027-2020 Life after the state

Title: Life After the State (Why we don’t need the Government)

Author: Dominic Frisby

I’ll admit it, the first thought that popped into my head when I read the title of the book had me think that the book must be about someone’s views on a life after the state has collapsed in fulfilling its duties and functioning as an effective body.

Quite the opposite. It discusses how our forefathers of the late 19th century made due without a fully-involved government body, then more state roles were phased in to the full body it has become today.

The book brings into perspective that our governments have grown much bigger today than they were approximately 150 years ago, and how the increased role of government might actually have resulted in certain sectors not being run effectively.

The areas that are discussed are broadly outlined below:

  • How one small European nation once was a powerhouse of Europe, and then as more and more power moved to government, became demoted to social problems and socially dependent country
    • The argument here is that before the state played a big role, people had an entrepreneurial spirit. When things went bad in the economy, they would adapt their business practice and then thrive again. Then the economy would be hit by another externality, and once again the people would adapt and thrive.
    • When the state gained a bigger role, the response to economic hardships was not the same as when the entrepreneurs adapted before. Now, people relied on the government to support them through it, even though the government relied on the economy to thrive to help its people. When the people didn’t thrive, the government cannot help them as much as its people hope.
  • Broken window fallacy
    • The story behind the fallacy is that Player A holds money. He can spend it on anything he wishes. Player B has the skill of fixing windows whenever someone wishes that service from him. Player C is the goods/services provider that Player A could/would spend his money on.
    • For the greater good, Player A’s window is broken. Player A now has to spend money on Player B to get it fixed. Player C doesn’t have his goods/services sold to Player A since he had to get his window fixed. By breaking the window, the state has made Player B a winner, Player A a loser and Player C a neutral that didn’t win or lose.
    • The way we relate this to the book is that (in one instance) the government uses money from taxation to bail out a failing state company (or too-big-to-fail private company), whereas that money could have been used otherwise to fund another project or expense (job creation, infrastructure, education, medical, etc.), and therefore money is not utilized in the most efficient manner
  • It is through exchange (trade) we have progressed (as a species), instead of only looking out for ourselves
    • Our exchange of ideas, knowledge, information, of skills and services amongst different cultures and peoples has helped us to improve our manufacturing and service provision efficiencies, and thus established comparative advantages towards others
    • State sometimes incorporates barriers to trade (such as protectionism, for the benefit of the country) and thus reduces opportunity for trade.
    • Even though it is with best intention to help a country not becoming wholly dependent and surplus importing, it results in products costing more
  • The state is every citizen’s biggest expense (ie. taxes), which has made families shrink in size so that it can afford to raise a child
  • How the state’s power and control over money is reducing its peoples wealth
    • The history of money went from tangible objects of value (ie. sea shells, gold, etc.) to fiat currency (faith-based currency – where the value of a currency is dependent on the faith people have in the issuer of the currency)
    • Before we shifted completely to paper currency and digital currency our fathers (before – early twentieth century) had pegged their currencies to gold (ie. the paper’s value was backed by an equivalent amount of stored gold).
    • Due to gold supply not being available in large quantities, banks could only lend so much money as they had to back with gold
    • When currencies were no longer backed by Gold (latest 1971, earliest 1918) via a banking process of fractional reserve banking, banks could lend out 9/10 of what a depositor has place with the bank, thus increasing the money paper supply, which in turn resulted in prices increasing (ie. inflation) which then dropped our monies purchasing powers.
    • When the economy was experiencing difficult times (defaults, bankruptcies, etc.) the government could now print more money, supplying more paper money, which also dropped the value of our currency, and dropped our wealth
  • Why money, independent of the state is more favourable than a fiat currency, because control over money then lies with its people and no longer with its government
  • More taxes, and an increase in different forms of taxes have increased the state power, and actually go against helping an economy to progress (because it takes away the opportunity from its citizens to use the money in the economy and spend)
    • Taxes paid on income (personal- and corporate income taxes), and then also on consumer goods (VAT, import duties, excise, etc.) reduces the amounts available to us to spend on other goods, which could have spent otherwise in the economy to help other businesses grow
  • The size of public medical coverage is not efficient to administer, and therefore doesn’t provide us with great medical cover
  • Taking the taxes away that are used to finance public education, and instead giving the money to the people so they can use it to pick which education institution to attend, increase competition
  • Too many laws and regulations are barriers to growth for trade
  • Living a life where the state provides for all our needs breeds an attitude of entitlement, and becoming dependent
    • I want to link this point with the first point, where the country’s people always adapted themselves through the economic changes. There, they knew they need to look out for themselves, and didn’t rely on anyone to watch out for them
    • Then they became a nation where they received welfare support, and in future expected such support to come their way when they would experience hardships once more.
  • How dispersed power in a country can lead to being prosperous and innovative
    • Since a centralized power doesn’t necessarily know everything that would be good for all of its citizens, it is proposed that power be decentralized to lower levels, who are closer connected to their districts and its needs
    • Further, reducing power is hoped to have leaders be held accountable for their actions, and their work be more transparent
  • etc.

Even though one can interpret the following message, that more control held by the state is bad for the economy, one needs to bear in mind that an economy is complex and that therefore multiple elements contribute to how a economy functions.

With that I meant to say that simply reducing government influence won’t automatically result in an upswing in the economy. Therefore, the points above should be considered for perspective of how too much influence might be detrimental, and that we should seek for improvements.

No economic system (communism, capitalism, socialism) is perfect, and therefore we need to strive and work on making them better.

Summary:

The book gives clear examples how the increased role of government intervention has made a public-funded project (medical aid, pension, education, etc.) somewhat less efficient, however, it doesn’t clarify that it is not solely government that is the problem, but many different factors, which may thus be interpreted wrongly as a quick-fix problem. However, the author does give away that he mentions these factors from an outsider’s perspective, and not as an expert, so he gives the view from an every-day-person’s perspective, as many others would likely also perceive the matter. The book has good information that serves for perspective, which is always valuable. I thus give it a rating of 3.4/5, as I believe more views and factors needed to be included to make it clear to the reader that the topic is not easy to solve.

Hope you have a good start to the week, and keep well!!