The Postpandemic World Is One of Widespread Dependence on Government
The state is making people dependent on it, both as means for control and as an outcome of many policies intended to provide relief. We have seen a lot of fear and dependence in this pandemic. Fear has been the message that has propelled types of repressive policies that were not possible before. Not only were people locked down, but society and therefore practically the whole economy was forcefully paused.
The problem here is that there is no «Pause button» for the economy. It may sound easy for politicians, who have no conception of how the real world works. But you cannot simply pause a business. If you have ever run a business you know that being an entrepreneur is not a steady state but a changing process.
It is a constant struggle to get money to come in so that you can cover costs that you’ve assumed long ago. That’s what entrepreneurs and businesses do. The farmer’s animals will not stop growing and will not stop eating because the economy is paused. The farmer will go bankrupt because he needs to cover their food, water, and care without being able to sell any beef.
Even if he has savings to cover the expense, the meat will lose quality and value as the cows grow older than their prime. At the same time, no meat is reaching the shelves in the stores. So while the farmer is stuck with costs he cannot cover because he cannot sell the meat he produces, consumers cannot find meat in stores. Consequently, we experience a shortage of food, while at the same time farmers and other producers have surpluses that they cannot afford to keep and are unable to sell.
What a ludicrous situation. The effect of this is of course that the farmer will not be able to rise again as the politicians press Play on the economy and beef processing is resumed. He will not have been able to make those continuous investments in his business in order to meet future demand for meat. So pressing Play will not solve the food shortage.
The same story can be told for other types of businesses as well. The longer the lockdown, the more businesses would have failed and the supply chains lain in shambles. This is an enormous loss. While it can be rebuilt, it can only be so at an enormous expense.
And it still requires that there are people with the know-how and willingness to start such businesses again. The issue here is that this would be a very bad situation if it were a sudden shock to an otherwise free market economy. These Western nations were hardly free market havens. Rather, they were welfare states to varying magnitudes.
In the case of the United States, a welfare-warfare state. In other words, these societies and economies were already burdened by large and very costly states which were usurping what the market was allowed. What this means is that the market that existed was already burdened by financing the nonmarket. The state costs money, but the greater burden is loads of people that it relieves from the discipline of the market.
In the purely free market, you are paid in accordance with your contribution to the value facilitated to the consumers. Of course, there would be systems and institutions in place to care for those in temporary unemployment and those with lesser fortune. It would be an easy burden to carry and to care for those who are in need when most people can care for themselves. With cooperative unemployment insurances and collective sick pay funds, where workers share their risk, that was the case.
The incentive became to exploit the system as much as possible rather than contribute to but otherwise stay out of it out of respect of your peers. The state is an enormous enterprise throughout Europe and the West and much of what it does is to undermine the market by creating incentives to not work, to not produce, and not contribute to joined welfare. This does not only include the sick, elderly, and those exploiting the system because they can. It also includes everybody working for the government, who are in fact living off the production that takes place in the market.
The government does not produce any value. While the cost of the state is typically counted towards the county’s GDP, it would make more sense to subtract it from the value created in the market. That will give us a good idea of the soundness of the economy. With this enormous burden on the economy, the chances of entrepreneurship to be at all successful diminish.
Even to start a business that puts enough food on the table is very difficult. It is made much more difficult because of the levies, taxes, licenses, regulations, and so on that politicians and bureaucrats force onto the entrepreneur and private businesses. This reduces the number of jobs in businesses, which leaves even more people without the possibility to make a living. And so, they seek help and therefore become embedded in the state system.
The only way out is to find a job in one of those businesses that are unlikely to be started because the state has made it all too burdensome to run a business. For every person who no longer works and makes a living, and thereby no longer contributes in the economy, there is a loss of one in production and an increase of one in burden. For every person who loses their job and becomes dependent on the unemployment benefits and other subsistence, the economy both loses production and must carry a heavier load. As a result, the economy becomes less lively and exuberant.
There is less entrepreneurship, there is less production, which means there are fewer opportunities for people to find jobs. They become ever more dependent on the state. This dependence is a problem for many reasons, especially when people become dependent on the system in the long term. As a brief stop to get on one’s feet, the system would do only little harm.
It would do what private systems used to do. But that is not how these systems work, especially when the state becomes an ever-increasing burden on value creation and the market. People get stuck in the system because there is rarely a way out and because the systems have been designed to be generous. Politicians pride themselves on promising that you will not need to lower your standard of living much when you lose your job.
It is a great way to get votes and it makes you look generous and caring, but it is utterly destructive to pay people as much for not working as for when they contribute to our society’s overall well-being. When people get stuck in these systems it affects their self-esteem. They lose hope, they lose confidence, they become fully dependent on the state, and not only financially. The burden of the economy rapidly increases, which causes greater problems and more people dependent on the state, and even fewer in positions in which they actually contribute.
Add to this situation, which existed before the pandemic, the mass death of businesses following the disastrous policies adopted to «fight the virus». The farmer in my example will not be able to rebuild his business. So, resentment builds, the burden increases, it becomes harder to start and run businesses. More people become dependent on the state and thereby add to the burden to those who are not.
Those depending on it are all too willing to grant a little more to get the system fixed. The problem, however, is not the inability of the state. The problem is a lack of market, and this lack becomes more present the more the state grows. This is what we are dealing with and why we must break people’s dependence on the state.
Source: Per Bylund | Mises Wire