The Perpetual Cycle of Big Government

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Reasons why we need big government regulation, bandwagon

… that generates perpetual cycles of government

By its very nature, the growing hands of government will exponentially precipitate more government. In fact, it may be time to come to the realization that neither of the major parties has any desire to loosen its grip on the free market or facilitate ways to reduce the effect of government, and unfortunately, that will always be at the expense of economic well-being.

Most of us agree that politicians will always seek the concentrated, visible interest of the few over the diffuse, less visible interest of the many because special interests are more inclined to possess a greater degree of magnitude than the general interests. This certainly doesn’t mean that I dispute the importance of government. I’m just merely expressing the rationalization that a limited government, (one that supplements and leverages market forces instead of one that controls and dominates), would yield the most optimal outcome for Americans. Thus, government should have very significant functions, albeit very limited functions, restricted to providing protection to citizens, providing courts of law to adjudicate disputes, enforcing private property rights, and promoting the liberties and freedoms necessary for individuals to pursue their own objectives.

Big government policies should be a concern for every citizen, consumer, producer, voter, or anyone else who has an interest in advancing economic, political, and societal well-being. I think most people would agree that government has been about as fiscally responsible as a teenager at a rave. Yet we to continue to support policies that give government more power to spend our money the way they see fit.

Re-emergence of socialism?

Yet, socialism, even after history has proven it to be such an economically corrosive system, is starting to re-emerge and could seek to potentially rebrand the Democratic party. One thing bureaucrats do well is to create the illusionary effect that government is needed to over-ride “imperfections of the market”. In so much as government has attempted to offset what they perceive as market imperfections, more often than not, it has led to results far worse.

The efficiency of the market

Consequently, we shouldn’t question the stability of the market, but rather the instability of its alternative: big government. Ask yourself what system has produced the vastness of resources and prosperity that have helped individuals achieve the greatest degree of economic well-being; it has been advancements made mostly by private industry in a market-based economy that generated the kind of wealth and standard of living people enjoy today, not through the large bureaucratic footprint left behind from government standing on the backs of the private sector, choking off productivity with regulation after regulation.

Private sector vs government spending

The opportunity cost of excessive government spending is less private sector investment. As interest rates start to rise, and resources begin to deplete, this, in turn, leads to a very unfavorable investment climate. Since business and industry can navigate much more efficiently through the market, the economy grows much healthier from private sector investment, than it does from government spending. Government will always require more input but will produce less output.

In addition, in a government induced economy, there will be an upward pressure on prices coupled with less productivity, which consumers are forced to bear through the implicit tax of inflation. Besides bearing excess costs, consumers will also experience lower standards of living, less disposable income, and become worse off.

Ultimately, government expands also at the expense of innovation, productivity, and progress.  Most of the great inventions that have advanced the conditions of mankind have not come from government bureaucrats, but rather from individuals seeking to maximize their own separate-interest and the interest of society.

This doesn’t mean that government has never acted with good intention, but unfortunately, policy shouldn’t be assessed by intent, but rather by result. It’s much easier for government to quantify progress through change than by maintaining the status quo, regardless of its state.

Cases of opposite effects

Time and again, history has illustrated case after case, how government, with the one hand, spends money in “creating problems” and with the other hand, spends more money attempting to fix the problems it creates.

For example, in the latter part of the 19th century, the Interstate Commerce Commission was established in order to protect consumers from the monopoly of railroads, except that the agency ended up becoming absorbed by powerful special-interest railroad executives, who used the I.C.C. to promote their own monopolistic needs, eliminating competition.

In another instance, the Civil Aeronautics Board was established in 1939 to protect consumers from the monopoly of airlines, except that the agency was absorbed by big and powerful airline executives, who used the board to eliminate competition as well.

Another example is the FDA. The existence of the FDA rests on ensuring the safety of consumers through minimizing the approval of harmful drugs entering the market, except that they have been equally responsible in delaying the approval of beneficial drugs from entering the market. However, this generates less visible effects and are harder to quantify. Additionally, big pharma ended up using the FDA to prop up regulations and lengthy patent protections, which contribute to the difficulty of manufacturing affordable and effective drugs. Consequently, the FDA becomes a barrier between the producer and the consumer, forcing the regulatory agency and the manufacturer to share liability. In this way, the manufacturer’s incentives may only be enough to circumvent the regulatory process. Alternatively, in the absence of the FDA, the manufacturer becomes solely accountable, maintaining direct responsibility for consumer safety. Who, then, holds more incentive in minimizing risk and maximizing well-being other than those bearing absolute and direct liability. Why do we consistently trust regulatory agencies rather than those whose best interest it is to produce the safest most effective product?

Still another illustration of government’s inefficient spiraling effect is price controls, which, presumably were imposed, again, for the benefit of consumers, except that suppressing prices lower than market rates led to resource misallocation, precipitating supply shortages.

Tariffs and trade

In evaluating yet another example of opposite effects, government has assisted the agricultural industry with billions of dollars of aid to counter high input prices caused by the effects of tariffs, which resulted from the same body of government providing the assistance to the same industry being affected. Furthermore, government has, on the one hand, spent billions of dollars subsidizing tobacco farmers and on the other hand, spent billions more to advertise the dangers of smoking.

It makes absolutely no sense that the source of funding government sends in one direction is used to counter another source of funding government sends in an opposite direction.

Conclusion

Looking through a wider lens, it’s clear that the opportunity cost of government is economic well-being. At the end of the day, government simply cannot create value or wealth in the same way the private sector can. The only means to which government can truly add value to one sector of the economy is by first removing it out of another sector of the economy.

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Gwayne Gautreaux is a libertarian columnist who enjoys expressing his views in a way that promotes unfettered free market concepts and limited government. He studied international political economy at Penn State, and he works in aviation full time. Gwayne enjoys reading and writing about issues encompassing economics, politics, and philosophy. He also enjoys researching economic indicators that forecast future economic conditions.

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