In late January of this year I wrote an article entitled “Free-Marketeers Have it Wrong,” which received some lively comments. I had taken the time to read the writings of Ludwig von Mises, Congressman Ron Paul and Milton Friedman in preparation.
For this follow-up column, I took some time to read “The Road to Serfdom” by economist F. A. Hayek (which I highly recommend) over the course of the summer, and I think my perspective on the economy and economic thought is better for it. In his book Hayek writes:
“It is important not to confuse opposition against [central planning] with a dogmatic laissez-faire attitude. The liberal [classical liberalism, not today’s Democratic Party] argument is in favor of making the best possible use of the forces of competition as a means of coordinating human efforts, not an argument for leaving things just as they are.”
However, this is what free-market fundamentalism has become- a dogmatic laissez-faire attitude, with barely any theory or statistical evidence to accompany it.
Today’s free-market fundamentalists assert lower taxes, privatization and less regulation are always the answer, as if by some kind of mysticism the workings of the marketplace have the power to cure all of society’s ills.
A perfect example is Paul’s response to health care access issues in America during the last Republican Party debate on CNN.
“I practiced medicine before we had Medicaid, in the early 1960s, when I got out of medical school,” Paul said. “I practiced at Santa Rosa Hospital in San Antonio, and the churches took care of them.
“We never turned anybody away from the hospitals. And we’ve given up on this whole concept that we might take care of ourselves and assume responsibility for ourselves. Our neighbors, our friends, our churches would do it. This whole idea, that’s the reason the cost is so high.”
Now, anyone who’s bothered to study the destitution that occurred over the course of history before the rise of President Lyndon Johnson’s Great Society knows this wasn’t the case.
In “The Road to Serfdom,” Hayek asserts that government can’t secure its citizens from all the risk of the marketplace without sacrificing liberty. I agree; however even Hayek would have found Paul’s response unreasonable as he writes: “The case for the state’s helping to organize a comprehensive system of social insurance is very strong,” i.e. Medicare, Medicaid and Social Security.
All those programs, as well as other services provided by the U.S. government, should be privatized according to the free-market fundamentalist. This is due to the widespread belief that contracting out services to the private sector saves the federal government money.
However, a new study by the Project on Government Oversight suggests the opposite. The study appeared in a recent edition of the New York Times.
“The study found that in 33 of 35 occupations, the government actually paid billions of dollars more to hire contractors than it would have cost government employees to perform comparable services,” read the New York Times piece. “On average, the study found that contractors charged the federal government more than twice the amount it pays federal workers.”
The point of this column isn’t to tarnish the workings of the marketplace and to praise the collective power of public institutions, but to point out the marketplace is fallible because people are of course fallible, and that sometimes those public institutions can be instrumental in carrying out the common good.
Criticize public institutions like the Federal Reserve System, as Friedman did when he claimed the Fed only worsened the Great Depression, all you want. But be sure to realize that since the Fed’s inception, not only have recessions become a less frequent phenomena but have lasted shorter lengths of time.
*To read Tatum’s Part One column, go to: http://www.easternecho.com/index.php/article/2011/01/freemarketeers_have_it_wrong
