The “classical economists” of the nineteenth century were often insightful and wise in their understanding of the dangers from government intervention in the market place.
Even John Stuart Mill, who is often considered the “bridge” between the older advocates of laissez-faire and the compromisers whose arguments have lead to socialism and the interventionist state, was not a fool on the consequences of unstrained government regulation.
He explained in a manner that still rings true today that government and its political manipulators are always tempted by and attempting to use the coercive power at their disposal to benefit themselves (and their friends) at the expense of others in society.
He keenly understood the lack of knowledge and ability on the part of politicians and bureaucrats to direct economic affairs better than allowing each person to decide how best to use their knowledge and abilities in free market association with others.
And he proposed limiting the voting franchise to only those not receiving government subsidies, redistributions and benefits, because those who received such favors from government would use their votes to maintain them and enlarge them at the expense of the net taxpaying members of society.
So, what lead such an astute thinker and economist, at the end of the day, to be an influence for the growth of the very government powers he warned against? His starting premise on political and economic policy issues was the misdirected notion that government should attempt to advance the common “happiness” of “society” and individuals had to conform to – to sacrifice for – how this common good and general welfare came to be defined.
He had turned his back on the earlier tradition of “natural rights,” that each individual had certain rights to life, liberty and property as derived by reason and reflection on the nature of man. And that government’s purpose and limits were to secure and protect each individual in his rights, rather than to make the individual a slave to a mythical collective concept of the “good of the whole” somehow separate from and independent of the good of each peaceful himself.
John Stuart Mill and the Dangers from Unrestrained Government
by Richard Ebeling Ph.,D.
One of the great voices for personal liberty was that of the British economist and political philosopher, John Stuart Mill. His essay, “On Liberty,” though penned well over 150 years ago, is a classic statement that the individual should be respected in his right of freedom of thought, speech and action.
But John Stuart Mill (1806-1873) was also one of the most important economists of the nineteenth century. His Principles of Political Economy, originally published in 1848, became the leading textbook for at least two generations of students from which they learned the nature of a market economy and its alternatives.
J. S. Mill’s Sympathies for Socialism and “Distributive Justice”
Mill has been a highly controversial figure among friends of freedom because while strongly endorsing the autonomy of the individual in thought and deed, he believed (and even hoped) that someday in the future human nature might have changed enough to be compatible with elements of the socialist idea of an altruistic good society.
He also argued that while the physical laws of production (the technological requirements of producing goods from resources and raw materials) are beyond man’s control to arbitrarily change, the “laws of distribution” were open to human choice and manipulation, given any social values people may have.
That is, after the output of goods has been produced, it is a matter of “society’s” preference to decide how to distribute it among the members of any community. This led the Austrian economist, F. A. Hayek, to argue that Mill’s “advocacy of distributive justice and a general sympathetic attitude towards socialist aspirations in some of his other writings, prepared the gradual transition of a large part of the liberal intellectuals to a moderate socialism.”
And it is certainly the case that in his Principles of Political Economy, Mill argued for numerous exceptions to the laissez-faire principle of governments being limited to the protection of life, liberty and peacefully acquired property. Most current-day classical liberals find many, if not most, of these exceptions unpersuasive in the light of more than a century with the experience of government intervention in education, business regulation, the labor market, and welfare state “social safety nets.”
Self-Interest and the Consequences of Government Intervention
But it would be unfair to Mill to assert that he had lapsed into a fully utopian la-la-land of malleable human nature in which social reality could be whatever the dreamer of a “better world” might desire.
He may have been open and even sympathetic to the idea that maybe someday human nature in the normal societal work environment might become more like a monastic brotherhood of collective sharing and selflessness. But in the world in which Mill lived he had no illusions about any such transformation in a reasonable horizon of time.
He worked under the clear and evident assumption that individuals are guided by self-interest, that they attempt to improve their own circumstances as they define betterment, and they respond to the incentive structures within the institutional settings in which they find themselves.
