Sarkozy Is Wrong

The French president, with a Hungarian father born in the mid 1950s, recently made headlines by announcing "Le laisser-faire, c'est fini," meaning that free market capitalism is finished.

What is interesting about Sarkozy having said this is that the term "laisser-faire" refers to how the French king was responded to when he asked French farmers "So what do you want?" He was told: "Leave us alone." Accordingly, laisser-faire came to refer to a system of economics, also defended by Adam Smith and the classical liberal and libertarian political economy tradition, in which the government plays the sole role the American Founders assigned to it, namely, "to secure [our] rights." Just as referees do at games, government has the important role of making sure the rules are followed and violators are punished. In the case of a society, including its economic system, the rules are that the rights to private property and freedom of contract are strictly respected and protected.

This idea has never been fully implemented but here and there, especially in America, it has gained some inroad in public affairs. Certainly, compared to the rest of human history and the rest of the globe, America's economy has often been relatively free. But as with most democracies which may not ban the input of even undemocratic ideas, the best that has been achieved is a mixed economy, one with socialist, capitalist, fascist, theocratic and even communist features, a fully free market never existed in America.

Still, whenever some upheaval with economic implications does occur in America and other mixed economies, defenders of some variation of the ancient regime of mercantilism—which include champions of all kinds of statist economic systems such as socialism, fascism, etc.—quickly announce what Sarkozy said, namely, that free enterprise is now dead, proven to have failed. In the current financial fiasco this is all too evident. Day after day one can read this bunk, in the New York Times, The New Republic, letters to various magazines and newspapers, you name it. (Keynes published his The End of Laissez-Faire in the 1920s!)

A regular feature of this glee, exhibited by folks who have never shown the slightest sympathy for free enterprise, is to mention that people in the business world are often complicit in promoting statism. But that's no news at all, of course—indeed, no segment of society is naturally devoted to the free market. Adam Smith already observed this vis-a-vis business back in the 18th century. As he warned in The Wealth of Nations:

The proposal of any new law or regulation which comes from [businessmen], ought always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from an order of men, whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it.

The bottom line is that in mixed economies it is somewhat difficult to detect the source of economic problems. The chattering classes both left and right—many of whose members would love to rule since they tend to believe (following the lead of a certain reading of Plato) that only they are qualified to do so—jump at the chance to blame freedom, including free enterprise, since that is the main obstacle to their being in charge.

My simple suggestions is that one not fall for this ruse. The current—as all human-caused—economic fiasco is the fault of statists who routinely distort the natural ways of an economy. (In this case it had to do with massive amounts of easy money doled out to various financial institutions, in the name of helping the poor, minorities, and so forth.) As usual, such interference results in disaster.

And those who are responsible have no intention of confessing their complicity in making it happen and one effective way to hide that fact is to point the finger at the innocent party, human liberty.

Tibor Machan holds the R. C. Hoiles Chair in Business Ethics & Free Enterprise at Chapman University's Argyros School of B&E and is a research fellow at the Hoover Institution.

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