The Key 2 Liberty involves learning the principles of freedom for yourself and then sharing your knowledge with others.

Free Markets

Problems with massive government regulations

As long as the government doesn’t attempt to micromanage the economy the free market will usually respond well to the natural demands of the people.  When the government steps in and regulates particular businesses or sectors of the economy it rarely has an overall positive affect.  In order for the government to provide a subsidy for a particular business or sector it must take money away from other people or businesses through taxation.  This is in effect the government choosing the winners and losers of the economy.  Another way a government can manipulate the economy is by establishing price controls on products and services.  If the government attempts to manipulate the market using price controls the end result is that the people find themselves having scarcities of those products and services since people will be unwilling to produce them if they cannot make a profit.

Monopolies are rarely if ever formed by an entrepreneur that creates the perfect business and is therefore able to eliminate his or her competition because of the company’s superior product or service rather they are formed by government regulations that favor one business over another.  Excessive government regulations on a sector of the economy can make it nearly impossible for a new, small business to enter the market and start selling a product or service.

A good example of this would be the regulations placed by the federal government on the automotive industry.  There are thousands of requirements that automobile manufacturers must follow when making vehicles ranging from fuel economy standards, exhaust emissions standards, and safety standards.  Even though there is no power granted to Congress in the Constitution to regulate how vehicles can or should be made they nonetheless have passed one law after another to do just that.  This is just one of many encroachments of the federal government on powers that are clearly reserved for the states.  Each state should be able to decide for themselves what type of cars people or businesses can make and use in their state.  States that pass over burdensome regulations on the automotive industry will cause their own people to have less choices available to them as less businesses will be willing to make products that meet the over burdensome regulations.  Giving the states the power to regulate their own economies allows the free market to work properly.  The more regulations that are passed by the government to control certain businesses or sectors of the economy the less of a free market you have.  The very definition of a free market is an economic system that is “free” from government regulations.  Placing regulations on an economy turns it from a free market system to a centrally planned economy which is the very basis of a socialist or communist type of government.

The more regulations that a government places on businesses or sectors of the economy, the fewer people there will be that will be able and willing to create and run businesses.  The less competition there is to create a particular product or provide a particular service, the higher the price companies will charge to create the product or deliver the service.  If there are few regulations that exist for a particular type of business or sector of the economy then there will be plenty of people that will be able and willing to create the products and deliver the services both needed and wanted by the people and at a lower cost.

It is important to note that it is impossible for a government to change the natural and fundamental economic law of supply and demand.  Any attempt by the government to manipulate the price of a product or wage of a worker producing a product or providing a service will cause the natural economic forces of supply and demand to kick in and artificially adjust the supply or demand of the product or service.  When the government passes laws to lower the price of products or services it creates an ARTIFICIALLY high demand for the product or service.  This will in turn cause a shortage of the product or service because people will be unwilling or possibly completely unable to deliver the product or service at the price demanded by the government.  If it actually costs $10 to make a widget and the government mandates that it be sold for $9.75 who in their right mind would attempt to venture into this business?  Of course no one, unless subsidized by a government program, which is outright taking money from successful businesses and giving it to businesses that cannot operate under the regulations imposed by the government.

If the government regulates the cost of labor by mandating higher wages than a free market is willing to pay then it is ARTIFICIALLY raising the cost of products and services.  When the cost of a product or service raises the demand for that product or service will fall.  When the government regulates and demands certain wages it only creates a shortage of products and services that otherwise may be able to be delivered if it did not interfere in the first place.  It is important to note that when the government makes any law that “regulates” any portion of the economy it is merely redistributing wealth from one company or person to another company or person.  This is the government picking the winners and losers and completely opposes the principles of freedom and liberty.

When the government creates a tax credit or subsidizes a product or service the natural economic forces of supply and demand will adjust by creating an ARTIFICIAL, higher demand for the product or service.  This in turn will cause the price of the product or service to rise.  This often creates two sets of rules for the people that are supposed to be treated equally in a Republic.  Some people get tax credits or subsidies for certain products or services which then causes the price of the product or service to rise due to the increased, ARTIFICIAL demand.  The people who don’t get tax credits or subsidies get robbed twice.  Not only did they not get a tax credit or subsidy they had to pay a higher price for the product or service.  This clearly opposes the principles of freedom and liberty and is without a doubt a socialist / communist ideology.

