Should governments intervene in the Markets? USA & EU Case Study

This opinion piece, written by Jad Chahrour, explores the case for government intervention by the US in the markets following the EU Model.

The United States of America, the most hegemonic Nation in the modern era, is known worldwide as the pioneer of civil rights and liberties on the social/political scale, but also, — and perhaps most importantly — the “Mother of Capitalism”.¹ We can define capitalism as synonymous with what Smith called “the liberal plan” or the “system of natural liberty” in which “every man, as long as he does not violate the laws of justice, is left perfectly free to pursue his own interest his own way, and to bring both his industry and capital into competition with those of any other man, or order of men.”² Capitalism is thus an economic and political system in which a country’s trade and industry take place in an environment free from government restrictions, and where most means of production are privately owned. It is built on the belief that the market can regulate itself without — or with the least possible amount of — government regulations. This free market economy is nourished by individual private initiative, investment, competitiveness, merit, innovation, creativity, and the pursuit of profit.

While most European countries shifted throughout time towards the establishment of socialist traits for their economies, strongly interfering in the market and regulating entrepreneurial endeavors,³ the American system has to this day been able to preserve the essential features of a capitalist economy more than any other country.

The National Bill of Rights guarantees essential civil and political rights for the American people, but it does not refer to any social or economic right to be guaranteed for citizens by the Government such as the right to shelter, or to healthcare or education. This omission of social rights in the said declaration is very logical and understandable since the Bill of Rights was adopted more than a century before the socialist ideology became a driver for political change. Back then, the idea of Government interference in the market, in the supply and demand of products and services, was still not conceptualized: there were some areas that were just left by the authority for the private sector.

While some might argue that social rights are more important than civil and political rights, how can one enjoy their right to private property if they do not have a place to live in? Is the right to strike useful if you don’t even have a job? There are many such examples. Even though it may seem that guaranteed social rights are a prerequisite for effective and useful civil and political rights, it would be a logical fallacy to relate this issue to the role of Government, for “nothing that requires the labor of others is a civil liberty”. The Government’s duty is to protect one’s right to bear arms, not to provide him with such products for free. The Government’s role is to guarantee one’s free and peaceful enjoyment of his property, but one must strive and endeavor on his own to get this property in the first place.

So the question “Should there be certain freedoms that are not only guaranteed by the government but also provided by the government?”

I ought to think that the general answer should be no. I believe that it is sufficient that Government does not prevent the mass from pursuing such needs and services. If the Government was in fact to provide some services such as higher education, transportation, a guaranteed job, and others for free, this would, on one hand, result in a painful increase in taxes on income, along with an augmentation in national debt ratio, since the Government would have to expand its budget to cover the new spendings. On the other hand, this radical change in the American economy will not be welcomed at all by the private sector. The State suddenly becoming some kind of a new competitor for the businesses in the service it will provide for free, will undoubtedly lead to a radical, unwelcome change in how the private sector runs. Moreover, profits will go down, many new and still fragile SMEs might close their doors, unemployment rates might go up, innovation and competitiveness will decrease and investors will be discouraged. However, this clear-cut “ no ” answer, I believe, might have only one acceptable exception: Healthcare. For it should not be tolerated, in the 21st century, to let someone die, lose their chance for a successful and peaceful life, because they could not afford the cost of living. This last matter is one of human solidarity and conscience, rather than one of pure business. And this does not mean that the Government should compete with private healthcare providers, but rather cooperate with them, make agreements with them, as to guarantee, at the same time, that no one dies when they could be saved, and that these businesses do not suffer losses but instead continue to prosper and grow the national economy.

The raw market has always done a pretty good job maintaining itself, operating through some kind of natural selection, rewarding those who understand best its unshakable laws. It is legit to spontaneously think that today’s Europe is one example of a successful intervention of Government in the market, but it is in fact too early to judge, for the outcome of the adoption of a certain economic/political model takes time to show all of its facets.