Freedom to Work, to Earn, & to Buy

by Harry Browne

(From The Great Libertarian Offer)           

Almost every politician claims to know how to run the economy.

And the differences in style from one politician to another are minor. They all believe government must stimulate the economy through spending programs, set interest rates through the Federal Reserve System, and dictate many aspects of your employment to you and your employer.

We sometimes hear a politician ask, "Are you better off now than you were four years ago?"

But, in truth, little changes from one presidential administration to the next. The economic policies are largely the same, and no President really knows how to make the economy run faster. Even those who say government should get out of the way continue the policies of government interference.

Meanwhile, the economy manages on its own because, despite all the interference and regulations, people have to produce to live and they're not going to let the politicians stop them. Despite the politicians, new jobs come into being mostly because the population grows, and because there will never be enough labor to do all the work that people want done.

Still, the politicians brag about the new jobs as though they had personally invested the money and dug the foundations for new factories, and transformed illiterate souls into productive workers.

So long as you have a decent job and your income is rising, politicians will gladly take the credit for everything you have, even though you've earned it with no help from them.

If you're better off than you were four years ago, it isn't because of some wise politician's economic policies.

And the comparison actually misses the point. Growth is part of the natural order of things. Barring disastrous interference from the government, you almost always will be better off than you were four years ago.

The important question isn't how you stand compared with four years ago. It is: Are you as well off as you could be?

And the answer unquestionably is no because, while government can't make the economy run better, it can make it run worse.

Change in Economic Direction

During the 23 years from 1947 to 1970, the median income of American families increased by an average of 2.8% per year. But from 1970 to 1998, the median income grew by only 0.4% per year.

The difference is considerable. If the previous growth rate had continued, the median income in 1995 would have been 90% greater than it was.

What changed in the 1970s?

That was when the government's control of the economy accelerated. The Great Society crusade of the 1960s and early 1970s (under the direction of Democrat Lyndon Johnson and Republican Richard Nixon) had brought us government programs like Medicare, Medicaid, and the War on Poverty as well as new regulatory controls through the Civil Rights Acts, the Environmental Protection Agency (EPA), the Consumer Product Safety Commission, the Occupational Safety and Health Administration (OSHA), wage and price controls, the War on Drugs, controls on natural gas and oil, and more.

With government tinkering so furiously with the country's economic engine, it became more and more difficult for America's industries to continue growing at the previous rate. In fact, the first fruits of the government's new, much closer attention were the furious cycles of inflation and recession that beset the country during the 1970s and early 1980s.

Today some industries are booming. But compared to its performance before 1970, the economy as a whole is suffering from Chronic Fatigue Syndrome.

We shouldn't be surprised that increased government control of the economy has reduced economic growth. The effort and resources a business puts into complying with government rules and pleasing government inspectors are effort and resources that can't be used to satisfy customers.

And it should be no surprise that political management of the economy isn't a success. After all, this is the same government that has had such poor results trying to stamp out drugs and poverty.

How Much Better Could It be?

So, again, Are you as well off as you could be?

Suppose the federal government weren't taxing your income, squandering your retirement money, adding regulatory costs to everything you buy, and forcing your employer to spend money on bureaucratic mandates instead of on you. How well off would you be?

Suppose all the money you now pay in income and Social Security tax $10,000 or more a year were available to take care of your family? Would you work fewer hours a week? Take a longer vacation? Provide better health care for your family? Live in a better neighborhood? Spend more time helping your church or your favorite cause? Pick a better college for your children?

Are you as well off as you could be?

FREEDOM TO BUY ANYWHERE YOU WANT

The politicians not only make it harder for American companies to please you, they also tell you what you may buy from overseas.

The government prohibits some imports and taxes others. The politicians say this saves American jobs and protects American companies from "unfair" competition. But the real reason is to reward the industries with the most political influence.

The principal barriers to imports are tariffs (taxes on imported products) that make foreign goods more expensive for you to buy. The tariffs also make American products more expensive by increasing the cost of imported raw materials. And the tariffs make some foreign products so expensive they can't compete here leaving you no alternative to more costly American versions.

In addition, when it's in the interest of companies with the right political connections, foreign products can be banned entirely from the U.S. because of questionable claims that they hurt the environment or their prices are unfairly low.

