Legislation is a Racket to Fleece the Productive
As Adam Smith explained, people are naturally keen to secure unfair advantage but should not be allowed to do so. But the modern state enables insider groups to plunder productive people.
“People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”
This a well-known quote from Adam Smith’s seminal work ‘An Inquiry into the Nature and Causes of the Wealth of Nations’, which was one of three remarkable literary works to appear in the English-speaking world in 1776 (the other two being the American Declaration of Independence and Gibbon’s History of the Decline and Fall of the Roman Empire).
Adam Smith observed and explained the steadily increasing prosperity of his native Scotland. Scotland had definitively thrown in its lot with England in the 1707 Act of Union, thereby adopting at one remove the classical liberal constitutional framework confirmed by the Glorious Revolution of 1688 and its aftermath in England. There was a state, but it was tightly constrained by a Parliament controlled by property owners. Membership of the House of Lords was hereditary and MPs in the House of Commons were chosen by a small, generally propertied fraction of the population – reflecting Parliament’s original role of representing potential payers of taxation.
Parliamentarian property owners were determined to allow no attack on property rights, and no more than a modest level of taxation. They were ideologically opposed to an authoritarian state, as represented by the French-style royal absolutism Louis XIV and his cousin James VI & I. The result of Parliament’s victory, historical accident as it may be, was a regime which approached the libertarian ideal, especially in commerce. Nearly 100 years after the Glorious Revolution, Adam Smith wrote as the resulting Industrial Revolution gathered pace (www.awah.uk post ‘Liberty’s Triumph - The Industrial Revolution’).
THE WEALTH OF NATIONS (1776)
In ‘The Wealth of Nations’ Adam Smith explained the productivity-boosting benefits of the Specialisation and Division of Labour which could be achieved by people voluntarily co-operating to specialise in a small part of the overall work of producing a marketable product or service. He explained that it might take a man all day to make a handful of nails or pins. But if each person specialised in just one of the stages of nail production, they would together produce far, far more nails than the same number of people working alone.
Adam Smith also introduced the idea of the ‘Invisible Hand’. This idea was that people who were free to co-operate with others would end up furthering the common good by producing an ample supply of what people really wanted – even though each man merely sought to improve his own perceived wellbeing. The Invisible Hand guiding producers to the best outcomes and the correct production decisions is an early representation of our old friend the Price Mechanism. The price mechanism is always superior to central planning as a means of maximising wellbeing (see www.awah.uk posts ‘Society Really does not Need the State’, and www.awah.uk ‘Twice as Well-off Without Politics’).
COMMERCE AND SOCIETY ARE SELF-ORDERING SYSTEMS
This idea of commerce as a self-ordering system (i.e. needing no state control) was an early element of the key British intellectual advance in recognising and explaining complex adaptive self-ordering systems. In such a commercial system, all that was needed was to let people do what they thought right and incentives would automatically lead to progress. For some reason this key British idea came to be expressed in French as ‘laissez faire’. Laissez faire capitalism is what created the wealth of the modern world. But we don’t really have it any more for reasons that this post is intended to explain.
The best-known example of such a self-ordering system is the natural world itself. Smith’s contemporary Erasmus Darwin was already thinking along similar lines about the natural world rather than the commercial world, but Britain would have to wait for the theory of evolution until his grandson Charles finally published ‘On the Origin of Species by means of Natural Selection’ in 1859.
Libertarianism itself is based on the realisation that human society as a whole – not just the ‘economy’ - is another naturally self-ordering system. People act to encourage more and more productive forms of voluntary cooperation between individuals. Enlightened self-interest plus standard human morality based on ‘live and let live’ or ‘do as you would be done by’ is quite sufficient to power progress. There is no place for external controllers. We can only be impoverished and threatened by tolerating bands of predatory individuals calling themselves ‘the state’.
THE THEORY OF MORAL SENTIMENTS (1759)
Adam Smith’s pioneering achievement in the late 18th century, is founded on his earlier ‘The Theory of Moral Sentiments’ written in 1759. In it he put forward a psychological explanation for ethics. He observed that people have a sense of empathy. If they see people suffering as a result of certain actions they consider those actions to be bad (i.e. unethical) and they disapprove of their perpetrators. People are, he says, motivated to react positively to opportunities to cooperate and to benefit others. They thereby reduce their own pain at seeing others suffer and secure the approval of others.
Smith believed society would fall apart if individuals had not been endowed by ‘Nature’ with social empathy. One hundred years later, after ‘Origin of Species’ appeared, one could say that empathy evolved in our species as an evolutionary mechanism promoting our survival.
‘The Theory of Moral Sentiments’ had great influence and is still taught abroad in places but is neglected in Britain. This is a pity because it provides the ethical ballast for the better known ‘Wealth of Nations’ published a decade and a half later, and indeed for the pro-liberty cause. Smith’s ideas prefigured not just evolution and laissez faire capitalism, but key Austrian School libertarian insights.
Firstly, value is always subjective – everything is worth what a purchaser will pay for it. Value is in the eye of the beholder and is significantly based on feelings - moral sentiments. It is unknowable to others and incapable of being measured, still less managed, by central planners. There is no objective quantum of value as believers in the labour theory of value, such as Marx, thought. There is therefore no measurable basis for finding ‘exploitation’ in any freely undertaken exchange.
Secondly, human beings act to increase their general sense of wellbeing, not just or even mainly their material rewards. This is what the Austrian School economists call increasing their ‘psychic income’ or (for pessimists) reducing their ‘sense of felt unease’ in the world. Therefore, humans are naturally willing to engage in apparently altruistic charitable or mutualistic activity. The idea, for example, that the state is necessary for there to be welfare and healthcare provision is therefore a nonsense.
