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The Morality of Capitalism, part 3: When Government Is Good

In this series we've been looking at libertarian economics professor Walter Williams' defense of free market capitalism as outlined in his video for Prager Univeristy.

Williams defines the free market as a series of voluntary actions.

The free market calls for voluntary actions between individuals. There's no coersion. In a free market, if I want something from you, I have to do something for you.

If I want to buy steaks, I'll need to earn some money, perhaps by mowing my neighbor's lawn. This simple arrangement has proven it can generate more wealth for more people than any other economic system.

But the real world doesn't always allow the free market to work to its full potential. Government coercion or corporate corruption can limit individuals' freedom to act in their own best interest. Williams recognizes the first danger, but appears to be unaware of the second.

Seeing only one enemy of the free market, Williams presses his case for limited government.

Limited government means you and I decide which businesses survive. That's the America that our founding fathers envisioned. A limited government that has only a few specifically mentioned—or enumerated—powers that are listed in Article 1, Section 8 of the United States Constitution.

There's a hole in this logic. It's true that America's Founding Fathers enumerated a limited set of powers for the federal government, but that's because they thought most issues could be dealt with more efficiently at the state or local levels. The Constitution's primary author, James Madison, makes this point in the Federalist Papers, number 45.

The powers delegated by the proposed Constitution to the federal government are few and defined. Those which are to remain in the State governments are numerous and indefinite. The former will be exercised principally on external objects, as war, peace, negotiation, and foreign commerce; with which last the power of taxation will, for the most part, be connected.

The powers reserved to the several States will extend to all the objects which, in the ordinary course of affairs, concern the lives, liberties, and properties of the people, and the internal order, improvement, and prosperity of the State.

A case could be made that today's federal government oversteps its bounds in many ways, but that's another argument for another time.

What's relevant to this discussion is that Madison never says that governmental powers at all levels should be "few and defined". His point was that that federal powers should be few and defined. Earlier in the same paper, in fact, Madison makes a statement that simply doesn't accord with the modern libertarian interpretation of limited government.

It is too early for politicians to presume on our forgetting that the public good, the real welfare of the great body of the people, is the supreme object to be pursued; and that no form of government whatever has any other value than as it may be fitted for the attainment of this object.

The notion that government might be "fitted for the attainment of this object"—the welfare of the people—isn't something we hear from today's politicians. But the reality is, we all receive beneficial services from many levels of government. We take for granted police protection, fire protection, public roads, public schools, public libraries, public parks, and other services that enrich our lives. We would spend a much larger percentage of our mowing money if we were to disband the institutions that provide these services, and try to replicate them as private individuals.

I suppose it would be possible to institute limits on government services at all levels, from the Department of Defense down to the local school board. Maybe it's just a failure of imagination on my part, but I can't see how such a strategy could ever be, in Madison's words, fitted for the attainment of the public good.

Walter Williams concludes his video essay by affirming the superiority of the free market.

It's this brilliant limited government notion that produced the wealthiest nation in history. In a free market, the ambition and the voluntary effort of citizens, not the government, drives the economy. That is, people, to the best of their ability, shaping their own destiny. Sounds pretty moral to me.

And in the abstract he's mostly right. He has identified the danger of one extreme. We don't want an economy driven by the government. On the other hand, if you squeeze government services to the point where they no longer benefit the people, it sounds pretty immoral to me.

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