On Laissez Faire Capitalism and Protectionism
I wrote the following in reply to a member of a Facebook group No To Philippine Communism. This group member claimed that laissez faire capitalism is too pure to be adopted in the Philippines. Here’s what he said: “Rand’s capitalism is too pure to be applied in a multiethnic society like the Philippines. Rand’s formula is applicable in homogeneous societies like the New England States, Korea, Japan and Southern France. However, I still believe that capitalism (minus rent-seeking and government interference) is the better system.”
Here’s my answer:
Why is laissez faire capitalism the only moral and practical economic system and what causes poverty?
Laissez faire capitalism, which means complete, solid, uncontrolled, unregulated capitalism, is the only moral economic system because it recognizes individual rights– man’s right to life, liberty, property and the pursuit of happiness. There is no other economic system that respects and recognizes man’s inalienable rights except capitalism.
Poverty exists in many parts of the globe because there are societies that reject the real essence of freedom and man’s nature and rights. Ethnicity or traditions are merely creations of man. Thus they can be discarded. When ethnicity or ethnic tradition impinges upon man’s nature and rights, then it must be declared as evil and impractical. Thus anti-man ethnic tradition must be rejected.
Laissez faire capitalism is not incidentally the creation or idea of Ayn Rand. Historically it’s the economic system that is being supported by Austrian Economics, a school of economic thought that advocates an extremely limited role of government and emphasizes the unstructured organizing power of the market and price system.
Laissez faire capitalism can work in any country as long as the people know and understand the very essence of freedom, man’s nature and man’s rights. Laissez faire capitalism cannot exist in ethnic or theocratic societies that regard man as a sacrificial animal. For example, it is being rejected in the tribal nations of Africa because of their grotesque mystical idea of ethnicity and Black Nationalism. It cannot exist in a Muslim country wherein the Shariah law explicitly rejects the notion of individual rights.
One should understand that laissez faire capitalism is the only economic system that recognizes individual rights. For a society to be free, man or the individual must be regarded as the “standard of value” or an end in himself and not the means to the ends of others. Now, is there a nation or a society that applied the principles of laissez faire capitalism? Yes, there was such a nation, and it’s the earliest period of the United States of America.
This same Facebook member also made a comment on protectionism in which he said: “I’m not a sociologists but I think the old American system (protectionism by the States) might work here. The provinces shall serve as the protector of the local businesses (minus privileges and interferences). The provinces role should be limited to enforcement of contracts and promotion of the free enterprise. If applied at a national level, certain groups will surely take advantage. US: WASP (white anglo saxon protestants). Phil: Old Rich Catholic Tagalogs.”
Here’s my reply:
In essence and by definition, protectionism is a breach of the principles of capitalism. Protectionism is essentially a legal mechanism of the government. Historically, protectionism is based on the idea that a country must protect its economic interests against outsiders. There;s nothing wrong with a government that protects the interests of its citizens and businesses so long as its political actions are objective, clear and do not breach the principles of free-market capitalism.
Ideologically, protectionism is based on the utilitarian idea that the government must secure and provide the “greatest good for the greatest number.” Only the government or a potential dictator can define the concept of “greatest good.”
The relativist definition of “good” is whatever is good for the “greatest number.”
But one must understand that in essence, protectionism is part and parcel of the idea of socialism. All socialist or communist countries in the world strictly apply protectionism. It’s a socialist phenomenon and it’s a breach of economic reality. The first victims of protectionism are not the “outsiders” who would like to enter a particular market, but the people or consumers in that particular society.
Thus, protectionism is evil and must be rejected because of the following:
1. It’s a breach of the principles of capitalism;
2. Therefore, it’s a breach of economic reality;
3. A breach of economic reality can only be initiated or forced by the government;
4. And this situation will lead to more government powers;
5. Which will lead to either socialism or fascism;
6. Protectionism is one of the first signs of a mixed economy bordering on dictatorship;
7. The first victims of protectionism are not the business “outsiders” but the people or consumers living in that society because of higher prices and lower quality of goods and services;
8. Protectionism invites economic monopoly or cronyism;
9. It invites corruption, bribery, and red tape;
10. It stunts economic growth;
11. It destroys economic freedom;
12. It will lead to dictatorship.