I have learned a new phrase. It is an intriguing phrase, one full of meaning and consternation. One that all of us who are concerned about the road to Serfdom should pay attention to. Trickle-down government is a phrase that should scare the daylights out of all citizens. Don’t get me wrong, government has a role to play in society.
I am a proponent of free enterprise which includes the circular market flow. People live in households, and these households provide workers for firms. The firms then pay people from the households a wage. The money goes into the households. The money within the households in turn go to the firms to pay for the goods that the firms make. The product then goes into the households to meet the needs of the people. This is the circular flow of the market. Through a process of supply and demand all of our self-interests are met. When this is accomplished unencumbered by government it is efficient. Zingales writes about this in his book “Capitalism for the People, “As [Adam] Smith correctly pointed out, and as I have emphasized throughout this book, the genius of the free-enterprise system is competition. It is competition – the famous invisible hand – that aligns individual incentives (the selfish desire to have more) with social incentives (the desire to increase the size of the economic pie).”
Trickle-down government detracts from an efficient system. By creating an entitlement society where the people are dependent upon government handouts creates the desire to “hang around the fort” to gain those handouts. Personal incentive is negated and dies in proportion to our desire to watch reruns of “Everybody Loves Raymond.”
With that said, there is a need for government. Government should act as referee to ensure limitations to assymetric competition, where either the buyer or seller takes advantage of the market. Also, government should create an environment where competition can flourish. And government should help to give those who have been disadvantaged by the social system to have the skills necessary to rise with their level of initiative. This is what Democratic Capitalism is all about. “Most free market supporters think the best way to prevent the rules being designed to favor powerful incumbents is pure laissez-faire. But pure laissez-faire is not a lack of government intervention; it is active intervention to protect the status quo.” This means the government’s role is to create a fair system where we can thrive, whatever that means.
One place where the government can help ensure a fair system is in the process of hiring. Research has proven that a person with the name of John or Emily will more likely be called for an interview over a person named Jamal or Lakisha regardless of experience and skill. This is wrong, and there should be a mechanism to ensure people with the best skill gets called for an interview, not because they have a certain name.
However, If our market system is throttled by trickle-down government then we have the same thing socialists have criticized capitalism about when they state that trickle-down economics doesn’t work; the biggest and best connected get the benefits. Instead of the market awarding incentives, the government will award those closest to the fort. You think a free market is bad, just wait to see what unfettered trickle-down government will do to freedom. Cronyism will be alive and well in the United States. I hope we haven’t forgotten the lessons of the Soviet Union.
And that is my thought for the day!