The 2010 Sir John M. Templeton Fellowships Essay Contest

First Prize, Student Division

“Everyone wants to live at the expense of the state. They forget the state wants to live at the expense of everyone.”
—Frederic Bastiat

Introduction:

States exist at the expense of their citizens, who are not aware of the price they pay. Although people tend to view states as indispensable institutions to promote equality, provide security, and protect public goods; they often overlook their sacrifice of liberty and economic well-being due to government interference. Forms of states vary—liberal democratic states, welfare states, communist states etc.—throughout the world; but their artificial nature is the same: states only emerged through the consent of all the citizens. Nevertheless, states do not function by a social contract; instead, the few who are in power usually make decisions for all. In fact, people are frequently misled to justify taxation—believing that states redistribute wealth, thus creating equality through this process. However, redistribution does not necessarily mean transferring wealth from the rich to the poor. Moreover, government interference in the free market usually only hurts the economy—despite some economists promoting state actions during economic downturns. Only through advocating grassroots associations, paying attention to future interests, and improving literacy and access to popular literature can people realize their economic and political sacrifices to the state.

1. The Formation of States

The concept of “state” is closely related to social contract thought. The social contract school of thought originated from the classic seventeenth-and-eighteenth-century political theories of Hobbes, Locke and Rousseau, who tried to explain the origins of civic community and political authority. Although social contract theorists differ in their conceptions of the state of nature and the political structure under the contract, they all agree on one point: the social obligation must be willingly accepted by individuals. According to the social contract school of thought, the state—the civic community and political authority—is the result of individuals’ voluntary move from their state of nature, in which each man is sovereign and self-sufficient, to a social order, where they submit themselves to a political authority in return for protection and equality.

To answer the question of why individuals tend to accept the agreement and obey the state, Thomas Hobbes, the first modern philosopher to articulate a detailed contract theory, believes that states can provide equality by equally treating their citizens.[1] Interestingly enough, Hobbes’ model of state as an authority overruling all the subjects still applies to our modern society today. What Hobbes overlooked though, as John Locke pointed out, was the reduced liberty of individuals. Locke stated: “When any number of men have so consented to make one community or government, they are thereby presently incorporated, and make one body politic, wherein the majority have a right to act and conclude the rest.”[2] Unlike Hobbes who focused on the function of a monarchic state, Locke presented a democratic state model that resembles the modern democracies today. He highlighted the inevitable sacrifice of individuals to give up part of their sovereignty to the state, which more than likely leads to the majority override of the minority. Jean-Jacques Rousseau based his exploration on Locke’s theory; he distinguished between “natural liberty,” the absolute freedom, and “civil liberty,” the limited freedom under the social contract.[3] The justification of the formation of states at the expense of liberty, as the core of social contract school of thought, lies in the equal burden carried by all individuals under the general will, expecting equality and protection from the state.

2. Political Economy

The state is formed under consent, a social contract that individuals agree upon. However, the state does not function under the same covenant as that of its emergence: it becomes an instrument, designed to serve its user.[4] The state only serves the interests of the powerful and entails the intrinsic nature of political power despite changing contingencies: it dictates the way forms of government evolve instead of being dictated by them.[5]

Therefore, it is necessary to make the distinction between the concepts of “state” and “society”—the state is the fully developed political means while the society is the fully developed economic means.[6] The interactions between the state and the society, so-called political economy, reside in a steady combat of economic means against political means. Thus, if the government intervenes in the free market, it hurts the peoples’ economic well-being as political force defers economic power.

The incompatibility between laissez-faire economy and government interference results from the harmonious economic interests of all members of society.[7] Seemingly irreconcilable conflicts between different interest groups—such as those between consumers and producers, workers and capitalists, and debtors and creditors—actually reveals a relationship of dependency. [8] Government intervention, on the other hand, only damages the situation because of the government’s incapacity to seek mutual interests on behalf of all the members of society.

