Getting the State Wrong

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I have made the below comment at Nick Johnson's excellent The Political Economy of Development:

This [progress and the hand of government] is a particularly important topic – thanks for drawing attention to it.

Political opponents (pro- and anti-state) tend to indulge in symmetric exaggeration, ignorance and distortion. The state-lovers tend to present government as a naturally beneficial agent, showing little regard for the tremendous potential that the state has for damage, destruction and maldevelopment.

One variant of their bias is a blanket condemnation of private enterprise and the role of personal initiative in a flourishing economy.

Symmetrically opposed: state-haters ignore the fact that the state (by dint of its interventions into human interaction) is the very precondition for freedom and the indispensable creator of the environment in which our most cherished values can blossom.

Early liberals were more aware of this than later libertarians. In spite of its tremendous potential for destruction, the state is an indispensable tool for creating the best society and the most advantageous type of economy we can possibly attain.

Just as some preposterously ignore the indispensable benefits of entrepreneurial activity, free markets, and free trade (all of which serve as powerful goods if properly constrained), certain types of “free marketeers” are entirely wrong in ascribing qualities to unfettered economic “freedom” that such a state of affairs simply is not productive of.

The cardinal sin of the libertarian is not to realise that free exchange is not an alternative to or an eliminator of competing interests and aims (which a free society calls to the fore much more vigorously than repressive societies do!) that are of a political nature (i.e. based on non-economic, non-tradeable preferences), and are in large measure capable of reasonable resolutions only by extra-economic, i.e. political means. In short: the economy and economic activities tend to be highly political phenomena.

The core libertarian idea that markets represent an alternative to a politicised world is utterly ill-conceived. It is due to the fact that markets cannot be guarantors of apolitical truth and harmony that the state is so important for a good society and a well-functioning economy, in proper shape furnishing a historically unprecedented means of making people compete productively in the ongoing quest for better knowledge, better ways for getting along with one another, and better ways of overcoming scarcity.

In nuce, the “libertarian” tends to deny conflict where it does exist (thereby paradoxically ignoring the main purpose of freedom, namely to let people express, compare and align their often diverging ideas, aims and plans). The “statist” tends to ignore the pluralistic constraints needed to keep the powerful state from acting as a totalitarian force (as in the “Green” power grabbing attempt à la “the science is settled”). Both positions are untruthful and dangerous. I have written more on “the state” here: The State [1] ...

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