From: lhughes@b11.b11.ingr.com (Lawrence Hughes)
Subject: Libertarian View of Economic Freedom
Organization: Intergraph Corp. Huntsville, AL
Distribution: hsv
Date: Fri, 2 Oct 1992 15:31:40 GMT

			ECONOMIC FREEDOM: PERSONAL FREEDOM

		From: Libertarianism in One Lesson, David Bergland

   A libertarian discussion of the economy begins, as always, with a concern
for the rights of all persons to do what they desire with their own lives,
bodies and property. When people are engaged in business, commercial, or
economic activities, they are still human beings. They do not fall into some
sort of second class category, with inferior rights, simply because they are
engaged in making a living.

   People have the right to deal with each other in any peaceful, vountary and
honest manner. This includes producing, selling, buying, and using the great
variety of commodities and services available in the market place.

   It doesn't matter whether people are Americans or live in other countries,
the principle is the same. Production and trade are necessary for people to
sustain their lives.

   Where the right of all persons to engage in peaceful and honest production
and trade is recognized, the resulting economic system is called a "free
market". This is a natural state of affairs. As one wag put it: a free market
is what happens when no one does anything to prevent it. Libertarians advocate
the free market because it is the only system based upon and consistent with
individual rights. The free market is also demonstrably the most productive
economic system so far, in comparison to any available alternative on Earth.

   Fascism is a political-economic system in which people are allowed to own
property but government officials make most of the important decisions about
its use, such as wage and price controls, what products may be produced, who
is allowed to be in what business, where and how business may be conducted, etc.
Although the U.S. is most frequently referred to as capitalistic, or having a
market economy, it has clearly had its fascist periods, such as during World
War II. Depending on the amount of government intervention in economic affairs,
a system can cross the line between "market" and "fascist". Many respected
observers today say that the situation in the U.S. is more fascist than free
market, particularly on the local level with such things as rent control,
zoning, growth controls and other limitations on the [private] use of private 
property.

   The political system in which government owns all or most of the major
industries is called socialism or communism. Socialist and communist economies
also typically allow some private ownership of property such as small farms or
shops, but all the significant decisions about resource allocation are made by
central planning boards.

LITTLE FREEDOM IN CONTROLLED ECONOMY

   Under either a fascist or socialist system, personal and political liberty
are much reduced. Individuals have little choice of career, how to use their
property best to make a living, or anything else important in the productive
areas of their lives. Most significantly, such conditions make it very easy
for government officials to stifle any sort of political dissent. Governments
which control the ownership and use of computers, printing presses and
broadcasting technology, can decide who may and who may not broadcast on the
radio and television. Personal liberty depends on economic liberty. Or to
think of it from the opposite point of view, the classic communist phrase is:
he who does not obey, does not eat.

   It is also increasingly clear that democratic political systems depend on
economic freedom. People are throwing off communist and other authoritarian
governments everywhere. Their common cry is for democracy and market economies.
This is no mere coincidence. Control of the economy is the primary tool used by
dictatorships to supress dissent and any challenge to the ruling party elite.

FREE MARKETS MEAN HIGHER PRODUCTIVITY

   The free market depends upon recognition of people's rights, particularly
rights to property. In order to be productive, any person must be able to use
the resources which he owns, starting with his own body, in ways he believe
will be most beneficial to him. A free market cannot exist or function without
legal protection for the right of individuals to own and control their "private
property".

   The basic reason for the free market's great productivity is that people
enter economic transactions on the premise that doing so will benefit them.
Two individuals who decide to do business with each other do so because each
figures he will be better off as a result. For instance, if I offer to sell you
my cow for $1000, and you decide to buy, this means I have better uses for
$1000 than I do for a cow, and you have better uses for a cow than you do for
$1000. Each of us feels we can be more productive with what we are getting than
with what we are giving up. Each of us will be better off than we were before,
according to our own judgement.

