Interventionism - And The Labour Market

Interventions in the labour market are directed towards the goal of increasing wages above the market rate. There are minimum wages stipulated (which cause permanent unemployment); there are trade unions which are protected in their violent and coercive actions (which cause more unemployment); there are doles for the unemployed (which cause even more unemployment); and finally there are immigration restrictions (which cause unemployment by making exports uncompetitive). Thus, these make no sense whatsoever. Rather, they are a fitting illustration of Lingle's Law:

Government intervention-> Distortion -> Impact on special interest groups -> demand for government intervention-> Distortion -> Impact on special interest groups -> demand for government intervention -> Distortion ->Ad infinitum /ad nauseum ….

Let us begin with the basic objective: raising wage rates in the domestic market. Now, in a completely unhampered market, all goods and services are sold at their competitive price. Thus, the benefits go to everyone as consumers of goods and services. It is in no one's interest as a consumer of, say, motor cars, that the trade unions make them costlier. It is also not in the interest of the "nation" taken as a whole, for export markets shrink, capital is transferred abroad, and the factories open in foreign countries.

Yet, Lingle's Law tells us that nations persist with these interventions because of the pressure of small groups who benefit from these interventions. These lead to more and more interventions - ultimately, to the complete destruction of the market economy. In the case of the market for labour, unemployment doles are the price paid for all the unemployment caused by minimum wages and trade unionism - and these are paid for by printing money. Since this cannot go on indefinitely, the international capital market is torn asunder and the gold standard destroyed. Each and every nation retreats into a "national economy" - and this is a recipe for war. Instead of mutual co-operation, we have mutual antagonisms.

The root of all this is the false and corrupt idea that the role of national governments lies in increasing the income of certain groups - either domestic workers, or domestic producers. What the science of Economics teaches is that there is no such role for the State. The government is nothing but the social apparatus of compulsion and coercion, whose only role is to act against enemies of the free market, enemies of natural social co-operation. With interventionism, it is the government itself that becomes such an enemy. The Predatory State is just a short step away from the Interventionist State.

This is the fourth post on the subject of interventionism. All these posts can be found by clicking on the label "Interventionism" on the right-hand bar. Tomorrow, I will conclude the series by discussing interventionism on "environmental" grounds. We will see that the environmentalists are enemies of Liberty and friends of the Interventionist State. Very misguided people, indeed.