Saturday, June 15, 2013

Free Markets, Central Planning and the Family Budget

Recently a Facebook friend of mine commented on a story about austerity not working and made a statement to the effect that therefore Hayek was wrong and Keynes was right. I was quick to race to the defense of Hayek and free markets. I pointed out that we haven't had a truly free market ever and that Keynesian policies had been in place since before Keynes even became a famous economist. I told him that if he was going to give Keynesianism credit for all the good that's come from economic policy, he needed to blame it for all the bad repercussions also. We haven't been vacillating between Keynesianism and free markets, we've been steadily but incrementally becoming more and more a Keynesian economy since at least the inception of the Federal Reserve and the institutionalizing of a fiat fractional reserve central banking system.

Since my friend leans toward the liberal side of things, I even included some quotes from Hayek to show he was firmly against austerity measures. It seems Hayek was not the cold hearted libertarian many historians paint him as, nor was he as staunch in his belief of the free market's ability to take care of every humane need as some might suggest. Of course, being that he was in academia and therefore likely heavily influenced by bureaucracies of some form or another, seeing him acquiesce to some points is almost to be expected. If he hadn't, I wonder if history would even remember him at all. But I digress.

Not long after airing my defense of Hayek, I read an article that contained an explanation of why the government's budget is not like a household budget, said that comparing the two was fallacious and offered an opinion as to why the deficit is a good thing. These explanations even seemed to make sense and I could see why the uninitiated would be easily fooled by the reasoning. It said, in short, that the government needed to keep spending up so that the economy wouldn't go into a death spiral, so that unemployed people could continue to collect unemployment and spend money at the grocery store so that grocers didn't go out of business, and basically to keep things going until the private sector got back on its feet. It needed to do this even if it had to borrow far beyond its limits and that eventually the deficit would be paid back.

This got me to thinking. I have used the household budget example in the past, particularly when talking about debt and the fact that piling on debt upon debt does not get one out of debt, it gets one deeper in debt. The author of that article dismissed that argument out of hand because, well, government debt and your personal debt are two different animals, to coin a phrase. So, I wondered, where is the disconnect? Perhaps these economies of scale aren't understood not because the comparison is invalid, but because it is a case of the seen versus the unseen. Moral issues notwithstanding, this is another area where it takes a little more critical thinking and a little imagination to understand what has never been.

What is it that we've never seen? Well, for one thing, I don't think in the history of the world we've ever seen a truly free market, except perhaps for a time in the so far distant past that it is long forgotten and archeologists find it hard to fathom. There's almost always been some kind of government intervention into the market system where someone powerful has used that power to bully people into doing things their way, usually revolving around taxes or the form of currency used to make transactions or some such thing. It is therefore fallacious to blame free markets for market failures. A closer look at failures will likely show that the intervention itself is to blame, either through corruption of the supposed objective of the intervention, through abuse of power that comes when intervention is turned to law, or through unintended consequences that inevitably occur when such interventions take place. What we've never seen is the power we as individuals would have to exercise if we lived in a truly voluntary society with a truly free market economy.

To demonstrate this, I will use the well worn example of the family budget versus the government's budget, only this time I'm going to try to put a little twist on it. Let's begin by looking at the family budget as it exists in this reality, in modern times. There are a few things you're going to need money for every month. The top priorities are of course going to be housing such as mortgage or rent, food, utilities such as electricity, heat, and maybe water and sewer, communications such as telephones and Internet access, transportation expenses such as gasoline, car payment, and automobile maintenance, insurance payments, etc. All these are your responsibility. It's up to you to figure out which is most important to pay and how much you will need every month to pay these things.

What this means is that you have the power to determine your lifestyle. Maybe you want the bigger, fancier home, so you have to drive a smaller car, or a used one. Maybe you don't need or want a large home, so you get a smaller one or rent so that you can afford the nicer car. Maybe clothes are important so you give up something to afford the really nice name brand suits. Maybe you want the latest in electronics, or the best food, or whatever, so you live more frugally in one area so that you can splurge in another. Maybe you just want to save your money so you have a nest egg so you live more frugally in all areas. The point is, it's your decision. You decide how the budget will work. You also decide which companies you want to do business with and which you don't. This gives you quite a bit of power as companies compete to give you the best deal so that they can obtain the dollar you budgeted for their product.

Of course, if you run a business, budget priorities are different from that of a household, but the same principles hold true. It's your business, your decisions to make. Whether you succeed or fail depends on your ability to determine how much money will be coming in, where the money is best spent to help increase or maintain profit levels, and how well you can adapt to competition in a changing market. It also depends on how happy you can keep your customers so that they keep coming back.

When government creates a budget, they don't have to worry about earning the money they get. They don't have to worry about keeping customers happy. They claim and have the authority to tax. They get their money no matter what. Why should they care if you're happy or not? If you don't pay your taxes you will lose your home, or your business, and they will sell it for the taxes you owe. They will use force to make it so, if necessary. You would think that would make government budgets the easiest to manage, for they should know how much they'll be getting year after year and how much they need to spend. Yet, somehow, it always seems like governments have the most difficult time sticking to a budget. It seems they just can't stand the thought of sticking to constraints. No matter how much money flows into their coffers, it never seems to be enough.

