Objectivism 101

Lesson 7: Three political examples

The dynamics of government

Let's examine what happens to a society where the government is small, and one where the government is of considerable size.

First, we can, for the sake of simplicity, group actions in two categories :

1. Trades between individuals and government action designed only to stop force or fraud (healthy actions).
2. Actions taken to compensate for, or change, political pressure, and government action of force or fraud (unhealthy actions).

In a completely libertarian society, where the government's only role is to penalize acts of force or fraud, we should observe only actions of the first type. This situation is represented by the graphic below.

In such a situation, there is little interest for people to appeal to the government or use political pressure for their own ends. Neither do they have interest in dealing with each other in non-harmonious ways, since the law forbids it. All actions of the second type do not exist.

Barring these two avenues, the only one left is voluntary trade. Therefore we observe that fruitful interactions between individuals are strong (lines #1) while government intervention is limited to maintaining the healthy flow of resources in these interactions (lines #2).

Let's take the opposite case, a strong formal government (statism) or informal governments (anarchy). This situation is represented by the graphic below.

Note that, as I have mentioned, the only functional difference between statism and anarchy is the presence of multiple informal governments instead of one formal government. This difference is irrelevant for our purposes here.

In this situation, the existence of a vast political power (lines #2) - whatever its source - makes it more profitable to influence political power in one's favour (lines #3) than to trade with other people directly (lines #1).

An extreme example would be a dictatorship, where the government controls all flow of resources. In that case, the only market left would be the black market, and the lines #1 would be very small. Being unregulated, black markets suffer from a number of problems which are inherent to any anarchist system (such as extremely high prices, deficient product control, high risks).

The first situation - that of a free system - is optimal because everyone trades in his perceived self-interest, as we have already seen. When the state is free to use force against individuals, this will necessarily go against people's perceived self-interest, and therefore against the optimal situation.

Note that the relations in the two situations we have seen does not only apply to the economy, but anything which involves a flow of resources.

It is because of this freedom to trade freely that libertarianism - and by extension capitalism and civil liberties - is the system of rational self-interest. As Peikoff mentions in O:PAR (p390) :

Since rights are inalienable, a man can succeed ultimately only by creative thought and action, not by sacrificing others through the use of force or fraud. Nor can he succeed by sacrificing himself - whether through selfless service or plain irrationality, such as being irresponsible, context-dropping, and short-range. Criminality aside, a man can act irrationally under capitalism; but he cannot run to the government for any recompense or bailout. In a system based on adherence to nature, there are no "no fault" clauses. Either one adheres to nature or, in due course, nature takes care of the matter.

For more on the dynamics of capitalism as regards to morality, see the section "Capitalism as the Only Moral Social System" (p380-395, particularly p385-391).

I will now briefly touch on the consequences of government intrusion in society. They are fivefold :

1. Public waste.
The lack of competition inherent to public monopolies entails waste of resources and inefficiency.

2. Political motivations.
By acting in its own self-interest in following the demands of some groups of people against other groups, the result of public action is necessarily inefficient and non-conductive to the interest of a majority of people.

3. Tragedy of the Commons situations.
State ownership of natural resources necessarily creates Tragedy of the Commons situations, where it is in the best interest of the state, or to individuals given access to them freely, to consume the resource first. This is especially detrimental from an environmental point of view, and can only be solved by private ownership or laws emulating private ownership (such as systems of flexible quotas).
For more on the Tragedy of the Commons problem, read the article "Resolving the Tragedy of the Commons by Creating Private Property Rights in Wildlife".

4. Power grabs and moral deterioration of society.
Instead of promoting peaceful, voluntary trade, the concentration of political and economical power inherent in a statist system pushes society into quarrels and moral deterioration, as groups attempt to influence political power to move against other groups.

5. Imposition of individual decisions on everyone.
The nature of peaceful cooperation is that individual decisions stay within the sphere of action of the individuals involved. When a powerful state imposes a new law or a new institution, it overrides the freedom of action of the individual, and imposes political motivations to the entirety of society.

6. Black market dynamics.
When peaceful cooperation is prevented, we obtain un-optimal patterns. These patterns are compensated in various ways, including corruption, criminality and black markets.

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