Giving Back With a Spoon, Taking With a Shovel

In most avowedly “free market” discourse on the right, the main direction of government activity is framed as a war on the “productive” rich in favor of politically organized, idle mobs. Government labor law serves mainly to limit the power of exasperated employers over their shiftless workers. And the hardworking rich are taxed at progressive rates to give welfare to the patholocally lazy underclass. You know the drill: Big business is the last oppressed minority. And them pore ole bosses need all the help they can get.

But I would argue that most regulations of what employers can do to employees are just secondary restraints on the abuse of their unequal bargaining power — an inequality which results from primary background conditions created by government intervention in the market.

The main effect of most government policies is to increase entry barriers, minimum capital outlays, and overhead cost of small-scale production, and to reduce the amount of idle land and cheap capital, so as to minimize the number of self-employment opportunities that wage employers are forced to compete with for your labor. And by putting a floor under the cost of subsistence, the regulatory framework increases the size of the minimum revenue stream the average household needs just to break even, hence increasing workers’ demand for hours of employment relative to the supply.

Part of the political pressure for Parliamentary Enclosures two centuries or so ago reflected a perception on the part of the employing classes that when free land was competing for workers and they could produce an inordinate share of their subsistence needs working for themselves, their need for paying work was insufficient to make them willing to work on acceptably profitable terms for the employing classes.

So government policies raise the cost of living, reduce the amount of competition wage employers face from self-employment, and artificially increase the total number of wage hours that must be worked to subsist. Government policies that regulate the extent to which employers can abuse this state of affairs are just a secondary qualification of a primary state grant of power.

As for welfare: Those who wring their hands and moan about income redistribution underestimate the extent to which 1) most or all of the super-rich got that way from government-enforced rents of various kinds; and 2) welfare payments made to the underclass are a small portion of the upward income transfers resulting from reduced bargaining power of labor, artificial scarcity rents and artificial floors under the cost of subsistence.

I believe the overwhelming trend of income transfer is upward (but more indirect and less visible), and that the direct and visible downward transfers involve just the least possible fraction of this enormous sum required to reduce outright homelessness and starvation below politically destabilizing levels.

One of the central functions of the state, as executive committee of the ruling class, is to organize members of the ruling class into an undefectable cartel. In so doing, it overcomes prisoner’s dilemma problems and enables the ruling class to act collectively in ways that serve their long-term common interests, even when it seems to fall afoul of the short-term wealth maximization interests of individual members of the ruling class.

That’s exactly what government does when it gives back to the poor just enough of the income whose upward transfer it has already enabled, in order to prevent the system from becoming completely destabilized.