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Home > Politics
Why Government and for What?
by Bob Powell, 3/27/14
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It's important to distinguish between economic systems and governing systems. Conflating them is a mistake because any economic system (be it communism, socialism or capitalism) can become an authoritarian or dictatorial governing system in the absence of a well-functioning democracy. No economic system is mentioned in the U.S. Constitution.
Introduction to Why Government and for What? below:

Ideology dictates views on why we need government and for what purposes. Libertarians and economic "conservatives" think we need "as little as possible" and only for national defense and defense of personal property and that "free market" business competition produces the best outcomes. Communists think that government should own the means of production and that redundant competition produces inefficient redundancies. Both have a point with the former focusing on the individual and the latter on the collective.

We argue, even war over, which is correct with little of the liberal understanding that we must attend to both individual and collective interests. Understanding systems principles informs us as to when we must attend to the collective to avoid systemic failures that bring failure to individuals through no fault of their own.

The major takeaway from this is that, just because a policy is needed that addresses the collective need to prevent systemic failure, does NOT mean it is simply a pejoratively-labeled "socialist policy"; it's pragmatic and necessary for a well-functioning society and economy to avoid systemic failure.

It's important to distinguish between economic systems and governing systems. Conflating them is a mistake because any economic system (be it communism, socialism or capitalism) can become an authoritarian or dictatorial governing system in the absence of a well-functioning democracy, the lack of which has led the U.S. to become a plutocratic sham of democracy. No economic system is mentioned in the U.S. Constitution.

Among the failures & weaknesses are the economic effects of negative externalities, tragedy of the commons, positive externalities, inelasticities, long delays, path dependence, adverse selection, escalation, the attractiveness principle, game theory, monopoly & oligopoly effects on competition, game theory, Net Present Value (NPV) calculations and cost-benefit analysis.

Those not familiar with these concepts will never really understand the need for collective action through government [OMG, he said "collective"]. Unless these dynamics are addressed by government, it cannot live up to the Constitutional requirement to "promote the general Welfare."

The need for this understanding is not an argument for "big government" or "small government". It's for the right kind of government. Now we have somewhat the worst of both worlds.

The text accompanying this meme is "The government's greed is what's wrong with America."

Yes, as described in this article, there is a problem with government being too big in many ways. This is used to feed the "government is too big" propaganda.

But the real debate should not be "big government" vs "small government", but government for what purposes?

The answer to this is that the need is for government to "promote the general Welfare" and tax for that purpose, as mandated in the Constitution of the United States. That's in contrast to what we mostly have today: "promote the special interest" welfare of corporations.

Libertarians like those who created this meme are both totally disconnected from economic reality and are lying in service to their corporate masters.

As I've noted elsewhere on this site: The Libertarian Menace is more dangerous than the Communist Menace ever was. The reason: there's more corporate profit and money behind libertarianism; therefore the inevitable result is corporate domination of government.

That's known as fascism.

Of course, there is some "too big" government. On the "too big" side we have

  • an authoritarian, "big government" police state;
  • extensive spying on citizens;
  • a prison-industrial complex and a societal addiction to prisons;
  • an aggressive and murderous military-industrial complex and unpaid-for wars;
  • an unpaid-for $700B bank bailout;
  • enormous subsidies and tax breaks for oil corporations
  • massive corporate welfare with many large corporations not paying taxes at all, which ignores fundamental business and economic principles.

Despite these travesties, the libertarian meme at right is circulating to bash Bernie Sanders, painting him as a proponent of "greedy big government" and wanting to "take 90% of your income." This is, of course, a lie as I explain at Bernie Sanders - OMG!

On the "too small" government side we have inadequate attention to systemic economic failures:

  • inadequate corporate regulation to eliminate negative externalities that destroy the commons (e.g., laws like those that exempt fracking from the Clean Air and Clean Water Acts),
  • a lack of universal health insurance to avoid the adverse selection dynamic,
  • economic policies that put the path dependence dynamic on steroids to increase poverty and inequality,
  • lack of anti-trust enforcement that leads to oligopoly and monopoly, also because of path dependence,
  • lack of regulation leading to market instabilities from speculation and boom & bust economic cycles,
  • economic policies that take inadequate advantage of positive externalities in the areas of education and health care,
  • wrongheaded understanding of economic development
  • inadequate control of Weapons of Mass Murder that results in ever-increasing death and injury.