Given the reality of human nature in the social world, Mill was insistent that, “though governments or nations have the power of deciding what institutions shall exist, they cannot arbitrarily determine how those institutions shall work.” The effects from changing how wealth was distributed in society were not under man’s unlimited control through government edict, legislation or command. Or as he put it,
“We have here to consider, not the causes, but the consequences, of the rules according to which wealth may be distributed . . . Human beings can control their own acts, but not the consequences of their acts either to themselves or to others. Society can subject the distribution of wealth to whatever rules it thinks best; but what practical results will flow from the operation of those rules must be discovered, like any other physical or mental truths, by observation and reasoning.”
He understood that the link between work and reward was strongest when the gains from effort were the property of the producer of wealth, and the resulting output might be negatively affected under prevailing human circumstances with a break in this linkage.
Individuals Know Their Own Interests Better Than Government
Mill also believed that individuals have a far greater understanding of their own surroundings in terms of enterprise decisions than any government agents and bureaucrats could ever possess. Even if one were to imagine that they possessed the same knowledge as the actors in the different corners of the division of labor, those representatives of the government would never have the same incentive to use that knowledge as productively and profitably as the separate individuals in the market arena.
However, in fact, there is more knowledge in the minds of all the members of a society combined than any one or group of government officials could ever know or master, Mill pointed out. Thus, it was better to leave the use of such dispersed and personal knowledge to those who possessed it, rather than the government taking on commercial and enterprising tasks for which it was not competent.
In addition, given the reality of self-interest on the part of all members of society, whether in the market or in government, Mill warned the presumption needed to be the constant danger of misuse and abuse of political power and governmental position.
Government the Greatest Threat to Person and Property
Essential for individual and social prosperity was security of person and property, Mill insisted. But there is always the eternal problem: who guards the people from the guardians meant to protect people’s lives and possessions? Or as Mill expressed it:
“By security I mean the completeness of the protection which society affords to its members. This consists of protection by the government and protection against the government. The latter is the most important.
“Where a person known to possess anything worth taking away, can expect nothing but to have it torn from him, by every circumstance of tyrannical violence, by the agents of a rapacious government, it is not likely that many will exert themselves to produce much more than necessaries . . . The only insecurity which is altogether paralyzing to the entire energies of producers, is that arising from the government, or from persons invested with its authority . . .
“It is sufficient to remark, that the efficiency of industry may be expected to be great, in proportion as the fruits of industry are insured to the person exerting it; and that all social arrangements are conducive to useful exertion, according as they provide that the reward of every one for his labor shall be proportioned as much as possible to the benefit which it produces.
“All laws and usages which . . . chain up the efforts of any part of the community in pursuit of their own good, or stand between efforts and their natural fruits . . . [tend] to make the aggregate productive powers of the community productive in a less degree than they would otherwise be.”
Government Services Should Not be Monopolized
Though Mill may have concluded that government in a liberal society should extend its responsibilities beyond the narrower confines of a more strict laissez-faire policy, he nonetheless remained suspicious and indeed critical of any monopolization of such tasks.
For instance, he believed that state involvement in education was essential to assure the development of a generally literate, intelligent, and informed citizenry. But while he argued government funding and supplying of schools were desirable for a functioning and free society of reasoning and reasonable individuals, he was forcefully against the exclusion of educational competition.
Nothing was more to be feared that total government control over any facet of life that would threaten to stifle the creative, innovative and uniquely original ideas that only emerge from diverse and free minds able to think and experiment:
“One thing must be strenuously insisted on: that the government must claim no monopoly for its education, either in the lower or in the higher branches . . . It is not endurable that a government should either de jure or de facto, have a complete control over the education of the people. To possess such a control, and to actually exert it, is to be despotic. A government that can mold the opinions and sentiments of the people from their youth onwards can do with them whatever it pleases.
“Though a government, therefore, may, and in many cases ought to, establish schools and colleges, it must neither compel nor bribe any person to come to them; nor ought the power of individuals to set up rival establishments depend in any degree upon its authorization.”
