Building up, not trickling down

Published 1:28 am Saturday, September 3, 2011

The ability of Americans to conduct commerce and participate in the economy is an essential component of individual liberty. Free markets provide the most efficient mechanism to allocate the goods, services, and resources in the economy.

So what?

Many Americans are more concerned about how economic policies impact them and their neighbors than they are with “efficient mechanisms” or “rational service allocation.” As a result, the free market is in increasing danger in the United States because its proponents have spent far more time advocating efficiency, reliability, and the right of wage earners to keep their money than they have appealing to the sensibilities of the common man.

Some political minds view inequality in the world as clear and convincing evidence of wrongdoing. To right these wrongs, they believe governments should tax those who have more in order to provide for those who have less. Accordingly, they submit that governments should also regulate and control the marketplace to achieve “good” results as a means to bring about certain ends such as social justice and egalitarian economic outcomes.

These advocates for heavy government intervention suggest that their ideas should be preferred over the free market because they appeal to Americans’ sense of “fairness.” Free market supporters routinely respond by stating that tax breaks for corporations and high income earners create economic growth which then trickles down to lower level workers. While there is definitely some logic to the trickle-down theory, it dodges the challenge of “fairness.”

The philosophy of government control and intervention may be based on noble intentions, but is deeply flawed by blind arrogance, paternalism, and an abject failure to obtain the “fairness” it holds as its highest objective.

The initial differences between the two major American political parties seem relatively straightforward. Republicans support scaling back government programs, increasing tax cuts, and minimizing the role of government. Democrats tend to support tax increases on businesses and the wealthy as well as “strategic” government intervention in the American economy and society as a whole.

These fundamentally different political perspectives both have the potential to harm the free marketplace. Governments do play an important role in the marketplace and America’s Founding Fathers recognized the importance of some regulation of commerce in Article 1 of the Constitution with the balance of that power held by the states. Governments can improve the marketplace by ensuring consumers have the ability to make informed decisions and companies do not have unjust competitive advantages.

Unfortunately, government responsibility has become a liability. When politicians attempt to control the marketplace through regulation, subsidization, or taxation, they effectively impose their concept of “fairness” on the rest of the population. In other words, their ideas of the “right” food, energy, healthcare, banking, and other goods and services are forced on the American people.

The free market should be defended because it provides true fairness by allowing every American an opportunity to build a better tomorrow rather than simply hoping that the wealthy or the government will drop a few crumbs their way.

While the economic policy justifications for a free marketplace are both necessary and useful, the real counter to the “fairness” of governmental control need be nothing more than the story of opportunity for people from all walks of life in America. Ronald Reagan said it best, “growth, prosperity and ultimately human fulfillment, are created from the bottom up, not the government down.”

Cameron Smith is general counsel for the Alabama Policy Institute, a non-partisan, non-profit research and education organization.