The Perception of Insecurity and the Growth of the Regulatory State

The transition of the American economy from a free market economy to a state-dominated economy has been a gradual process that has taken place over nearly a century.  While the lynchpins of this development have been the Federal Reserve and the progressive income tax, the growth of the administrative state has played a key role in building a web of regulations encompassing every imaginable aspect of human life.

The result has been a slow strangulation of the economy and increasing entanglement of consumers in a complex bureaucratic matrix.  The American government at all levels now stands as the nation’s largest employer at over two million workers, who collectively impose an estimated trillion dollars on the economy in compliance costs. But such growth of the state hasn’t taken place in a vacuum; beyond the constant fearmongering of “Public Service Announcements” that nearly everything conceivable can possibly kill you, and therefore we need myriad well-funded  departments of ‘watching out for stuff that might kill you,’ there is a specific structure of advanced capitalist economy that leads to perceived economic insecurity, and thus democratic demand for such hyper-regulation: job specialization and economic interdependence.

A snapshot of the composition of the U.S. labor force demonstrates the degree to which we are all dependent on one another to meet our basic needs, and we are growing more dependent. For one example, the number of workers in the fundamentally self-sufficient agricultural industry has declined about 50% since 1990, from a little over three million to a bit over two million. The ratio of service sector to goods manufacture employment has gone from 2.2-to-1 in 1970, respectively around 48 million to 22 million workers, to 4.4-to-1 in 2000, and about 5-to-1 in 2005. One can only imagine the ratio is spread even wider today.

What does this mean? It means service sector workers are getting paid wages and then are using their earnings to buy real goods, including food, clothing, cars, electronics, and homes. It is debatable whether many of these service sector workers are exchanging value for value. But it is not debatable that government workers overwhelmingly are not, excluding those performing military service, or some postal and construction workers.

The implications of this is that government force is increasingly needed to maintain a structural system of spoils and rent-seeking, where those who produce such fundamental goods as food, clothing, energy, and housing are exploited through taxation, debt, and inflation by a parasite class who would prefer not to get their hands dirty. This extends not only to those who would rather take welfare than work, but those who are overpaid in cushy government-financed occupations, and those sheltered from taxes in the so-called “non-profit” sector. The result is a pyramidization of society exactly like the socialists accused the free market of producing, with real laborers and producers being exploited by bureaucratic and service workers, and at the top, banksters and politicians.

At a more abstract level, there is a certain amount of insecurity that comes from economic interdependence that feeds the demand for more regulation. This is fueled by the delusion of democracy, the idea that the people and the state are synonymous, and thus whatever the state does in the name of the majority is consonant with the public will, and the resulting concept that corporations and banks should be controlled by democracy in the way that the government presumably is. Since the free market leads to income disparity, this is conceived to be an affront to democracy and equality, and thus the economy should be yoked under the way the government is and income redistributed until it is equal.

The market is distrusted by many as a mechanism of accountability, because they feel powerless within it. In other words, these people resent having to work in a specific occupation and then to use their wages to buy food, clothing, energy, and housing from different suppliers. They do not see that as a means of them forcing businesses or corporations to be accountable through the market, but rather that they are vulnerable because they are dependent upon  those institutions to meet their needs. Better, in their view, that they simply charge the government to guarantee employment, food, clothing, housing as a matter of human “rights” than to be personally accountable for maintaining one’s own life.

Thus these people do not trust the market to hold accountable businesses and banks. Many do not see how the act of purchasing among competitors is a far more immediate and direct form of democracy than can be achieved through periodic voting.  Instead of relying on the courts to penalize businesses that knowingly sell dangerous, defective, or impure products as matter of contract or tort law, they want the government to have control of it all and then to not have to worry about anything.

The problem with such logic is when you empower the government to control the economy, you are creating a situation of more insecurity by centralizing power. This inherently leads to less accountability, since the government shelters its power behind a bureaucratic wall that is not subject to elections. Politicians can also more easily bully businesses and corporations leading to more corruption. The result is more economic disorder and declining quality of goods; look at any state-dominated economy, and you will find businesses getting away with murder, both figuratively and literally.

Ultimately, charging the government to provide supposed freebies can take the power of choice and control out of the hands of citizens altogether. Those people who rely on the government to give them fundamental things like food, housing, and education for free, ultimately lose their freedom. This is because the power to control one’s own life is incrementally taken from him. Such power is always used to serve the interests of those in control of the government; the few are eventually enriched and empowered at the expense of the many.

A key thing to understand is that an individual has more economic power in a free market than he could ever achieve through periodic elections in a nominal democracy for more central planning. The ability to buy is a powerful thing, and we should not let that power be taken from us by the government.


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