Dangers from Democracy and the Need to Limit the Franchise
In his famous essay “On Liberty,” Mill had warned about both the political tyranny of the minority and, now, in his “democratic” age the growing danger of a tyranny of the majority. (See my article, “John Stuart Mill and the Dangers to Liberty.”)
In the Principles, he emphasized the same point, arguing that, “Experience, however, proves that the depositories of power who are mere delegates of the people, that is of a majority, are quite as ready (when they think they can count on popular support) as any organs of oligarchy to assume arbitrary power, and encroach unduly on the liberty of private life.”
Indeed, Mill suggested that a tyranny of the majority was potentially more dangerous than the monarchies or oligarchies of the past, since when “the people” assert their sovereignty there remain few if any of the intermediary institutions of society to protect and support the threatened individual from the abuse of the “masses.”
This danger of an unbridled voting majority taking advantage of their numbers to plunder others in society was an especial problem in democratic society, Mill warned. Therefore, in his 1861 book, Reflections on Representative Government, Mill argued that those who received “public assistance” (government welfare) should be denied the voting franchise for as long as they receive such tax-based financial support and livelihood.
Simply put, Mill reasoned that this creates an inescapable conflict of interest, in the ability of some to vote for the very government funds that are taxed away from others for their own benefit. Or as Mill expressed it:
“It is important, that the assembly which votes the taxes, either general or local, should be elected exclusively by those who pay something towards the taxes imposed. Those who pay no taxes, disposing by their votes of other people’s money, have every motive to be lavish and none to economize.
“As far as money matters are concerned, any power of voting possessed by them is a violation of the fundamental principle of free government . . . It amounts to allowing them to put their hands into other people’s pockets for any purpose which they think fit to call a public one.”
Mill went on to explain why he considered this to be especially true for those relying upon tax-based, redistributed welfare dependency, which in nineteenth century Great Britain was dispersed by the local parishes of the Church of England. Said Mill:
“I regard it as required by first principles, that the receipt of parish relief should be a peremptory disqualification for the [voting] franchise. He who cannot by his labor suffice for his own support has no claim to the privilege of helping himself to the money of others . . .
“Those to whom he is indebted for the continuance of his very existence may justly claim the exclusive management of those common concerns, to which he now brings nothing, or less than he takes away.
“As a condition of the franchise, a term should be fixed, say five years previous to the registry, during which the applicant’s name has not been on the parish books as a recipient of relief.”
I would suggest that the same argument could be extended, today, to all those who work for the government, for as long as they are employed by the government they are directly living off the taxed income and wealth of others.
If it is said that government employees pay taxes, too, the reply should be that if you receive a $100 salary from the government and pay in taxes, say, $30, you remain the net recipient of $70 of other people’s money and are not a contributor to the costs of government.
Extending Mill’s logic a little further, I think that the same case could be made that all those who live off government expenditures in the form of government contracts or subsidies, should likewise be excluded from voting for the same conflict of interest reasons.
Such individuals and their private enterprises may not be totally dependent upon government expenditures for their livelihood. A rule might be implemented that to be eligible for the right to vote: no individual or the private enterprise from which he draws an income should receive (just for purpose of example), say, more than 10 percent of his or her gross income from government spending of any sort.
If a form of Mill’s voting restriction rule had been in affect 100 year ago, it is difficult to see how the government could ever have grown to the size and cost that it now has in society.
In turn, if there were any way to implement such a vote-restricting rule, it is equally hard to see how the current, gigantic interventionist-welfare state could long remain in existence. Government, no doubt, would soon be cut down to a far more limited and less intrusive size.
Mill’s Illusion of Calculating “Social Utility”
Finally, what was the source of how someone like John Stuart Mill could, on the one hand, argue so persuasively on the dangers of unlimited government, especially in its modern democratic form, speak so eloquently on behave of the liberty of the individual against the tyrannies of minorities or majorities, yet, make the case that the “laws of distribution” were a matter of “society’s” choice, and government should intrude in various and sundry ways into the market and related aspects of people’s lives for the “good of all”?
