any limits whatsoever. A person’s freedom is limited by the freedom of every other person. In the United States, a person is free to drive down a highway. In its general sense, everyone will agree with that statement. At the same time, everyone understands and agrees that the freedom to drive down the highway is limited. Only people who have the ability and a license are free to drive down the highway. A person’s freedom to drive down the highway is also limited by the other people using the highway. The government passes laws and enforces those laws in such a way as to maximize the freedom of everyone. Speed limits, stop signs, and traffic signals provide the necessary order to a free society of drivers.
The fallacy of free market economics lies in the assumption that there should be no restrictions, no regulations, and no oversight by government. It is similar to the idea that there should no speed limits, no traffic signals; everyone will naturally respect everyone else. While this would work for most people, it definitely would not work for everyone. There would be a small group of people who would not respect the rights and privileges of the rest of society but instead would take advantage of the lack of appropriate and agreed upon controls in order to capitalize on the situation for their own personal and selfish purposes. A free market with no rules, regulations or management is not a fair market, but a fair market is always a free market. A fair market is based on rules, regulations and management. To achieve a free market, it is first necessary to achieve a fair market.
There has to be government controls and government oversight within the economy in order to maximize the freedom and opportunity of all. There cannot be a free market in the sense promoted by the capitalists; a market without any regulations and controls. It is like a football game without any rules or referees. Rules bring order; without them there is chaos. The natural constraints on the economy come from a free and representative government: a government that represents the people; serves the will of the people and acts to regulate the economy so as to maximize the wealth and prosperity of all of the people. It is the role of the government to maintain the balance between capital and labor through regulations, supervision, and adjudication. If there is some aspect of the economy that is out of balance, the government must do what is necessary to restore balance. There is no other means of achieving and maintaining a balanced, efficient and effective economy than the government; the Federal, state, county and local governments.
The US economy consists of 315 million people, millions of goods and services, and hundreds of thousands of businesses all interacting constantly and continuously. There are billions of transactions and interactions between these economic entities occurring daily. The aggregation of all of these entities, interactions, and transactions constitute the economy of the United States. Can such a gigantic and complex system function efficiently and effectively without oversight, management, and regulation?
Imagine what would happen if one million people were gathered together for one year in a very small area without any direction, without any rules, without any laws, without any kind of supervision and without any management. What would happen? Would there be order or chaos? Would there be harmony or conflict? Would all of the interactions and transactions between the one million people be fair and balanced? Would everyone treat everyone else as equals? Would the vast majority of the one million people be happy? Order, harmony, equity, balance, respect, and happiness cannot come about without rules, laws, and supervision. These rules and laws and this supervision must come from an impartial third-party which the majority agrees to or selects through a fair election process. And this is what is called government.
An economic system cannot function efficiently and effectively without rules, laws, supervision and management. At the same time, there cannot be too many rules and laws or too much supervision and management. Micro-managing people and their activities are almost as bad as no management whatsoever. Rules, laws, supervision and management must be moderate not excessive—but rules, laws, supervision and management have to exist to achieve and maintain order, equity, efficiency and effectiveness. In addition, government should only manage by exception. Management by exception implies that action is only taken by management when there is an imbalance or something is not working. Applied to the government and the economy, the government should only take action when there is an imbalance or problem in the economy, otherwise it should allow the economy to function on its own.
Many of the factors that caused the Great Depression exist today, especially the unbalanced distribution of wealth and the lack of regulation of the financial industry. However, currently there are also many other factors undermining the efficient and effective functioning of the US economy that did not exist at the time of the Great Depression. The US economy is burdened by an enormous trade deficit caused by the imbalance between imports and exports and excessive government spending on foreign policy ; military bases, military engagements, foreign aid, and intelligence operations. There are more and larger multi-national corporations today than at the time of the Great Depression and they exert a far greater influence on the US government than the corporations that existed at the time of the Great Depression. The aggregate effect of all of these factors have the potential to cause a much more severe and lengthy depression that the one that started in 1929 and severely impacted the majority of the population. In fact, these factors have the ability to totally ruin the United States economy.
Consider what would happen if the US economy was totally ruined? Most local and county governments would go bankrupt, and it is probable that the Federal government would also go bankrupt. As these governments go bankrupt, public and social services would be greatly reduced. Social security, Medicare, Medicaid, unemployment insurance and social services would either cease or be drastically reduced. Many if not most public institutions such as schools, hospitals, libraries, and parks would close. Those employed by the various levels of government would be laid off. Basic services such as police and fire protection, and sanitation services would be severely reduced. Private companies would take over these services and charge whatever prices that they want. The Federal government would have to significantly reduce the military. The thousands of businesses whose major customer is the government would probably close. In a domino fashion, thousands of businesses would close and tens of millions of people would be out of work with no income whatsoever. Imagine unemployment at seventy percent. That would mean over 100 million people out of work. Imagine senior citizens who no longer receive social security payments every month (there are 65 million people on Social Security). Imagine people not having money to buy food, to pay their utilities, or to pay for their housing? Imagine students not being able to attend public schools because they were closed (there are 70 million students attending public schools). Could this happen? These things certainly could happen for the underlying factors that could bring about the collapse of the US economy exist, are operating today, and are increasing in their effect on the economy?
All economic systems involve consumption and production. Production generates goods and services which are consumed and or utilized through consumption. The economic cycle consists of continuous production and continuous consumption. The major economic systems within history have been capitalism, socialism, and communism. At the same time, the type of government that exists and operates along with the economic system (capitalism, socialism or communism) needs to be considered since the government and the economy are intimately related within a nation. The primary difference between capitalism, socialism, and communism as economic systems has to do with the ownership or control of property: land, natural resources, artificial resources (buildings, machinery, equipment, materials, energy, furniture, etc.) and intellectual concepts (theories, models, designs, formulations, recipes, music, artistic expressions, and literary expressions), human labor, human activities, and communication. All of these things are property.
In a purely communistic economy, the government owns and controls all property. The government owns and controls all of the land, all of the natural resources, all buildings, all machinery, all equipment, all materials, all energy, all furniture, all theories, all models, all formulations, all recipes, all music, all art, all literature—the state owns and controls everything even people. Because of the extreme nature of communism, the government that promotes and supports communism must be virtually totalitarian, that is, it must control every facet and activity of society. Communism is wrong