   Recognizing people's rights and not interfering with their peaceful and
honest economic activity increases productivity for everybody. We have an
expanding economic pie. People work harder, produce more, save more, are more
innovative, when they know they will retain the benefits of their efforts for
themselves and their families. This explains why, since the beginning of the
industrial revolution in those parts of the world with relatively greater
economic freedom, there has been a great increase in productivity and a rising
standard of living for all - at the same time that there has been a tremendous
increase in population.

   Where government interferes least in the economic activities of citizens,
economic productivity increases more rapidly than where government controls
economic activity. In Hong Kong, for instance, the British government 
intervenes very little in the economic affairs of the people and this small
island, with no natual resources, is able to support millions of people.

   History provides a laboratory example with [the former] East Germany and
West Germany. After the devastation of World War II, Germany had to be rebuilt.
East Germany was under communist rule and West Germany was governed by people
who followed the advice of free market economists and established a relatively
free economic system. The productivity of West Germany since World War II has
been viewed as an economic "miracle". The East Germans had no personal liberties
and their centrally planned economic system ultimately collapsed, along with
many other socialist economies.

   Socialism/communism was seen by most intellectuals and many others as the
"wave of the future" from the late 19th century until very recently. One of the
giants of free market economics, Ludwig Von Mises, in 1922 published his book
"Socialism", in which he demonstrated why centrally planned economies cannot
succeed. Without the pricing mechanism, available only in a market economy,
there is no guidance for the planners. There is no way for them to know how to
decide how to allocate resources or to know if their decisions were good or
bad after the fact. Nor is there the discipline of competition to direct
factory managers. Nor is there the incentive of self interest for the workers
who receive the same pay whether they work hard or not. Obviously, not much
attention was paid to Mises or the other critics of socialism in 1922 or later,
until the recent collapse of socialist economies in Eastern Europe and 
elsewhere finally proved him right.

   Today, all socialist economies are finished. Central planning is recognized
as hopeless. The big issue in Eastern Europe and the Soviet Union today is how
best to convert to market economies. It is gratifying to report that many of
the economists there in positions to lead their formerly socialist countries
toward the market are looking to the writings of Ludwig von Mises, Friedrich
Hayek, and others of their school [the "Austrian" school] for guidance.
Unfortunately, here in the United States, intellectuals, legislators and policy
makers still seem reluctant to end economic intervention in favor of economic
freedom for Americans.

REDUCE GOVERNMENT, INCREASE LIBERTY AND PRODUCTIVITY

   Every reduction in taxes and every reduction in government control over the
economic activity of the citizens will improve Americ's productivity and
increase employment. This would mean an increased standard of living for 
everybody in the country, and would also mean a much wider variety of choices
and opportunities for all persons, of whatever means, to improve their own
conditions.

   Why do tax reductions improve economic productivity?

   When people can enter transactions and negotiate freely regarding the terms
of any economic transaction, then all deals consumated improve the conditions
of the participants, from their own point of view. Obviously, some decisions
and investments don't work out well and some businesses fail. However, when
private individuals or companies fail, the government can force people to pay
for its services and subsidize its losses. It is not subject to a profit and
loss statement, nor does it have the incentive of market competition to make
it more efficient. When government makes bad decisions, those decisions affect
more people and cost much more.

   Government waste is a well known phenomenon and is a necessary consequence
of bureaucracy, which is not subject to the discipline of the marketplace.
This is why, when people in the private sector of the economy are taxed and
their wealth is transferred to the bureaucrats and then used in a less
efficient manner, the economic pie shrinks. Therefore, reducing taxation and
the number of government functions will be a net economic benefit, productivity
will increase, and more people will be able to find work doing the things which
appeal to them most, and which give them the greatest opportunity to improve
their conditions in accordance with their values. In other words, economic
liberty and personal liberty are inseparable.

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Larry "squirm all you like - we'll make more" Hughes