THE WORM IN THE BUD
As Adam Smith explains in the quote at the top of this post, producers are always attracted to the idea of securing protection for their activity and incomes. It is a perfectly understandable human desire to benefit from others having to compete for one’s custom whilst at the same time stitching up one’s own customers.
The reality is that in order to actually create a legally privileged favoured vested interest you need to have a state. The state uses public law, or state made ‘legislation’ or nowadays ‘regulation’, to favour some people by preventing other people from securing redress against them.
In the absence of the state no violence or the threat of violence could be used to enforce laws maintaining professional or industrial monopolies. Those who engaged in such violence or threatened it would simply be led before one of the judgement firms and made to pay restitution directly.
In Smith’s time there was a state. The Government did indeed use its power to unfairly privilege some commercial interests. A well-known example was the recent (in 1776) case of the politically powerful but financially challenged monopoly East India Company. It was given a privileged position for its tea in the British colonies in America to mend its finances at the expense of the colonists. The result was a certain Tea Party in Boston and another lurch towards secession from Britain.
Nevertheless, in Smith’s time the intellectual atmosphere was hostile to using state power to favour commercial vested interests, not least because of his writings. People at all levels of society understood then, as they do not now, that eliminating restrictions on trade raises living standards. Furthermore, the property owners in Parliament were understandably not inclined to support government attacks on property rights in general. There was no French style persecution of small entrepreneurs. Nor were the wealthy but unsalaried gentry in the House of Commons interested in processing mind-numbing regulatory minutiae.
LEGISLATION AND REGULATION CAUSE EXPLOITATION
Such is now however the soul-destroying reality of a modern salaried parliamentarian’s life as an incomprehensible torrent of new laws and regulations pours into the world. Every adult has the vote and politics has become a vote buying game paid for by looting the more productive. H.L. Mencken, the American libertarian commentator of the mid 20th century, aptly described elections as ‘advance auctions of stolen goods’.
Everything has changed. There are no longer any ethical or practical constraints on the ability of legislative bodies to pass all the regulatory protections that any self-interested public or ‘private’ vested interest could desire. The result is that market after market has been stitched up, rigged or cartelised by the kind of big ‘corrupt corporates’ which are now trying to entrench their power as part of the WEF Great Reset.
The result has been impoverishment for consumers and small business people across the West. Prices rise while growth and opportunity are squeezed out of the system. The resulting dissatisfaction, and the bloated cost of public sector vested interests, have put the political and financial viability of the West in question.
And there is nothing anyone can do about this unless they are willing to eliminate the state, or at least its privilege of unilaterally creating law (which is the essence of the state). It is politically impossible to halt the tide of stultifying meddling. To see why I shall employ an example supplied by Mises Brasil.
Imagine that a group of one hundred people realise that they can each obtain one million Brazilian Reals by getting a regulation passed which makes a minor product slightly more expensive. Perhaps it drives a few smaller competitors out of business, or it mandates unnecessarily expensive features. As a result, each of the roughly 200 million Brazilians will be one Real the poorer – which for them individually is an imperceptible loss. Brazilian society overall thus loses a net 100 million Reals as millions of fairly poor people collectively transfer another 100 million to a few wealthy individuals.
It is not worthwhile for any individual Brazilian citizen to take the time and trouble to oppose this cynical regulatory wealth transfer because he would only save one miserable Real a year. But it is worth it to the 100 individuals bent on feathering their nest at public expense to employ lobbyists and generally schmooze politicians and bureaucrats to get the regulation passed. They have a million Reais per year at stake.
This sort of thing has been going on day-in day-out. Economic life has in recent generations become tied up by a series of cartels, rigged markets, dominated by big companies. These companies come to depend on political favour to survive rather than on producing competitive goods or services. Productivity and prosperity go by the board. Politically influential firms strip value from consumers. They become ‘crony capitalists’ in American parlance – cronies of government that is. The ultimate stage in this degrading process is the crony corporate support for the WEF’s Marxist attack on the West (see www.awah.uk post ‘Putin says No to the WEF Great Reset.
Politicians and bureaucrats love this game because they can trade regulatory favours for donations and sinecures. Obviously, no politician will really go against such a powerful and profitable racket of self-interested predation. Any who tried who be quickly ground down.
This is how it works. The existence of the state’s privilege of protecting wrong doers from redress by their victims creates the opportunity for concentrated lobbies in the public sector and crony ‘private’ sector to exploit the general population. The latter cannot hope to put up organised resistance to the tidal wave of new regulations and laws. Although these are said to be for the public good, they are not. They are put forward and indeed drafted by state favoured insiders feathering their own nests. The ‘deplorables’, as Hilary Clinton called them, are left knowing deep down that something is going increasingly wrong. They blame politicians and mainstream journalists who are mostly just bought-and-paid-for front men.
But so long as there is a state, and one presided over by professional representative politicians, it is practically impossible to prevent in-group predation of most producers via legislation and regulation. The only viable solution is a moral challenge to the right of the state to protect its favoured associates from judgement under the Non-aggression Principle. There must be no law making by the state apparatus.
The bad news is that it is going to require a lot more disillusionment with the state before most people are willing to try to do without it. Nevertheless, the number of people in the West, especially perhaps America, who perceive government establishments as the enemy is growing very rapidly. The good news, as ever, is that anywhere where a free-enough society can establish itself will quickly prosper greatly.