Import barriers cost Americans about $70 billion a year roughly about $700 for every American household.

Another way of looking at it is that each American job "saved" by import restrictions costs consumers roughly $170,000 about six times the annual wage of the average manufacturing worker. Thus the jobs and wages saved are much more than offset by the higher prices we pay for products.

Why We Need Foreign Products

Some goods are more efficiently produced outside the U.S. Anything that impedes or prohibits trade between countries lowers your standard of living. Such prohibitions preserve jobs in selected American industries, but destroy jobs in other industries. And they reduce your choices, make you poorer, and leave your life less comfortable.

Import barriers destroy American jobs because they keep dollars out of the hands of foreigners leaving them with nothing to spend on American products. Without imports, our export industries shrivel and die.

"Fair Trade"

Because few people want to give up foreign products, no politician will admit to being against free trade which is the freedom for you to buy any foreign product you want. Instead they mask their desire to exclude foreign products as a desire for "fair trade." That is, they want only to restrict imports from countries whose governments treat American companies unfairly. If a foreign government puts up barriers to American products, the politicians want to respond in kind.

It sounds as though we're punishing a foreign government for hurting us. But the foreign politicians don't care very much that we restrict imports from their country. In fact, they may like it. They are politicians, not producers. They don't export anything expect speeches. Our import barriers just give them an excuse to subsidize their favorite exporters or otherwise increase their power.

The real victims of our government's retaliation are you and the foreign workers. The foreign workers don't get to sell to you, and you don't get to buy what you want at the lowest price.

It wouldn't make sense, for example, for you to pay $1,000 for your next VCR or an extra $5,000 for your next car just because the Japanese government makes it difficult to sell American cars in Japan. Why should our government punish you when foreign politicians act like American politicians?

Posturing on Trade

Import barriers may not make sense, but that doesn't stop politicians from playing to the crowd posturing on behalf of their political backers who want to avoid foreign competition.

For example, Patrick Buchanan has said:

The Japanese in the last 25 years have bought 400,000 American cars and sold us 40 million. Now if that is not trade aggression, I don't know what is. You've got to wake up and start defending the national interest of the United States and of American workers, American businesses, and American auto workers.

This overlooks something. Every car sold by a Japanese company here was bought by an American. Were those Americans committing "trade aggression" against their own country?

Trade isn't aggression. Trade means that the buyer and the seller each get something he wants more than what he has to give up.

Americans sell far more airplanes to Japan than the Japanese sell to Americans and that goes as well for aluminum, cereals, lumber, chemicals, meat, oil seeds, and tobacco products. Are Americans committing aggression against the Japanese?

Bashing the Japanese may play well to audiences that are losing customers to Japanese companies, but America does quite well in its trade with Japan. As Murray Weidenbaum has pointed out:

It may be a surprise to most people to learn that the average Japanese spends more on U.S. products ($538 in 1996) than the average American spends on Japanese products ($432 in 1996). But we run a large trade deficit with Japan because we have far more people than Japan does.

America is a large, wealthy country. We are able to buy more goods from foreigners than they buy from us because we are better off, not because we are victims.

Competing with Low-Wage Countries

Are low wages and poor working conditions in foreign countries a reason to restrict imports? How can Americans compete with countries whose workers make only $1 a day?

In fact, American workers compete quite well with low-wage countries because Americans are far more productive.

Our two largest trade deficits are with China and Japan. Chinese wages are much lower than American wages, while Japanese wages are higher than American wages. So which way does it work?

Actually, it doesn't work either way. Extremely low wages reflect primitive production methods. American workers earn so much more than workers in, say, Malaysia because they are more skilled and have better machines and tools to work with. With these tools, each American worker produces far more each day than his Malaysian counterpart.

Misplaced Compassion

Those who want to exclude foreign products may try to appeal to your compassion. They call foreign factories sweat shops where all the workers are miserable and many of them are children. They ask you to boycott the goods made in those factories.

But that kind of compassion is the cheapest product of all. It's easy to say that no child should have to work in a factory and so we should pass up foreign products made with child labor.

