This entry is part of a series focusing on Dr. George Reisman’s article, “The Myth that Laissez Faire is Responsible for our Current Economic Crisis.”  The article provides a defense of laissez faire capitalism and states, correctly, that our economic system falls short of that ideal.  But there is a good reason for that.  As defined by Dr. Reisman laissez faire capitalism is an absolutely unattainable ideal and the pertinent consideration in analyzing our economic system is whether we have trended to more or less laissez faire capitalism.  Here is Dr. Reisman’s definition as provided in the article.

… a politico-economic system based on private ownership of the means of production and in which the powers of the state are limited to the protection of the individual’s rights against the initiation of physical force.”

The previous entry explained that the laissez faire part of this vision is limiting the economic role of government to only protecting individual economic freedom.  The reason this politico-economic system amounts to pure fantasy is the definition of individuals held by laissez faire economists.  Individuals are not just people as you and I might think.  Individuals are also business corporations.  Thus government’s role should not go beyond protecting the economic freedom of business corporations.

When expanding the definition of individuals to include corporations there are two fundamental fantasies inherent with the laissez faire ideal.  The first is that government cannot be limited to protecting economic freedom because an expanded government role is needed for corporations to thrive or even survive.  I have touched upon this assertion previously on both The Middle Class Forum and more elaborately in Systems out of Balance.  Limit government to only protecting individual economic freedom, even that of corporations, and business corporations would fail to compete with proprietorships.  Proprietorships can function better without expanded government roles in commerce, capital and contracts.

The other inherent fantasy is that the economic freedom of people and corporations never conflict.  The government enforced contract is a testimony both to the fact that their liberties do conflict, and that government tends to side with corporations in this conflict.  The knowledge of whether government protects people or corporations more as individuals can be derived two different ways.

Dr. Reisman alleges that economists like to come to their knowledge deductively.  This would not be very empirical or scientific of them but Dr. Reisman does indeed speak for laissez faire economists at the least.  Fine, let’s use a bit of deductive reasoning here.  Government protects corporations and people as individuals.  Government licenses corporations for limited liability, but not people.  Ergo, we must as good scholars deduce that government favors corporations over people with a laissez faire objective of only protecting individual economic freedom.

Scientists would rather derive this knowledge empirically.  In other words, what can be induced from actual experiences.  I have provided the data for pertinent experiences already on The Middle Class Forum.  Over the past thirty years the proportional role of private enterprise, net dividends and privatized benefits have expanded.  Meanwhile, welfare from government has decreased proportionally.  Over those same thirty years the amount of labor a family has to contribute has increased, personal savings has decreased, household liability has increased, medical care costs have increased, higher education costs have increased, student debt has increased and the proportion of housing costs to median family income have increased.

Whether you want to be a good scholar and come at the knowledge deductively, or a good scientist to come at this same knowledge inductively, the conclusions are the same.  In our economic system government favors the corporation over the person in the protection of individual economic freedom.  Trending towards laissez faire capitalism over the past thirty years has been bad for the people of the middle class.

To think that we can improve matters at this point in time by increasing further our commitment to the unattainable ideal of laissez faire capitalism is pure fantasy.  Or is it devious hypocrisy?  After all, there are winners and losers to every policy decision.  Corporations have been the obvious winners over the past thirty years.  An article that defends and exhorts laissez faire capitalism, though unattainable, seeks to entrench these winning ways.

Scholarly professors, think tanks and schools of thought all advocate this fantasy that serves only to favor corporations over people.  These scholastic entities all benefit from the support of business corporations.  To think that their amazing deductive capabilities is not being influenced by a corporate master would be naieve.  And that is why I actually agree with the overall thrust of Dr. Reisman’s article, misinformation is something we need to address, though I doubt he and I share the same inductive conclusion for where the misinformation lies.

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