Does a Good Government Mind its Own Business?

“The Divine Right of Kings” was a theory of government that held water. But you had to put the water in the right container. You had to believe in God. You had to believe that He gave out job assignments. You also had to believe that He didn’t mind when His employees and agents made a mess of things…or even when they contradicted His own orders. Looking at the history of the monarchs who were thought to have been given this divine authority, you would have to conclude that God was either a very tolerant task-master, or a very negligent one. Adultery, murder, thieving, lying — there was hardly one of God’s commandments they obeyed.

As a theory of government, the ‘divine right of kings’ would have been okay had it not been for the kings themselves. Some were reasonable men. Others were tyrants. Many were incompetent, largely irrelevant and silly. Taken all together, it was very difficult to believe that they had been selected by God, without also believing that God was just choosing His most important managers at random. Kings were not especially smart. Not especially bold or especially timid. Not especially wise or stupid. For all intents and purposes, they were just like everyone else. Sometimes smart. Sometimes dumb. Sometimes good. Sometimes evil. And always subject to influence.

Towards the end of the 18th century, the ‘divine right of kings’ lost its following. The church, the monarch and the feudal system all seemed to lose market share. The Enlightenment had made people begin to wonder. Then, the beginning of the “Industrial Revolution” or the “energy revolution” made them stir.

In 1776, Adam Smith published his “Wealth of Nations,” arguing that commerce and production were the source of wealth. Government began to seem like an obstruction and a largely unnecessary cost. Its beneficial role was limited, said Smith, to enforcing contracts and protecting property.

The school of laissez-faire economics maintained that government was a “necessary evil,” to be restrained as much as possible. The “government that governs best,” as Jefferson put it, “is the one that governs least.”

Government was supposed to get out of the way so that the ‘invisible hand’ would guide men to productive, fruitful lives. Smith thought the arm attached to the invisible hand was the arm of God. Others believed that not even God was necessary. Men, without central planning or God to guide them, would create a ‘spontaneous order,’ which would be a lot nicer than the one created by kings, dictators or popular assemblies.

This theory of government, such as it is, leads to what we know of today as “libertarianism.” Libertarians argue about how much authority the government should have. They scrap among themselves over what the government should do and how big it should be allowed to get. But all libertarians agree with Jefferson. And all agree that the governments in the world circa 2011 are much too big.

Here at Markets and Money we are sympathetic to this point of view. Not that we are libertarians. We just don’t like anyone telling us what to do.

But libertarianism is hardly a theory of government. It makes little attempt to explain why government is what it actually is. In fact, it is purely prescriptivist day-dreaming, focused on what government ought to be. In theory, a government ought to be small, say the libertarians.

Government ought to mind its own business, they say. It ought to sort out disagreements between members of the public…and protect the public from wrongdoing. It ought to have not to drain the resources and productive output of one part of the population for the benefit of another. But so what? Who cares what the libertarians want?

Throughout history, government has operated in pretty much the opposite fashion. The insiders who get government control use the police power of the state to promote their own agenda. Sometimes it is an apparently selfless agenda. Adolf Hitler, for example, took little wealth for himself. Nor did Stalin raid the public treasury for his own benefit. Instead, each worked long and hard in the interests of his people. (It would have been better if they had been on the make for money. It might have distracted them.)

Whether the insiders want money or power hardly matters. If they seek money, they take it from the outsiders — those, by definition, who neither control nor are favored by the insiders. If they seek power, that too must be taken from someone. The outsiders pay, every time.

While the proto-libertarians focused on how much harm an activist government could do, the utilitarians, positivists, and collectivists turned their attentions to how much good it could do. According to John Stuart Mill and Jeremy Bentham, a government should provide the “greatest good to the greatest number.”

Again, this was not a theory of government, it was merely an idea about what government should do. And a dumb idea, at that. Who knows what is ‘good’ and what is not? Only God…or people themselves. Since God keeps his own counsel, only the people can decide. But how? They can only decide if they are allowed to choose for themselves — how they will spend their time and their money. And the only way they can spend their time and money as they wish is if they are given the liberty to do so, which takes us back to libertarianism, the very creed to which the utilitarians, positivists and collectivists opposed themselves. They wanted an elite to decide what was ‘good’ for the masses.

Which, of course, is what really happens. The elite insiders decide what they want. They call it ‘good.’

More to come…


Bill Bonner
for Markets and Money

Bill Bonner

Bill Bonner

Best-selling investment author Bill Bonner is the founder and president of Agora Publishing, one of the world's most successful consumer newsletter companies. Owner of both Fleet Street Publications and MoneyWeek magazine in the UK, he is also author of the free daily e-mail Markets and Money.

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3 Comments on "Does a Good Government Mind its Own Business?"

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Peter James

Are we all insiders? Within our families we generally get preference over strangers. Same too as a citizen of a nation with respect to non-citizens. In a corporation we are expected to look after our bottom line at the expense of other corporations and people’s bottom lines. We even subscribe to The Daily Reckoning to become one of its insiders. Is it the most natural thing to ally ourselves with those that help not harm us as individuals – thereby creating the phenomenon of ‘the insider’?

peter james: yes,we are insiders inside our family.that is why families are collectivist/socialist.parents dont need a price system to determine if their first son is as “valuable” as the second -even if the second one is paraplegic down syndrome affected child. when you interact with strangers,however,you cant behave like insiders.unless you want to use force/violence on them being an insider is fine as long as it is not violent. the thing with human beings is that it is not easy to detect where the boundary between insiderness and others starts.somoe families themselves are dsyfunctional .libertarains say that as long as… Read more »

Yes, a good libertarian government should only retain a police force to control the serfs and an army to plunder their colonies.

Big business and merchants must be free to profit.

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