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The Cost of Statism

Mr. Summers is a member of the staff of the Foundation for Economic Education.

For 6,000 Years of recorded his­tory, men have lived under some form of statism. That is, mankind has never known a truly limited government — a government whose force is purely defensive in nature, protecting all from humanly initiated force and fraud, and do­ing nothing more. Thus, people have always experienced an ag­gressive component of govern­mental force, a component that takes from some and gives to oth­ers. This aggressive component, this legal plunder, has been at the expense of human beings. Let us examine the cost.

The cost of statism cannot be measured, for we have no way of knowing how life would have pro­ceeded were it not for statist dis­ruptions. Thus, there is no way of placing a dollar value on the con­sequences of government economic interventions, no way of measur­ing the suffering resulting from statism, and no way of accounting for the loss of life, for who knows how life and death would have proceeded in a free society?

Does this mean that we are stymied before we even start? Not at all. One examines the cost of statism by considering the na­ture of statism. And the nature of statism — legalized aggressive force by men against men — is perhaps best revealed by focusing one’s attention on particular sta­tist interventions. Let me suggest how such a survey might proceed.

Begin at Home

It is probably best to begin at home. There are millions of laws in America, so many, in fact, that no one can more than guess the number. How many of these are statist in nature? As many as are not specifically designed to protect people from humanly initiated co­ercive force and fraud.

Americans have laws that tax some and give to others, laws that prevent the hiring of nonunion workers, minimum wage laws that result in the unemployment of workers whose hourly productiv­ity is less than the minimum wage, laws that prevent unlicensed barbers from cutting your hair, laws that restrict advertising and other forms of competition, anti­trust laws that penalize efficient producers, laws that restrict im­ports, and on and on.

Not one of these laws protects people from coercion or fraud. Rather, every one of them is ag­gressive in nature, directed against taxpayers, nonunion work­ers, unskilled workers, efficient producers, and all their families. Who can measure the cost to these people?

And note that every one of these laws restricts and discourages production. With an eye on the simple truism that consumers can­not consume any more than pro­ducers produce, it is clear that these taxes and interventions vic­timize millions of consumers. But the cost does not stop here.

We must also consider the effect current taxes and interventions will have on the future. The quan­tity and quality of tomorrow’s production, and thus tomorrow’s standard of living, will be greatly dependent on today’s capital investment. To the extent that cur­rent taxes, interventions, and the threat of taxes and interventions prevent and discourage this cap­ital investment, our children will pay the price.

We should note well that this cost will not merely be in terms of material consumption. Tomorrow’s leisure time, goods and services used during leisure, charitable contributions, and funding of medical care, medical research, education, science, and the arts will be greatly dependent on tomor­row’s standard of living. And to­morrow’s standard of living will be based on the tools of produc­tion we are building today.

A World-Wide Problem

Of course, statism is a world­wide phenomenon. One sees its destruction in every land. Con­sider the many wars of conquest. Who can measure the loss of cap­ital? And, of far, far greater im­portance, who can account for the suffering? Who knows what con­tributions the unfortunate victims would have made had they only lived to see another day?

Or consider the cost of a con­trolled press. Of concentration camps. Of immigration and emi­gration laws. What is the cost of the Berlin Wall?

Statism is with us at this very moment. Men and women are pay­ing the price. And their children and their children’s children will also pay the price in terms of the destruction of capital, the destruc­tion of liberty, and the destruc­tion of people.

All this is not to say that the alternative to statism, a truly lim­ited government, is without cost. However, the cost of government that protects people from humanly initiated coercion and fraud, and does not intervene otherwise, is measured primarily in terms of taxes that support these two le­gitimate functions. As an economy grows, as it always has when men have come anywhere near the ideal of limited government, these two functions consume a smaller and smaller percentage of produc­tive output. That is, we would expect limited government to be supported, except in time of war, by a falling relative burden of taxation.

This, of course, is an ideal that may never be attained. However, in light of the tragic cost of sta­tism, this ideal must be pursued for as long as people turn the forces of government against their fellow men.  

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