Government's inherent problem

Friday, October 25, 2013

Government's inherent problem

Watching the roll out of Affordable Care Act (aka “Obamacare”) has been interesting. Regardless of anyone’s opinion on the merit of the program, I think it is generally agreed that the task before the federal government is of mammoth proportions. How in the world can the federal government efficiently corral millions of people and have them sign up for something? Likewise, how can government accurately price it or pay for it? How can it practically enforce it if people simply don’t participate? We are talking about millions and millions of people.

These types of questions are not new. Indeed, many economists have opined on the topic of government action through the years. Of particular interest to me are the folks who have come to be known as the Austrian economists, not because the practice is followed in Austria, but because many prominent economists who hold (or held) the Austrian perspective came from Austria. Among the most famous was F. A. Hayek.

Hayek found himself in England during WWII and took it upon himself to think through the challenges raised by the tyranny of Nazi Germany. How did this disaster come about? He set forth his thoughts in a book entitled, “The Road to Serfdom”, calling to mind the European serfs who were subject to their lord’s whims. What Hayek concluded was interesting.

According to Hayek, what many governments fail to realize is that governments are not good at certain activities, not because government is full of bad people or bad intentions, but because government simply cannot replicate what happens every day in the non-government, private world. To see what he was getting at, consider something like the price of a car tire.

Every day across the world, the materials and mechanisms that create tires are being purchased by tire makers, who are setting their prices on a variety of factors that are changing every day. For instance, if there is a natural disaster, war or shipwreck and rubber is in short supply, prices of tires might rise instantly. Governments who are working with the economy are not so fortunate. Our bureaucracy requires matters be done by committee, through open meetings, and with much debate and political wrangling. In other words, if the government was supplying tires, it would take months to adjust to a shipwreck, and it would probably cause another one along the way.

No matter how many good folks we have working in our federal agencies, it is impossible for them to react as quickly as the private sector where millions of private actors make millions of decisions every day, taking into account every conceivable world occurrence. Unfortunately, far too often we have seen that rather than admit this, governments do their best to try to make it work. This is what Hayek deems as a society on the “Road to Serfdom”.

On Hayek’s road to serfdom, you find that rather than admitting a mistake, governments simply try to hire more bureaucrats, enhance enforcement mechanisms and eventually do away with constitutions or elections. For a good example of this, consider the government of Hugo Chavez, the recently deceased leader of Venezuela.

Chavez tried to centralize nearly everything to the government and faced chaos when the effort proved unworkable. Then, rather than admit the mistake, he doubled-down, focusing on changing or eliminating any obstacle in his way – at times in ruthless fashion – and was only hindered by his eventual death from cancer. Obviously, unless such a government is turned around, the road leads to a loss of liberty, e.g., serfdom. Hayek would not have been surprised.

One of the things that made America prosper over the centuries is the robust nature of our private sector and the free market. Rather than rely on central planning, the folks who came before us relied on individual responsibility within a framework of fair play. They didn’t always get everything right, but I do think they were on the right track. World history is littered with the atrocities that come from those governments which chose other paths, which, despite even good intentions, put their countries on the road to serfdom.


State Rep. Tom Washburne serves as Vice Chairman of the Judiciary Committee. He also serves on the Financial Institutions Committee and the Select Committee on Government Reduction. Rep. Washburne represents the entirety of Gibson County and portions of Knox, Pike, Vanderburgh and Posey counties.