spend that money in areas which would have otherwise not received it.

The IRS is only one example.  But what about all the other bureaucracies?  Well, simply think of all the harm that they are doing now, and then think of if they were better at what they did.  What if the EPA was able to pass more regulations every year and cramp down on even more businesses?  What if the FDA was able to outlaw certain products every year and send out more fines and fees as a result of their better processes?  What if the United States military groups were able to get to more places around the world and stir up even more trouble than they already do?  What if, and this is highly relevant given the fake-news on the issue, Obamacare’s website had gone up without a problem and the entire system was ready to go?  Would not that be an immediate nightmare?  The blessing of Obamacare is the stalled website!  We don’t want the government to get better!  We want it to be a lousy failure because the extent to which it causes harm in today’s world is limited strictly by its failures, inefficiencies, ineffectiveness.

Second, it is impossible because governments have no price mechanism.  How do we know what “efficient” is and whether or not a firm is accomplishing its goals?  Simple: we look at its profits.  If the expenditures required to produce an economic good are less than the price of the product on the market, a profit can be realized and the business owner, entrepreneur, and capitalist investor (three different functions sometimes filled by the same person, other times, by different people) is rewarded.  As he becomes more productive and learns to better his business processes and make his product development more efficient, he will gain a better profit (assuming the price of the good stays the same, for the sake of the argument).  All of this learning and gaining knowledge requires the presence of a price.  The price is a signal which communicates information.

Importantly, the government does not, and cannot, have a price.  Rather than being run with an Entrepreneur who is interested in bearing uncertainty for the hopes of making money, the government manager (the bureaucrat) bears no uncertainty because he does not risk voluntary economic actors rejecting his product for any reason.  There is no true price because there is no natural supply and demand relationship.  Everything is budgeted from the top-down and there is no economic justification for the resources being managed by the bureaucrat at all.  Every resource that is given to the bureaucracies is there because of government fiat and government command.  The role of the price is to inform the business owner that he is doing things right and there is a demand for his product or service.  The government has none of this.  Citizens are forced to “pay” for the activities regardless of what their preferences are and thus, there is no economic incentive to pursue efficiency at all.  Without the economic incentive, running the agency “like a business” is simply an ignorant and impossible pursuit.

Third, it does not address the root of the problem and the masses continue to place hope for the future in the State.  I think that this point is not emphasized enough today.  The root of the problem is the psyche of the American people who do not realize the true nature of the State as a “gang of thieves write large” (in Murray Rothbard’s words) for the purposes, I might add, of redistributing that stolen money to the friends of those in charge (whether business owners, contractors, the Unions, the impoverished).  Now, the GOP has its own interest groups and lobbying buddies which are different from the interest groups who are friendly with the Democrats, but the important point is that Americans are profoundly ignorant of the mentality of the rulers in Washington.  The fact of the matter is that when some political schmo, like Herman Cain, Mitt Romney, Newt Gingrich, Hillary Clinton, Harry Reid, Barack Obama (I could go on forever) wants to make government act more efficiently, American’s hearts are warmed and softened to the thought of a politician “actually doing something” to, you know, “turn this mess around.”  What a bunch of baloney.  Why do these authoritarians always get the benefit of the doubt when they claim to want to make government work more efficiently?  Of course they want it to work more efficiently! Of course they want the dragon which they control to do its evil deeds better and with more success!  Without the beast they are nothing!  No emperor ever wanted his empire to have a lesser impact on everyone around.  The politicians in Washington act predictably when they claim to want to make the government run better and be more effective.

What the multitudes of this world must realize that the government perfects itself at their expense.  The root of the problem is the existence, not the internal glitches, of the State.  The day we beg for the State to do its job better is the day we lose more freedom.  Carnivores eat meat.

Let’s not give them more rows of teeth.

 

 

Written by C.Jay Engel

Editor and creator of The Reformed Libertarian. Living in Northern California with his wife, he writes on everything from politics to theology and from culture to economic theory. You can send an email to reformedlibertarian@gmail.com