Those who don't understand these aspects of economics and why we need government to address them should learn about them and that much of what's called "socialism" is merely pragmatic to avoid systemic failure.

Thomas Piketty on The Market and Private Property Should Be the Slaves of Democracy:

... technological rationality does not lead to a democratic rationality. So the market and private property should be the slave of democracy rather than the opposite. So we want to use the market system, the price system, the property system so as to make sure that everybody will benefit from prosperity, will benefit from income and wealth.But for this to happen we need very strong democratic institutions, very strong fiscal institutions, a very strong and inclusive education system. You know that's not going to happen just by relying on technological forces and market forces.

Indeed, what's called the "free market" system often achieves results that are individually-logical, but collectively irrational.


Why Government and for What?

The typical "conservative" response is that government is bad and that trying to do anything about the problems inherent in capitalism will just make things worse. It's practically a knee-jerk mantra; but funny thing, that's exactly the 16th century thinking of Niccolo Machiavelli. He wrote:

When a problem arises either from 
within a republic or outside it, 
one brought about either by 
internal or external reasons, 
one that has become so great that 
it begins to make everyone afraid, 
the safest policy is to delay dealing with it 
rather than trying to do away with it, 
because those who try to do away with it 
almost always increase its strength and accelerate 
the harm which they feared might come from it.

Niccolo Machiavelli, The Discourses, 1519
Quoted in Sterman, John, "Learning in and about Complex Systems", System Dynamics Review 10, No 2 - 3, Summer-Fall 1994, and in Sterman, John, Business Dynamics: Systems Thinking and Modeling for a Complex World, Irwin/McGraw-Hill, 2000, p. 8.

Sterman's paper on "Learning in and about Complex Systems" is a must-read for those who wish to even begin to understand the difficulty we have dealing with the behaviors of economic systems. See Sterman's reaction to Machiavelli's assertion at Government Dysfunctionit's now the 21st century and we know how to do better.

Reality: The Dagger in the Black Heart of Libertarian Ideology explains the reality of emergent properties of systems and why ignoring and/or denying these properties results in libertarians being quite literally insane. One might observe that the communist ignoring and/or denying the individual is also insane. In fact, both extremes are evil.

So how to determine the balancing of these concerns? It's when systemic failures bring failure to individuals through no fault of their own. In systems we can make individually-logical decisions that are collectively irrational. Our human thinking is subject to the Fallacy of Composition: When we act as if what is true for a part is true for the whole; that the whole has emergent properties is cause of this fallacy.

It is not in the interest of individuals to promote policies that allow systemic failures that hurt many individuals through no fault of their own.

It's not that in many cases individuals do fail because of their own irresponsible actions. No denying that; it's easy to see examples. It does not take individuals "off the hook" to recognize that systemic failures are responsible for as many or more individual failures (e.g., the mortgage crisis that left homes of millions of people "underwater" with a market value less than their mortgage ... and, when they lost their jobs due to business contraction during the Great Recession, they also lost their homes to the banksters responsible for the crisis).

The great majority of liberals understand this intuitively, but do not understand the aspect of reality that backs it up.

The Invisible Hand describes the foundation on which the "free market" depends and the Invisible Hand Drops Ball & Economics 101 describes many of the weaknesses and failures of the "free market."

In The Wealth of Nations Smith argued that:

Every individual endeavors to employ his capital so that its produce may be of greatest value. He generally neither intends to promote the pubic interest, not knows how much he is promoting it. He intends only his own security, only his own gain. And he is in this led by an invisible hand to promote an end which was no part of his intention. By pursuing his own interest he frequently promotes that of society more effectually than when he really intends to promote it.