Another way governments interfere with free market economies is by creating international trade laws that favor certain businesses over others.  International trade laws such as NAFTA, GATT, and the WTO create massively expensive bureaucracies to “regulate” commerce between nations.  These treaties and many others are a direct attack on the people of the United States and those of other nations and their ability to have a free market of goods and services.  People of one nation should never be subjected to laws or rules created by people of another nation, especially when it involves the local economy.  These types of treaties are basically just creative ways of creating government sponsored monopolies and serve to destroy our Republic by handing over our national sovereignty to bureaucracies controlled by foreign interests.  Some say that treaties like NAFTA (North American Free Trade Agreement) make trade between countries such as the United States and Mexico “fair”.  This is far from the case.  How is it “fair” to American businesses that are required to pay “minimum” wages to their employees that are much higher than Mexican business are required to pay their workers?  This is especially true when you take into account that American businesses have additional mandated costs associated with labor such as having to pay unemployment taxes and workers compensation insurance which are not required in many other nations.  It is not a “free” market when small American businesses have to compete with large, international businesses that can make their products in a foreign country that are not subjected to the same laws as American businesses.  Instead of “free” trade what you really have are businesses playing by two different sets of rules.  Large, international businesses can make their products with slave labor and then “freely” import their products into the country and sell them on the “free” market while American businesses have to comply with overwhelmingly burdensome regulations and then sell their products in competition with the international businesses on the “free” market.  The term “free trade” is nothing more than a play on words designed to deceive people who are not familiar with the way a true “free market” is supposed to operate.  If the American people could tax Chinese, Mexican, and other country’s goods that do not place massive regulations on their businesses like America does on its businesses then the playing field could be leveled and American businesses would be able to compete once again.  This would create millions of new manufacturing jobs in the country and virtually eliminate the problems we have with unemployment.  Or maybe a better solution would be just not to have all of the massive regulations on businesses in the first place.

The Founders wanted a free economy with a minimal of government interference.  They thought that the costs of running what was supposed to be a small, limited federal government should be paid primarily by placing taxes on imports and exports.  This encouraged Americans to purchase goods made and services performed by other Americans.  When the Constitution first took effect the United States had the closest thing to a true “free market” that has ever existed in the world.  There were no minimum wage laws, no laws mandating higher than standard wages for government projects, no overtime laws, no unemployment laws, no workers compensation laws, and most importantly of all no Social Security, Medicare, and income taxes that regulated the economy.  It is painfully clear that regulations require bureaucracies to administer and enforce them and most government bureaucracies are notorious for being wasteful with the taxpayer’s funds.  Having less government regulations over the economy means less bureaucracies and less waste of the taxpayer’s money which can then be used for more useful purposes.

It is a fallacy that only governments can keep the people safe from corrupt or fraudulent business practices.  It is important to remember that in a constitutional republic such as the United States the freedom of the press and freedom of speech can offer an astounding level of protection.  As long as the freedom of speech and of the press are not under control by the federal government the press has the ability and duty to report crimes and bad business practices to the public.  This gives the people the information they need to be able to make good decisions on whom to do business with.  Thomas Jefferson once commented, “Where the press is free and every man able to read, all is safe.”  Today there are several businesses that operate in the free market solely to watch over other businesses to make sure they conduct their business fairly such as Angie’s List, the Better Business Bureau and Consumer Reports.

The free market of the United States remained a free market for the most part until the start of the 1900’s.  Beginning around the 1900’s the federal government has passed one unconstitutional law and treaty after another and has eroded the traditional American free market system into a quasi-fascist style government run economy.  There are massive regulations on almost every sector of the economy now.  You cannot run a business without a “license” or permission from the government and sometimes at many different levels of government (local, state, federal, etc.).  The prosperity of the average American is now clearly starting to decline.  If Americans do not begin to learn how a free market works and demand that the people they elect to legislative and executive positions create laws to promote true free markets the prosperity of the American people will continue to decline until as Thomas Jefferson warned, “they wake up homeless on the continent their forefathers once conquered”.