Economic Reality Comes Before Social Justice

Progressives are masters of indignation. They see injustice everywhere, whether political, social, professional, or economic – wherever humans interact with each other. Regardless of the context, their solution is always the same: more government regulation.

Progressives also love to use “rights” language: “People have a right to healthcare. They have a right to a job. They have a right to a living wage. It’s a matter of justice.” While these statements certainly sound nice, there’s one problem:

They ignore reality.

Before talking about “how things should be”, it would seem wise to first understand “how things actually work”. If you want to understand how the world works, you must understand economics. It’s not optional. As Murray Rothbard so accurately said:

It is no crime to be ignorant of economics, which is, after all, a specialized discipline and one that most people consider to be a ‘dismal science.’ But it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance.

Progressives have a particularly poor track record when it comes to economics. Not only are their theories confused, but they’ve concretely demonstrated – for a century – that their central planning does far more harm than good. (The Soviet Union was a left-wing paradise. Indeed, examine the rhetoric from the old SU; it sounds eerily similar to today’s progressives. The Soviet Union couldn’t have been a larger economic catastrophe.)

Any political theory devoid of sound economic reasoning is useless at best and dangerous at worst. It’s like a car without any engine, transmission, wheels, windows, seats, or floor. It’s a shell with nice, glossy paint.

Imagine a blind artist trying to paint a perfect replica of whatever building stands in front of him. He doesn’t have paint, a brush, or a canvas. But he does have an old napkin and some dirt. That’s the political theorist who doesn’t understand economics. Whatever the artist’s final product looks like, that’s the equivalent of a political theory without economics.

Before talking about what jobs, wages, and healthcare people are entitled to, we must ask: how do jobs, wages, and healthcare come into existence? How do the systems work? Economic goods and services do not appear in nature; poverty is the natural state of mankind, and wealth is the exception. So how do humans become wealthy?

It’s not by government degree. It’s not through central planning. It’s through markets – free markets. I won’t make a bunch of economic arguments in this piece, but a huge amount of information is available online which teaches the basics. A good rule of thumb: if you don’t yet understand why the minimum wage causes unemployment, keep digging deeper.

All economic truths are based on a foundational principle: resources are scarce. Meaning, there isn’t enough stuff for everybody to get everything they want. Thus, resources must somehow be allocated.

It’s not an easy question: how should scarce resources be allocated? Every country has a different economic situation – lots of diamonds in South Africa, lots of oil in the Middle East, lots of manufacturing plants in China. How should they all get coordinated? Contrary to intuition, the best allocation method is to have no pre-planned allocation at all. You simply let people trade by themselves, absent planning or design, and wealth gets created.

Declarations like, “There should be no child labor!” might sound great, but they are economically illiterate, with big real-world consequences. Imagine I said, “General Motors should be producing three times as many cars, at half their current price! That way, more people could afford them.” Surely, a lot of people would like that idea. But it’s completely ignorant. It overlooks countless economic realities, like:

Why do cars sell at their current price in the first place?

Given the limited amount of steel and rubber in the world, how much should be devoted to producing cars, versus producing machinery, tools, and other goods?

Selling at half the price, would GM even bother making any cars at all?

You could easily name another thousand questions which all need answering. In very short order, it becomes clear: there are too many moving parts to the economy to think you can plan it out. Too much knowledge for anybody to have. Instead, markets use an extraordinarily efficient pricing system to allocate resources to their optimal use.

And cars are not unique. This kind of allocation takes place with literally every economic good, from health care to tennis shoes. Economic laws do not change depending on the good. The production of sweaters is not intrinsically different than the production of food, water, housing, and health services. Yet, without fail, progressives overlook these facts and rely on emotional rhetoric instead.

“But I need health care to live! I need a living wage! We can’t let businessmen determine whether I live or die!”

Unfortunately, their rhetoric persuades lots of people. Couple this with a democratic government, and you’ve got a recipe for systemic poverty.

News for the progressive: you don’t get fed because of laws. You aren’t dodging killer consumer-products because of the FDA. It’s despite government regulation that wealth is created. You get fed because functioning prices, profits, and losses within a market system. Without it, you’d undoubtedly starve, regardless of the law – the history of communism confirms this.

Granted, cold economic laws do not have the same rhetorical power. It sounds wonderful to say, “Everybody should have free college education!” But that’s not a world most people want to live in – if they understood the economic trade-offs involved.

Take, for example, my recent trip to the hospital. I was getting out-patient treatment, and I needed a place to park. I used a parking garage, but I had to pay for it. Money! For parking my car, so that I could get essential health services. What kind of greedy capitalist pig would force me to hand over money to park at a hospital? Hospital parking should be free!

Thank goodness I didn’t get my wish. What would have happened with a) free parking for everybody and b) a scarce amount of parking spaces? I would never have found a spot.

Everybody who wanted to park in that area – for the local restaurants, the park, or maybe because their car needed maintenance – would have been packed into the garage, while I (somebody that really needed a spot), would have been unable to park.

The solution: prices. There’s only a finite amount of spots. Instead of having “free parking for everybody”, we need “parking for those who really need it” – i.e. for those who are willing to pay for it.

It’s not a perfect solution, because there is no perfect solution. Scarcity necessarily means some people’s desires will remain unsatisfied. It’s simply the best solution possible, given the imperfect circumstances.

Campaigning on moral indignation against paid hospital parking would not only be silly and ignorant – it would be counter-productive. The world would be better off that campaign lost. But unfortunately, this kind of counter-productive nonsense is precisely the modus operandi of progressives. They take moral positions, not rooted in reality, and persuade voters by appealing to emotional rhetoric – on a perpetual “quest for cosmic justice”, as Thomas Sowell puts it.

Fundamentally, claiming a “everybody has a right to affordable housing” is no different than claiming, “Everybody has a right to a refrigerator, two television sets, a car, several pairs of clothes, and broadband internet access!” Nevermind any concern for how these good actually get produced, or what the concrete effects of government micromanagement would be.

All political and social theories must first be rooted in reality; they have to be grounded in sound economics. Otherwise, they are hopelessly doomed to inaccurate, fanciful conclusions.