I explain at The Invisible Hand that the key it's-good-for-everybody justification for the "free market" has an enormous irony that eludes libertarians:

This societal benefit, the "public interest," is an emergent property ... the result of the whole, the collective, being greater than the sum of its parts. There's a certain irony here, given that "good for society" results can come from "self-interested behavior"; it's an excellent example illustrating that there are properties of the collective that are not a feature of the parts. The irony is that economic "conservatives" and libertarians deny the existence of a collective ... there are only individuals. Yet, the core tenet of their ideology depends on just such an emergent property of the collective to justify their ideology.

At Explaining Liberal Principles, and in more detail in 'Free Market' Fundamentalism (see Powerpoint presentation), there are specific examples of "free market" failures and the need for government to be involved. It's not either "free market" or "government"; it's both-and. What's called the "free market" (price rationing) not only does not solve all problems, it creates many problems.

See summaries of many examples where what's individually logical results in system failure in Reality: The Dagger in the Black Heart of Libertarian Ideology.

So it's not a matter of "big government" vs. "small government" (or even "no government" for that matter). There is a way to determine the situations where we need government to "promote the general Welfare" and tax for that purpose as the U.S. Constitution provides. That "promote" is an activist word, more so than even "provide for the common defence". It's about promoting common interests, instead of special interests.

Failure to recognize, and create policies to deal with, the many emergent properties of systems and their implications in order to prevent systemic failures is a violation of the U.S. Constitution.

It's important to understand that the primary government role is to establish the conditions for individuals, businesses, and the economy as a whole to be successful. Doing that is not what NOT what "conservatives" and libertarians paint as Command and Control. This story illustrates:

A man was walking by a church parish one day and saw a priest tending the garden beside it. He remarked to the priest what a beautiful garden he and God had created. The priest stood back and looked around, saying, "You know, you're right; it is beautiful. But you should have seen it when God had it all to Himself."

Find versions of this story on the internet.
Google "you should have seen it when God"

So-called "conservatives" and libertarians are fond of saying that "liberals don't believe in the Constitution", all the while they ignore the requirement to "promote the general Welfare". But it's not at all a matter of "belief" in the Constitution, because it's the law of the land! It's about understanding the nature of reality and following the Constitution -- the law -- based on that understanding.

To repeat: It is not in the interest of individuals to allow systemic failures that hurt many individuals through no fault of their own.


Added 12/23/16. An article explaining a difference:

Why Government Should Not Be Run Like A Business by John T. Harvey, Forbes, 10/5/12

The idea that government should be run like a business is a popular one with both Republicans and, albeit to a lesser extent, Democrats. But this betrays a basic misunderstanding of the roles of the private and public sector. We should no more want the government to be run like a business than a business to be run like the government. ...

does it make sense to run government like a business? The short answer is no. Bear in mind, first, that "efficiency" in the private sector means profit. Hence, to ask that the government be run like a business is tantamount to asking that the government turn a profit. The problem in a nutshell, is that not everything that is profitable is of social value and not everything of social value is profitable.

Reality TV, pornography, fashion, sports, and gambling are all of questionable social value, but each is quite profitable and exists in the private sector. Meanwhile, few would argue that the Army, Navy, Air Force, Marine Corps, Coast Guard, police department, fire department, libraries, parks, and public schools are of no social value, and yet they could not exist if they were required to be profitable.

Imagine maintaining a standing military by selling subscriptions door-to-door: "Hello, my name is Captain Johnson, and I represent the US Army. Are you afraid of foreigners? Would you like guaranteed protection against invasion, pillaging, enslavement, and more? Please see our brochure for our three levels of service." There would, of course, be a few subscribers, but nothing approaching the level necessary to truly protect the United States from attack. ...

Those arguing for a business model for government must necessarily be ready to shut down all government functions that do not earn a profit, regardless of their contribution to our well being.  And, if the public sector is being run properly, that should mean every single one. If it's profitable, they shouldn't have been doing it in the first place. There is no need for the government to start a chain of hamburger stands, hardware stores, or coffee shops. Rather, they run child protective services, the National Park Service, and the Air Force. Profit is the realm of business, while unprofitable but socially useful tasks is the responsibility of government. ...

Those "promote the general Welfare" and shutting them down would be stupid ...

URL: http://www.exponentialimprovement.com/cms/whengov.shtml

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