Sunday, November 17, 2013

Is Small Government Better than Big?

Let me say at the outset that in my view, there is no absolute yes or no answer to the question posed in the title. I am convinced that different societies require the sort of government that will do the best possible job managing their affairs at the stage of development they have attained, and the circumstances of their current situation.

What this means is that we cannot formulate a philosophical construct that will show what an ideal government should look like to suit all societies all the time. We simply cannot come up with a single size that will fit all, or fit them at every moment. What we can do, however, is think up as much as we can of the elements that will go into the construct, and discuss how they might be used to formulate it. This will be like saying here are the ingredients that may go into the cake but every chef will have to judge for themselves which of them to use and by how much so as to bake the cake that will best suit their society at the time they are asked to do the work.

The one thing we cannot escape is that economics is now the most powerful shaper of our behavior, that it will so remain for a long time and perhaps forever. What we must understand is that economics is not something that is new to the modern age or that it is unique to the human species. In fact, economics has always meant the same thing to all the species since the formation of the first cell on this planet. It meant food security, physical security and the right to procreate. Thus, economics is the stuff we are made of at the level of the cell.

If the members of a species do not fight to death for a piece of the economic pie, it is because a prior protocol would have been established as to the pecking order that sets who has priority in many of the things that are necessary to maintain life. Among these are the questions: Who gets what of the available food, who occupies the highest point in the territory, who has mating rights and so on? Working out such a protocol is called the culture of the species; something that applies as well to bees as to human beings. In fact, all this has been worked out and written into our genetic code over half a billion years of organic evolution on Earth.

What happened in the past few thousand years, however, are developments that were purely the product of the human brain for which no workable protocol has yet been perfected. Economics still dominates our motives but we do not have an artificial system that is as predictable as the protocols that nature wrote into our genetic code. Thus, the most base of our instincts have returned, and they are shaping the decisions we now take when plotting our economic well being. Sometimes we refer to our behavior as that of dog eat dog, but because the species do not normally eat each other, we should refer to that behavior as cat eat mouse.

This in mind, we must recognize that any form of government we have today is but an improvisation representing the early stages of an experiment that may someday lead to an artificial system as useful as the one that nature wrote into our genes. We're not there yet but while getting there, we must remain conscious of the fact that the same brain which is trying to formulate an artificial economic system is also changing the premise upon which that system is to be formulated. That is, we are trying to bake a cake while some of the ingredients are disappearing from the table, and new ones are made to appear out of nowhere.

This is happening because the relentless progression of science and technology is constantly changing the way that we farm the land, manufacture the goods, deliver them and deliver the services we produce. It is also changing the way that we communicate with each other and do our economic exchanges. In fact, we have gone from a system of bartering the goods or the services we produce to the creation of fiat money, a development that is at the center of our current economic debate.

This is happening because unlike the past when we bartered what we produced – were thus able to assess what we made and what we got in return – we now produce goods or services not knowing what we shall receive in return because the assessment of our effort is done by a collection of hands we never get to see or influence, much less get to control.

Whether we work on a plantation, in a mine shaft, a factory, a construction site, a store or an office, we get paid with a promissory note called money. We then use this money to buy goods or services produced by someone else. We may at times buy some of what we produce ourselves, which is a distant echo of the days when we consumed much of what we produced in a system we now call subsistence level; one that is still practiced by societies we call primitive.

We too were primitive at one time but we lived in a system where no one received more than two or three times what someone else did because we recognized that it was impossible for someone to physically produce that much more than someone else. Thus, the primitive system represented the true essence of meritocracy. But now that fiat money is here, and it is filtered to us through the many hands that run the financial institutions, we find that the filters make as much as a thousand times what an ordinary person usually makes. This happens because the filters retain the money, and they use it to buy not only the goods and services we produce and they consume, but also the plantation, the mine, the factory, the building, the store, the office and all the premises where the goods are produced and the services are delivered.

Thus, the people of the financial services can be thought of as the new feudal lords who no longer need killer armies to loot the peasants or impose taxes on them. Instead, they have the central bank which hands them the money it prints – most of which they retain – and give the rest to the producers of goods and services who live from hand to mouth at the modern version of a subsistence level.

But if they have no armies equipped with swords or bayonets, the new feudal lords have armies equipped with pens, microphones and television cameras. These people get paid as much as ten times those who produce the real wealth of the nation – and they sit in studios where they spew complaints all day long about the people who produce the wealth, and sometimes ask for wages that would raise them just a little above subsistence level.

This is where the concept of the distribution of wealth comes into play, and where the role of big government versus that of small government becomes important. The crucial questions are these: Is fiat money used to redistribute wealth by taking it from those who create it in the plantations, mine shafts, factories, construction sites, stores and offices – and give it to those in the financial institutions who filter it, retaining it and pay the armies of men and women they employ to sit in the studios and bitch all day long about the people who work for a living.

And never forget that these are the people who feed the modern feudal lords as well as their armies even though neither of these two could produce a grain of wheat, an ounce of meat or regulate the heart beat of a patient. They are the whiners who would starve to death in a system of meritocracy, but here they are, living the good life by the sweat of those they denigrate at every moment of their waking hours.

So now the main question: Which government is best suited to break up this alliance of the useless, and return the system back to one of true meritocracy? Will it be the small government or the big one?