Philosophos: Again I think it is time for us to change gears. We will now discuss how the government should relate to other spheres of life. We will begin with the field of economics. So what is the economic policy of a just government?
Nomodiphas: Well we know that the right to contract or to make covenants is a God given right. In fact the distinction of the Hebrew people as a chosen people lay in a covenant made between God and Abraham. This covenant was reaffirmed and referred to numerous times throughout the Hebrew people’s history. God created people with the ability to enter into contracts for their own benefit. Sometimes contracts end up working against our own best interests, but as long as the contract was freely made, we should be held to it. In Numbers 30:2 Moses wrote that “when a man makes a vow . . . he shall do according to all that proceeds out of his mouth.” The idea of performing a vow was further qualified in Deuteronomy 23:23. “Whatever your lips utter you must diligently perform just as you have freely vowed.” The key word in this statement is free. Only when vows are freely made are people obliged to follow them. Any vow that is made under compulsion or force (i.e. duress) is not valid. The convent that served as a foundation for their government was freely made and renewed out of a place of absolute liberty. Before Moses gave the law to the Hebrew people he reminded them in Deuteronomy 5:2-3 that “our God made a covenant with us at Horeb. Not with our ancestors did the Lord make this covenant, but with us, who are all of us here alive today.”
Philosophos: How is the government involved in making these covenants?
Nomodiphas: Well it does not tell people what covenants to make. It does not tell them what is in their best interest or what is appropriate, it assumes that people are capable of working on behalf of their own best interests. Since covenants are supposed to be free I guess the government should work to ensure that they are freely made, i.e. not made under duress. Further in order to avoid people relying on personal violence to enforce covenants, the government should be available for the people to come to in order to have their contracts enforced.
Philosophos: Basically the government’s role then is that of facilitation. People have the right and take the initiative to contract with one another, the government’s role is to ensure that these contracts are procedurally fair (fair in the way they are made, not ‘fair’ in their terms, i.e. substantial) and the government is to enforce all contracts?
Nomodiphas: Correct.
Philosophos: Is this how you see the government interacting with people?
Nomodiphas: To some degree. The government does a good job of enforcing contracts. There has been a move to find some contracts unconscionable and therefore invalid. As you’ve said, when doing this the government is basically saying that it knows better what is best for a person than the person who made the contract.
Well, now that I think more on it, the government seems to be a bit over involved. It tells people that they cannot work below a minimum wage and sometimes even that they cannot work above a certain amount of numbers (and if they do they must be paid a certain amount).
Government interference in business is unjust, but further it is inefficient. When the government raises wages artificially businesses must either lay workers off, reduce hours, or raise the prices of goods and services. People may make more per hour, but less people have jobs, those with jobs are either making the same amount because of reduced hours or paying extra for staple goods and services so any advantage they may have had is cancelled by their loses.
To see what a disaster government involvement in business can be study the great depression. They set minimum prices that prevented competition and efficiency. The government gave subsidies to farmers, and by doing so, they flooded the market. Then the government paid for crop destruction at a time of hunger. The government passed a law that made it illegal for a farmer to use his home grown wheat to feed his animals, for by doing this he was not buying from the market and this action was undermining the government’s effort at controlling the price of wheat. This law was upheld by the Supreme Court (Wickard v. Fillmore). This did not create economic growth, on the contrary it extended the depression. With our entrance into World War Two the government was forced to relax restrictions on business so that we could produce the material needed for our war effort. It was only this termination of governmental involvement that ended the great depression. The New Deal is an alarming example of how far liberal ideas press the government to overreach and impinge upon liberty. And how these programs not only undermine our liberty, but fail to bring about and in fact lessen the wealth and equality they claim to produce.
As far as ‘monopolies’ are concerned, I do not think they raise prices. A true monopoly is impossible in a global economy; there is always someone who can undersell. Business, when it is not molested by the government, creates jobs and lowers prices for consumers with efficiency. What do anti trust laws do? Companies that lose in the market, those that can’t outcompete their competition, ask the government to step in and help them produce and sell goods nonetheless. If I make bread in an inefficient manner so that the cheapest I can sell a loaf is $5 and no one buys my bread because my neighbor makes his bread more efficiently and sells it for $3 a loaf why should the government take from those around me, including my neighbor, so that it can pay me $2 for every loaf of bread so that I can sell it at the same price and compete with my neighbor? Companies that are given government aid are less efficient and increase prices for consumers.
I can’t believe the folly of giving subsidies for businesses! The government takes the wealth of some and gives it to others in order to encourage business. By investing into a business the business promises to stay local and the people become reliant on that business. If it becomes more profitable to move, the government must up the ante and provide even greater subsidies to convince the business to stay. Look at how the car industry first made and then ruined Detroit. The government gave the car makers lots of incentives to build cars in Detroit and the people became reliant on these jobs. With time it became more profitable to build cars in other places (like Mexico or China). In order to keep the companies there the government has given more and more subsidies. These subsidies are costing the people more and more in taxes. Finally, even with the subsidies it becomes more profitable to move somewhere else (a place without so many economic restrictions) and the car companies move. This move costs thousands their jobs and there are less jobs available in other fields because everyone has been so overtaxed subsidizing the car companies that no one else could afford to run profitable businesses.
On outsourcing, people wonder why so many companies are moving abroad. It is true that the cost of labor is one factor, but another is that many of these places are not so hostile to business. For example, gas is very expensive now. But the problem is not production. We are producing just as much crude oil as ever. The problem is with our refineries. A few of our refineries have had problems and no new refineries are being built. I read that it costs over one billion dollars to get the necessary environmental tests and permits to build a new refinery. Further this process takes approximately ten years! So I, as a business man, see a gap in the market. There are not enough refineries. I think I can provide a needed good and make a profit. However, in addition to building the plant, if I want to build in the U.S. I will have to spend an extra billion dollars and wait ten years for the plant to be operational. I would be mad to build one in this country! This is an extreme example, but it gives you an idea of why so many businesses are fleeing this country.
Philosophos: That’s very interesting. I agree that the government should facilitate business, but not interfere with it. A good example of that, I think, is my city’s farmer’s market. The city creates a space and allows farmers to sell their products directly to the public. The government best facilitates business by avoiding unnecessary restrictions and enforcing the contracts that people make. Subsidization is not only unjust, but it is inefficient and ends up hurting the people. . . . On a related note, how should the government deal with poverty?
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