3. Limited Government

The contention between political and economic force usually results in undesirable consequences; however, the conflicting interests of people and the state does not justify anarchism. Although the state should not intervene in the free market, its political protection of people is certainly beneficial. Bastiat argues: “The interests of all members of society are harmonious as long as they respect each other’s property, deriving from self-ownership, because cooperative production is more physically productive than individual production.”[9] However, he also points out the fact that the free market can satisfy all interests except for the interests for those who seek to invade the property of others.[10]

Therefore, people only need a limited government that punishes those who invade others’ properties. Nevertheless, the state is always in charge of more than carrying out punishment. In fact, many people do not realize that the state functions at their expense because they tend to satisfy their wants with the least possible effort. Although this conclusion seems self-evident, Bastiat shows that a popular way to satisfy one’s wants with minimum effort is to vote for subsidies and protection. He also reveals the awkward fact that such a solution is actually contrary to the wants and actions of the persons who “must pay the resulting higher taxes and higher prices.”[11] In fact, shortcomings of unlimited government are obvious:

“[Governmental] regulations have been made in yearly-growing numbers, restraining the citizen in directions where his actions were previously unchecked, and compelling actions which previously he might perform or not as he liked; and at the same time heavier public burdens, chiefly local, have further restricted his freedom, by lessening that portion of his earnings which he can spend as he pleases, and augmenting the portion taken from him to be spent as public agents please.”[12]

Not only does what the government aims to do violate individual liberty, but the government also rarely fully carries out what is expected of it. Politicians and government bureaucrats usually have individual private agendas in their work. These agendas are based on self-interest which is not magically discarded upon donning public-employee robes.[13] However, people trust those public agents and believe government does what they have asked it to do because they solely focus on short-term interests, have limited access to government agendas, and do not track the process of redistribution. In order to be aware of the price they pay for the state, people need to value grassroots associations, pay attention to the future benefits, and improve their literacy in order to access more popular literature.

4. Grassroots Associations

The rationale behind advocating public agents is the belief that the government can do a better job on redistribution. However, looking at redistribution within welfare states—France and Germany—one can readily come to the conclusion that business interests often monopolize the policy-making process.[14] It contradicts the prevalent assumption that redistribution always favors the weak and the unfortunate; in fact, the Swedish welfare state with taxes near fifty percent of gross domestic product (GDP) benefits the middle class more than the poor.[15]

Not only in traditional welfare states as mentioned above, but in the United States—a country that deeply values freedom and liberty—redistribution fails to meet public expectations. Admittedly, the poor who receive welfare usually benefit from it; at the same time, however, two groups of poor people suffer because of welfare—the future poor and the poor foreigners.[16] Welfare slows down economic growth; a reduction in economic growth, even a small one, if compounded, can cause more future poverty than would otherwise have been the case. The welfare state also acts as a magnet for poor immigrants to the United States. It leads to various domestic pressures to limit immigration, which in turn limits poor foreigners’ chances to become richer.

Redistribution, featured by ineffectiveness, also lowers people’s living standard and harms their economic interests in the future. Higgs discusses some noticeable consequences of redistribution:

“Taxes for the purpose of income redistribution discourage the taxpayers from earning taxable income or raising the value of taxable property through investment; transfer payments discourage the recipients from earning income now and from investing in their potential to earn future income; recipients of transfers tend to become less self-reliant and more dependent on government payments; recipients of transfers set a bad example for others—including their children, other relatives, and friends, who see that one can receive goods, services, or money from the government without earning them, etc.”[17]

In fact, most government transfers of wealth are not from the rich to the poor. Instead, “government takes from the relatively unorganized (such as consumers and general taxpayers) and gives to the relatively organized (groups politically organized around common interest, such as the elderly, sugar farmers, and steel producers).”[18] It is clear that public agents do not effectively and properly distribute the wealth of a society, but what alternatives provide a better solution? Grassroots associations are the answer to this question because they empower individuals on both political and economic grounds.

Grassroots associations are in the hands of people who can use available resources to help the poor directly and reduce the cost of the bureaucratic system of public agents; more importantly, they can serve as an important agent to balance the power of the government. In his “Democracy in America,” Alexis de Tocqueville points out the necessity of both political and civic associations. Since political associations are established by people who share similar political views, they encourage participation in public affairs, so as to protect liberty. Meanwhile, civic associations are founded by people who share similar physical conditions (age, gender, race etc.), who serve to protect liberty by advocating minority rights.[19] Therefore, grassroots associations can serve as an engine to achieve equality more effectively, enhance the liberty of the people, and balance the power of the government.

5. Future Benefits

More than likely people find it acceptable, if not necessary, for government to intervene in the free market during an economic crisis. In fact, more attention is paid on how to effectively use the government spending and how much the government should spend than on whether the government’s intervention in the free market is proper, resulting from John Keynes’ influential economic theories about the positive effect of government spending in economic crisis. Nevertheless, it remains debatable whether any type of government spending can save the economy; and it is uncertain what consequences would ensue government spending in the future.

