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‘Progressive’ Economy Beats ‘Progressive’ Government Every Time

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The first commercial cell phone was the Motorola DynaTAC8000x.  Introduced in 1983, it had a retail price of $3,995.  It was 10 inches high, not counting its rubber-duck antenna, and weighed almost two pounds.

Today Radio Shack will sell you an LG 420G cell phone for $20.  Probably more reliable than Motorola’s original, the 420G fits in the palm of your hand and weighs less than three ounces. 

“Progress” in cell phones was accomplished when prices dropped dramatically and they became available to almost everybody.  Today in some cities even the homeless can be seen chatting away on cell phones.  

Where does such progress come from – government or enterprise?  Well, government does issue patents on intellectual property.  In the case of cell phones, the Federal Communications Commission also had to approve use of part of the electromagnetic spectrum.  And government has an indispensible role in maintaining an honest marketplace through punishing breach of contract, theft, fraud, and violence.    

But it was not the government that invented cell phones, built out the cellular system, manufactured, marketed, and continually improved the devices, or provided the various network services.  It certainly was not the government that caused the price of a cell phone to drop by a factor of 200 in less than three decades.  

Progress on cell phones – and so many other inexpensive products we take for granted – comes from enterprising human effort, allowed to develop through the interplay of the price mechanism and profit motive, in relatively free markets.

President Barack Obama and his liberal Democratic colleagues mean something different when they use the word “progress.”  Progress to them involves more government rules (narrowing human action) rather than a more efficient interaction of free citizens in an open market (creating wider human scope).  The liberals want new laws, comprehensive regulations, more government overseers, and more taxes to accomplish many “good” things.  Government power will decree progress, they think.

Yet the distinguishing characteristic of all government action is not more affordable goods and services but more command and force.  In a civilized society, government is given a monopoly on force.  Everything it does is backed up by force, whether criminal sanctions aimed at one’s liberty or penalties, fines, licenses, and other civil impositions targeting one’s property.  Indeed, a classic definition of law is a threat backed by force. 

There would be no new national health care plan without federal mandates and additional taxes.  Ditto for the recent financial regulation overhaul.  And if Mecklenburg County fully funds all its current activities, including an overbuilt branch library system and a wasteful Department of Social Services, it will have to raise taxes, collection of which will be enforced against those who don’t pay.

The antidote to the mentality of progress through government is an appreciation for the results that come from markets and the price mechanism.  How many times has the cell phone example been repeated in history?  Henry Ford and the automobile come to mind, dishwashers, TV sets, personal computers, Walmart, so many others, all raising the standard of living through cheaper, better goods and services.    

Instead of merely advocating some lesser degree of government action than what the Democrats propose, Republicans need to smarten up and explain how much more progress we can enjoy by letting the market work, by letting free people trade among themselves, using competition to create constant downward pressure on prices.

As articulated by Adam Smith and other free market economists, the linchpin is the price mechanism.  Its three essential functions are signaling surplus and scarcity, communication of preferences, and rationing resources. 

Prices freely set by voluntary exchanges in an open market assure the most efficient allocation of resources as well as constant innovation.  As to the material well-being of humans, that guarantees higher standards of living and real progress.

Take gasoline for example.  It’s now about $2.70 a gallon and not long ago hit $4.  In a free market as soon as enterprising folks discover a cheaper fuel to power motor vehicles, whereby we can leave high-priced gasoline behind, they’ll be immediately rewarded with profits.  The standard profit motive provided to thousands in a free market is a much more effective incentive to develop “alternate fuels” than congressional appropriations to a select few.

Study 20th century Russian history.  Central government planning wasted enormous resources, stifled innovation, and impoverished millions over multiple generations.  Instead of ushering in the promised age of progress, the Union of Soviet Socialist Republics collapsed before the whole world in 1991.    

Every nonessential government command which disrupts the price mechanism and free exchanges – most of the Obama domestic agenda – works a more inefficient allocation of resources and makes us all poorer.  Liberal progress through government decree typically produces the opposite effect from what its proponents claim.  Their progress is mostly our regress.

For a further explanation of Adam Smith’s understanding of the price mechanism and its functions, check out http://tutor2u.net/economics/revision-notes/as-markets-price-mechanism.html.     

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Tom Ashcraft, a Charlotte native, is  a lawyer and former Reagan-appointed U.S. Attorney .  Write him at TAshcraft@bellsouth.com.

Special to PunditHouse.com. ©2010 Tom Ashcraft. Used by permission.

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