Maybe no child has to toil in primitive conditions in America, but people in many other countries aren't nearly as fortunate. Children there have to work because their families can't survive, as we can, with only the parents working. The families choose the best alternative available which may be factory work for the children. Take away their best alternative and they may starve.

Before you heed the boycotters, ask yourself what will happen to the children if those factories close down. Will they become prostitutes or thieves or simply die? Or are the boycotters planning to adopt all the children that are thrown out of work?

We should also consider the plight of their parents. It makes no sense to boycott foreign companies whose workers toil without the comforts mandated by the U.S. Department of Labor. Refusing to buy the goods they produce may make some people here feel better, but it will make the workers there feel a lot worse.

American children stopped working in sweat shops at the beginning of the 20th century. This progress wasn't prompted by foreign boycotts of American sweat shops or intervention by our own government. The sweat shops disappeared as expanding technology made workers more productive, and as America's poorest adults accumulated better skills, became wealthier, and could afford to get by without sending their children to work.

Working conditions improved for the same reason. As basic technology advanced, as employers were able to invest in more tools and equipment, and as workers developed greater skills, labor became more productive. Using some of the increased profits to offer workers better conditions was just one more way for employers to attract and keep the best workers.

When people in poor countries can save a little from their paychecks, start accumulating capital, and take advantage of modern technology, working conditions will improve there as well.

Tariffs & Taxes

Tariffs (or "duties") are taxes on imports. A tariff isn't a "good" tax; it's just a tax. But the government can collect it without sending IRS agents to snoop through your records.

Until we find a way to finance government without taxes or a way to assure our safety without any government, some form of taxation will be necessary. And my choice is to use tariffs and excise taxes as the Founding Fathers did.

However, tariffs today are just one more political tug-of-war. Congress imposes tariffs as high as 100% on some foreign products (doubling their retail prices) to reward their political allies. Other imports are free of all tariffs.

The use of tariffs as a political weapon must stop. I don't believe any goods should be barred from the U.S.; you should be able to buy any product or service you want from any foreign country without exception. And all imports should be taxed at the same low rate which needs to be no more than 2%.

By charging every import the same tax, we take a tool of favoritism out of the politicians' hands. Discriminatory tariffs are one more political game that won't be played in a Libertarian America.

PROGRESS

The politicians claim to manage the economy through government spending programs, the manipulation of interest rates, regulation, and other tools. None of this helps you or anyone else who doesn't have the right political connections. These activities are just more opportunities for the politicians to reward their friends and hurt their enemies. You pay for it in the form of higher prices. And you pay for it as well when the political tinkering leads to inflation or recessions.

The Constitution gives the federal government no authority to manage the economy, to create jobs, or to run our economic lives in any way. And politicians have exhibited no more competence in handling the economy than anywhere else.

We don't need government to tell us how to run our businesses or perform our jobs. There are much better managers you and I and everyone who offers to buy or sell, to work or employ. Our actions and decisions make up the free market which has produced all the good things the economy has to offer.

America progressed from an agricultural economy in the 1700s to a manufacturing economy in the 1800s, to more of a service economy in the 1900s and now has the chance to use computer-based production to advance to even greater wealth in the century that lies ahead.

Such progress isn't miraculous. It is perfectly natural, as innovation and technology make us more productive and wealthier. Today, instead of working 14 hours a day plowing in the hot sun on a farm, or 10 hours in a factory, you probably work 7 or 8 hours in an air-conditioned office. And you make far more money than you could have made in farming or manufacturing.

The computer revolution has the potential to enhance work and living as dramatically as the industrial revolution did. But if the politicians continue to make decisions for the economy and the workplace, or if they begin to interfere with computer technology as they have with medicines and health care, we may realize that potential very slowly.

The Great Libertarian Offer will take the federal government out of every area not authorized by the Constitution returning the savings to you by repealing the income tax. That means federal politicians will no longer be making decisions that only you and your employer are qualified to make.

I want you to enjoy the benefits that liberty can bring a shorter work day, longer vacations, better working conditions, higher pay, a safer and more prosperous retirement, plus the ability to use your greater wealth to help others if you choose.

It is almost impossible to imagine all the exciting innovations that could be just two, three, or ten years ahead of us provided the government gets out of the way, and provided we once again bind the politicians down from mischief with the chains of the Constitution.