The proposition that socialism can be a natural consequence of an excess of governmental regulations may be an overreaching idea, but not by much.
By definition, socialism refers to a range of economic and social systems characterized by social control of the means of production. In parallel, regulations can be defined as a model of management prescribed by a superior authority having the force of law. That is, excessive government regulations may be viewed as the mechanism for effective socialist governmental control of the means of production.
From that perspective, the increase in federal regulations in the United States over the years is not only staggering, but ominous. Each year, the Competitive Enterprise Institute publishes a survey of the size, scope and cost of federal regulations, and how they affect American consumers, businesses and the US economy.
The report, aptly titled “Ten Thousand Commandments,” alerts us as to the impact of federal regulations. Regulations get little specific attention in political debates because, unlike taxes, their costs are not budgeted and are often indirect and off the books. But consider that the 2015 Federal Register — the federal government’s daily publication of rules — finished the year at 80,260 pages. That is equivalent to over 400 books of average size.
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Though precise regulatory costs can never be fully known, the “Ten Thousand Commandments,” report uses government and private data about regulations enacted yearly, and their effects to offer us a more comprehensive overview of the costs of the regulatory state.
The 2016 report highlights that federal regulatory costs exceeded $1.885 trillion in 2015. This figure is incomprehensible for most of us, so let’s introduce some context. If US federal regulations were a country, it would be the ninth-largest economy in the world, ahead of Russia. If we assume that the cost of federal regulations is transferred directly to households, each US household incurs a yearly regulatory hidden tax of $14,842. This hidden tax amounts to 28 percent of the average budget expenditure per household.
In the same way that regulatory costs remain largely hidden from public view in our federal budgeting processes, regulatory costs are also unaccounted for in our personal household budgeting. But inevitably, the cost to businesses of regulatory compliance finds its way to the prices consumers pay, the wages workers earn and to lower levels of prosperity. We pay the bill, but the lack of transparency regarding the real costs of regulations may explain our gluttonous appetite for paternalistic government interventions.
Paternalism embodies the twin socialist convictions that most individuals make bad decisions when allowed to decide for themselves, and that businessmen, acting out of greed, endanger the gullible public by cutting corners to make an extra buck.
Yes, commerce is a self-interested pursuit that encourages and rewards selfish behavior. However, it does not follow that business is about harming, or exploiting customers. In a free enterprise system, profits result from creating superior value for customers, not from exploitation.
Regulatory policy imposes the judgment of a small group of regulatory wise men over a market process of voluntary exchange that reflects the needs and preferences of the population at large. In a free market economy, every voluntary exchange guides resources to their highest value use. Thus every regulation that impedes voluntary exchanges reduces the effectiveness of resource use, and increases costs.
Markets do not cause escalating bureaucracies and inefficiencies, government regulations do. Competitive markets lead to innovation, customer satisfaction and declining prices. After all, one does not succeed in business by harming or mistreating customers.
This is not to suggest that regulations are always unnecessary. Policies that seek to protect children and those unable to make reasoned judgments are clearly defensible, but regulations that aspire to protect individuals from themselves undermine the very concepts of personal responsibility.
Accepting responsibility for our own lives is a moral and intellectual achievement. It is a celebration of our individual freedoms. Philosophically, government regulations delineate the boundaries between freedom and socialist coercion.