The basic reason is the philosophical premise from which John Stuart Mill grounded his arguments concerning freedom, society and the government. Though he changed his views over the years, he fundamentally remained a “utilitarian.” The goal of public (that is, government) policy is to maximize the happiness of “society,” and therefore “goodness” of every social arrangement – the “rights” of individuals to any liberty, the ownership of property, and the distribution of any material wealth produced – was a matter of estimating whether they generated more collective “pleasure” than “pain,” more “happiness” than “harm” to the society as a whole.
The individual was allowed to keep or have redistributed to him from others what the “social collective” decided was to be his out of the total of “society’s” material wealth. The individual, in other words, is made a material slave to the community of which he is a member.
One of Mill’s contemporaries, the social philosopher, Herbert Spencer, pointed out, in Social Statics (1851), the insolubility of this train of reasoning saying that if we argue, “a man is not at liberty . . . to do what may give unhappiness [negative social utility] to his neighbors, we find ourselves involved in complicated estimates of pleasures and pains, to the obvious peril of our conclusions.”
Such notions as “pleasure” and “pain,” or “happiness” and “unhappiness” are certainly real feelings that individuals experience and which influence and guide both the goals they set for themselves looking to the future and their judgments after the fact as to they evaluate how things have turned out.
But there is no way to quantify, measure, or sum up such inner feelings that an individual experiences, and there is certainly no way to, then, add them up over a community of individuals to determine whether one set of social institutions or government policies can be “objectively” said to make “society” as a whole better or worse off, more “happy” or “unhappy.”
Such a purely utilitarian approach to governmental decision-making is a swamp of subjective judgments, pseudo- scientific calculations based upon arbitrary assumptions assigned by the policy-maker, and a battlefield of competing conceptions of the “social good” that easily plays into the hands of those desiring political power and those wishing to rationalize the use of that power to coercively manipulate markets and wealth redistributions to benefit some at the expense of others.
“Natural Rights” and the Purpose of Government
What John Stuart Mill rejected in attempting to redesign society according to this shaky premise of “social utility” was the older tradition upon which the great achievements of winning liberty was based in the eighteenth and early nineteenth centuries, the tradition of “natural rights.”
It had taken on its early “modern” form in the writings the British philosopher, John Locke, in his Second Treatise on Government (1689), had said that individual rights did not come from government, but were derivable from reasoned reflection on the nature of man, the requirements for his survival and betterment, and the social arrangements most likely to be conducive to the improvement of each individual’s life while assuring the exclusion of force or fraud from human relationships.
Government, in this tradition, has a rationale for its existence in the need and usefulness of an enforcement institution to secure each individual in his right to his life, liberty and peacefully produced or acquired property from the plundering and murdering hands of others.
In the tradition of a reasoned conception of individual rights prior to and independent of government, the delineation of “just” associative relationships between human beings is their basis in mutual agreement and voluntary exchange.
In such a social setting, the role and delimitation of the duties and functions of government is to use coercive power to protect each individual’s liberty and not to apply its authorized use of force to, itself, abridge one person’s life, liberty or property to benefit another – and most certainly not on the basis of some arbitrary measure of people’s “pleasures” and “pains” to maximize some imaginary “total” of “happiness” for the entire society.
It is this natural rights tradition that was the basis for the principles expressed in the American Declaration of Independence, and it is the political philosophical tradition that needs to be restated, refined and persuasively articulated in our own times if liberty is to be restored and real social peace and mutual prosperity are to be effectively assured.
(See my article, “The Case for Freedom and Free Markets in the Writings of Ludwig von Mises, F. A. Hayek, and Ayn Rand”.)
First published at EPICTiMes, and posted here with the kind permission of the author
Dr. Richard M. Ebeling is the BB & T Professor of Ethics and Free Enterprise Leadership at The Citadel in Charleston, South Carolina, He was formerly professor of Economics at Northwood University. Was formerly president of The Foundation for Economic Education (FEE), was the Ludwig von Mises Professor of Economics at Hillsdale College in Hillsdale, Michigan, and served as president of academic affairs for The Future of Freedom Foundation (FFF).