Let us take a break from the pretend news of the political conventions to consider a more important topic. By the way, if you plan to vote, don’t watch these conventions; otherwise you will grow too cynical. In politics, even a little bit of familiarity breeds contempt. Here we see the state in all its loathsomeness: a class of pandering, mealy-mouthed, grasping special interests all fired up about what they will do with your money once they get or retain power.
Think about this. When people say government should do x, y, and z, they are really saying that these people should be given power to appoint other people to permanent positions of power to tell you and yours what they can and cannot do with their lives and property, and to take a rake-off for their trouble. That doesn’t sound like a very good system, but to put the best spin on it we call it democracy, or simply: the modern state.
And so for the big issue today: should the modern state regulate what we eat? Must the state do so for our own health and safety? Do we owe our health and safety to government regulations or to the responsiveness of the well-capitalized market economy to our preferences and needs? You know my answers already, but consider that most people are all too willing to credit government for all that is good in the world, and equally prone to overlook market freedom as a source of all that we call civilizational progress. For example, they observe the coincidence of available, safe, and delicious food with federal regulations and conclude that the regulations brought about these good things.
History doesn’t support this claim. In every carefully studied case of business and consumer regulation from the late 19th century to the present, we find something very different. Typically a large market player will make some improvement in safety, working conditions, consumer product transparency, or what have you, as a means of gaining competitive advantage (all well and good) and then lobby the government to make this wonderful improvement universal across the industry by force. The pretense is the improvement of all of civilization; the reality is the imposition of high costs on competitors. The improvement was brought about by the market, with government only arriving later to claim credit. This is one reason large market players are the main influences within the agencies that regulate them.
Let’s move from abstractions to particulars. I claimed in an article on food allergies that no government regulation on labeling is necessary. The free market will encourage producers to reveal the contents of their products insofar as the consuming public desires such information and producers are free to provide it. They will provide as much or little as consumers desire to know. Even extreme demands concerning ingredient disclosure, ones that serve only a small niche organized around religion or specialized health concerns, can be served better by markets than government. The reason is that food producers profit only from service to buyers, not from fraud, sickness, or trickery (and in so far as fraud is involved, it can be settled through private litigation). If particular producers are unresponsive, there are a host of institutions that provide accountability: stores, consumer groups, special websites, or whatever.
This claim has called down a fury of protest from people who believe that only government can insure that producers do not lie, trick, cheat, steal, and even kill. The arguments are not so much knee-jerk or absurd as they are highly conventional, just the sort of thing you hear from the tv news or read in the papers. The underlying bias is in favor of government not because the writer loves coercion or trusts power but because there is something that genuinely worries people about the idea of letting the “anarchy” of the market process determine what is produced and how.
Mind you, it is not socialists who are making these arguments but people who believe that they seek the best of both worlds: the productive power of the private economy, nicely curbed and trimmed here and there by regulations that help shape the patterns of production and curb the excesses of greed. This is a position that Mises said was impossible to sustain because regulations generate more problems that seem to cry out for more government fixes: and thus the disastrous march forward of the state through market institutions.
Whenever the government tells companies that they must do something one way and one way only, they are making alternatives illegal. When the German government says that beer can only be manufactured in a certain way, it is excluding all other ways. That leaves no room for innovation, even if innovation would be rewarding to the consumer. In France, for example, wine production must follow a prescribed method, and, as a result, the French wine industry is being destroyed as consumers choose wines from places that permit a free market in wine.
The US has fewer such regulations but we recently experienced the debunking of the government’s preferred diet from mid-20th century until the present day, when the bureaucrats told us to eat maximum quantities of carbohydrates and not so much meat. Today, carb-avoiders and meat eaters are huge players in the market. Producers have responded to a very notable extent, and government only lately adjusted its recommended diet. (The very idea of a state-recommended diet strikes me as Soviet or something.)
By universalizing regulations on food, the government prohibits people from profiting by serving niche markets. Thank goodness the US doesn’t prohibit agri-business and trade from improving their products by artificial means (fertilizers and the like), even as a vast market is available for organically grown foods.
Perhaps there’s no accounting for taste, but business is always ready to serve the widest possible variety, provided government isn’t there with its standardization and regimentation. If regulators say that the chaff must always be separated from wheat, it denies chaff eaters the opportunity to buy what they want and prohibits producers from meeting consumer demand.
A correspondent brought up the case of an Indian woman who was shocked that Americans do not have to sift rice to remove gravel, as she did in her native country. The writer said this is because in the US, the government does not allow rice makers to leave gravel in the rice. For this, he says, we should be grateful and say a prayer of thanks to left-liberal statism.
Now, I do not know whether or not there really is a regulation that tells rice makers that they must put no gravel in their rice. But I would hope there is not. In the first place, rice makers have a strong incentive to remove particles on which people might break their teeth. Put two rice bags on a grocery shelf, one that says sifted and the other that says unsifted, and we’ll see which one sells. If no one sells sifted rice, there is an entrepreneurial opportunity for someone. This much we can know: no government bureaucrat has ever conceived of and implemented a viable, life-improving change that an entrepreneur hadn’t thought of first.
What constitutes a life-improving change, we cannot always know in advance: I can easily imagine some rice snobs insisting that the sifting process ruins the flavor. Ultimately we must leave it up to the negotiation of consumer and producer to discover what should or should not be included or disclosed in food. The market mechanism is highly responsive to consumers’ demands for taste and quality — and in fact this is another reason why people criticize the market. People say that it is a social waste to cater to every niche, every whim, every idiosyncrasy. As always, the free market gets blamed no matter what the outcome.
What’s really at issue is a matter of history, causality, and faith. Do we owe our high standard of living to the market or the state? That is the question. The interventionists and statists credit the state because they get their causal connections mixed up (and this is because they have not studied economics) and they take a leap of faith to credit the government for things it cannot possibly do.
The state from the ancient world to the present has created nothing. It has only taken. The market, on the other hand, delivers more miracles every day than we can count. This isn’t dogma; the evidence is so overwhelming that it takes a leap of faith to believe otherwise.
The next time you consider believing that the state can do anything better than the market, imagine a sea of permanent bureaucrats, lobbyists, pandering politicians, and those mad attendees at political conventions, and ask yourself: what can these people do that individuals in society — acting in their own self-interest, coordinating exchange through the market process, constantly testing decisions against economic feasibility and consumer demand — cannot do. The answer is nothing. There is nothing the state can do and that should be done that the market cannot do better.
Before you write to tell me that without the state, there would be a fly in every soup, please read Murray Rothbard’s Man, Economy, and State. It is the best explanation of how society manages itself just fine without a band of respectable-looking criminals telling everyone what to do.