Now, let's suppose for a minute that government was unable to just extort your money in the form of taxes and needed to compete against other organizations offering the same services they offer. In this case, every cent you ever earned would be yours to decide what to do with. All of a sudden you'd find yourself faced with more decisions to make and you'd have to think quite a bit more about what's important to you. On the national level, you'd have to think about how much each month (or year) you'd like to spend on things like the armed forces, the National Security Agency (NSA), the Transportation Safety Administration (TSA), and a myriad of other national agencies that every year clamor for more tax dollars and bigger budgets claiming they need more to do their jobs properly.

On a more local level you'd have to think about how much per month you'd want to pay for education services, both for your family and your community, for police services, fire protection services, roads, libraries, parks, etc. Some of you would have to think about things like water, sewer and garbage services while others already have private wells and septic systems and a private company to haul away garbage. Yes, it might be a little more work. You might have to plan a little more for your children's future. You might even have to get a little more involved with your community and talk to your neighbors a little more often. You might have to take time to do some actual organizing or set up alternative organizations to field competing ideas. But just think what you could do with all the money you'd have if you didn't have to pay property taxes. Just think of the good you could do if you and others decided how that money would best be spent rather than a bunch of control freak politicians.

Some people do this partially anyway. People already shop for a home in a neighborhood with good schools, some choosing to pay more in taxes because of the school district. Some people choose to dish out additional money to send their kids to private schools. A few may look for a neighborhood with good policing criteria, or may put out the extra money to live in a gated community. People donate freely to police and fireman benevolence charities. I remember once when the fireworks event in a community I lived in was going to be cancelled, but it went on that year better than ever because the park district asked for donations by putting jars out in the neighborhood grocery stores and people gave freely to the cause.

Can you see the point I'm trying to make by using the example of the family budget? This all isn't merely about spending money, it's about power. It's about your power to decide what your future will look like. It's about taking your power away from you and entrusting it with someone else. It's about trying to make you believe that you're entrusting that power to some nice, well meaning politician when, in fact, that politician is most likely lying to you and the real power resides in the corporations paying for the politician's campaign. When you give away your power to a group of bureaucrats, whether those bureaucrats live in your neighborhood or in Washington, DC, your future is at least partially being decided by them. It should be obvious by now that they don't have the same vision of the future that you have. It should be obvious that their priorities are quite a bit different from yours. In fact, judging by the way things are going these days, it seems to me that they are the paranoid, delusional ones, not the common folk. It seems that the crazy people have all ended up in so called leadership positions and the sane folk are too frightened of them to do anything except obey.

This is how they really maintain control, not through politics, not through political actions, not through their ordinances, not through their regulations and oversights, not through the laws they pass, but through economic means. Through the budget. Through not only telling you how much you should be spending on certain things, but by making you to pay that much through bullying and force of law. Through keeping you from even thinking that perhaps you should have a say in such matters. Through making you believe that they know better than you how to spend your money. Through making you acquiesce to their theft of your earnings. They are the biggest bullies of all. They are the mob. If you were able to withdraw not only your consent to be ruled, but your funding of their efforts to enslave you without fear of retribution, then it would be they who would have to change their way of thinking or suffer dire consequences. As it is right now you are the one who has to think the way they want you to think or you will suffer at their hands. This is what fundamentally needs to change.

It's strange to think that usually I'm the one who's trying to simplify things. Usually I'm the one who's pointing out the obvious. When it comes to budgeting, I think it needs to become a little more complicated for the common folk. For too long we have shunned our responsibilities. For too long we have delegated our power to politicians just so we wouldn't have to think too much. If we want freedom, we will have to take responsibility for our actions, and for our economy. We will have to claim personal responsibility for our spending practices and will be expected to use this power to hold poorly run companies accountable for their foibles. Then we will live in a truly voluntary society.

I cannot guarantee that a true free market society would be a better society, but evidence of past performance suggests it would certainly be a more prosperous one. I cannot guarantee that all our problems would be fixed by a free market economy, but it certainly makes sense that a myriad of solutions being tried at the same time is more likely to find the best solutions than any one size fits all solution based on force that government agencies might come up with. I don't promise that having a free market would lead to utopia because I am not a politician and I don't make promises that I don't intend to keep like they do. I simply believe that if we want to make a more fair and honest world we need to stop making excuses for and allowing practices akin to theft and extortion at any level, for any reason. After all, how can we have a fair and honest world when the basic fundamentals of our governing systems rely on unfair and dishonest principles?

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Caged in America: A Collection of Essays Celebrating Freedom. By Szandor Blestman

Ron Paul's Wisdom, A Layman's Perspective. A Collection of Opinion Editorials. By Szandor Blestman

Galaxium. A screenplay By Matthew Ballotti

The Colors of Elberia; book 1 of The Black Blade Trilogy. By Matthew Ballotti

The Legacy of the Tareks; book 2 of The Black Blade Trilogy. By Matthew Ballotti

The Power of the Tech; book 3 of The Black Blade Trilogy. By Matthew Ballotti

The Edge of Sanity. By Matthew Ballotti

The Ouijiers By Matthew Ballotti

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