President Franklin Roosevelt’s New Deal seems to have reiterated the claim that economic crisis can only be resolved by government interference. However, Amity Shlaes, a Bloomberg columnist with libertarian tendencies, reveals that over-burdened taxpayers, rather than those who are traditionally at the bottom of the economic heap, were forgotten in the New Deal. Shlaes reevaluates the effects and influence of Roosevelt’s New Deal during the Great Depression and states that during the Great Depression, there was a strong tendency in expanding the role of government in the national economy. She says: “Even as Hoover made his point [Government should not get into any business because that is not liberalism but degeneration.], however, broad interests in the concept of government control was expanding among Americans.”[20]

There are two problems created by government spending. The state’s monetary policies usually hurt small businesses that more likely offer employment opportunities in an economic downturn and always have political purpose to cater to the voters in order to win elections. Moreover, by borrowing money to increase government spending—thus stimulating the economy, “the younger generations’ enterprise and initiative are fatally handicapped by tax and red tape.”[21] Although in the short run, increasing government spending seems to save the economy; in the long run, it hurts economic growth and the individuals’ economic well-being. Therefore, it is important to analyze the future effects of public policies—especially economic policies—besides focusing on their temporary influence.

6. Literacy and Popular Literature

The asymmetrical information between state and people is another cause of people’s ignorance of their sacrifice of liberty because of the state. Knowledge can be arranged in two categories in modern society: “Some is known only by scholars and some influences the public only in proportion to what the public itself has.”[22] Literacy is important not only because of knowledge itself but also because of the “enabling effects” it has—as Jack Goody described in his book “Literacy in Traditional Societies”: “The ‘enabling effects’ of literacy in contemporary societies tends to seduce the observer into confusing often rudimentary knowledge of how to read with popular access to important books and documents: this confusion is then projected onto ancient societies.”[23] Goody discovered that literacy altered ancient Greek society—its political culture in particular. “In ancient Greece” Goody writes, “alphabetic reading and writing was important for the development of political democracy.”[24]

In Athens, one critical factor in breaking the old aristocracy’s monopoly power was the early development of a written law code. However, the written laws changed little because the application and efficacy of all law codes depended on their interpretation by magistrates and courts. Although the juries represented the population in general, they did not have access to any kind of book or document; instead, they were guided solely by the speeches prepared by professional leaders.[25]

Even today people still rely heavily on scholars—a truly knowledgeable minority—for orally-transmitted information and its interpretation. Nevertheless, this is still fundamentally different from an ancient society where there was no popular literature that dealt with sociopolitical issues: no newspapers, magazines, not to mention televisions or computers. Fortunately, fundamental documents are accessible for study not only to an elite class today; otherwise, the rest of the society would have had no choice but to follow the rules interpreted by the elite. It is crucial to bear in mind that life, liberty, and property existed beforehand: although laws are always interpreted by legal professionals, those are indispensable elements that caused men to make laws in the first place.[26] In fact, the law could benefit one citizen while harm another without committing a crime; therefore, to some extent, people in the legal profession have privileges over others. It is more so for the state that promulgates laws and public policies.

In order to constrain the state from overly exercising its power in various perspectives—economic, legal, social etc.—citizens should prepare themselves to participate and supervise the exercise of state power. Therefore, it is essential to improve literacy in order for more people to have access to books and documents. But more importantly, people with literacy should take advantage of popular literature and participate in sociopolitical discussions—that is how public opinions emerge to influence government behavior.

7. Conclusion

Frederic Bastiat says: “Everyone wants to live at the expense of the state. They forget the state wants to live at the expense of everyone.” It is conspicuous that only limited government benefits its people.[27] Bastiat’s unyielding stands on free trade and limited government are noteworthy. In fact, “none of his ideas has lost any of its power in our time.”[28] The misconceptions of the function of state are common: more than likely people believe that public agencies can shorten the gap between the rich and the poor through redistribution; economic crisis can only be resolved by state interference, especially in government spending. Therefore, they tend to overlook their loss of liberty and suffering of economic well-being due to the state’s interference in political, economic, and social issues. Although people need the state to protect their properties through the method of punishment, any additional government interference harms the population. Advocating grassroots associations, paying attention to interests in the future, and improving literacy and access to popular literature will help people realize their sacrifices to the state and enable them to balance the power of the state.

Notes