Societal choice on dominance by king/government or individual/enterprise over a nation’s economic leadership has been debated since time immemorial. The debate has often been earnest, sometimes violent, and settled nationally by electoral or military win. The current pandemic, with its threat to business and personal livelihoods, and the need for governments to invest more now in national and regional well-being, fuels this critical argument, especially since free enterprise seems threatened and our comfort with government control is possibly increasing.
Philosophers Adam Smith and Karl Marx represent opposite sides of the debate on the relationship between enterprise and government. Smith proposed that national wealth is achieved by a free exchange of goods and services between buyers and sellers. Economic growth occurs when supply of and demand for resources increases, and competition between and within capital and labour groups work to meet the demand. Due to surplus production or distant opportunities, trading of goods expanded beyond local markets.
Karl Marx, while appreciating the relationship between capital and labour, including the value of capitalists in driving innovation, industry, productivity, and a right to reasonable profits, saw that wealth accumulated disproportionately in capitalist hands. He believed capitalism created classes in society, primarily the ruling, business class and the dependent, working class. His theory on communism became a movement to redistribute wealth and eradicate class distinctions.
Like Thomas More’s early 16th-century Utopia, ironically set on an island in the very New World, both philosophers envisioned ideal societies. But mankind’s behaviour is not ideal; we want freedom to exchange but tend to take more than we deserve, creating imbalance and conflict (think about the parable of Adam and Eve). American political economist Charles Lindblom argued that the free market is the best mechanism for creating wealth and innovation (Smith), however, it is inefficient in the distribution of social and economic benefit (Marx). Mixed economies arose in democracies to strike a balance between industry and government, individual and state (I ignore communism because I don’t know where it exists in any nation; facsimiles can be found in small, free societies like Hutterites, Amish and Israeli kibbutz). Canada functions in a mixed economy and, like other, similar countries, often struggles to maintain the right balance between participants.
Governments’ role in the economy historically has been through applications of monetary (interest rates) and fiscal (tax) policies, and, increasingly, investment in infrastructure, particularly transportation and communication, and the social services of health, education and welfare. During the current pandemic, we’ve appreciated and resented a surge in government authority and spending. However, sensible citizens accept it, knowing it’s necessary and limited in time, no less than until the next elections. This year and onward, government authority and spending will abate, returning to their key roles in the economy. Businesses and households will return to normal, or a new normal, and be re-enabled to create, produce, live free. It has to happen if we want to manage the enormous public debt accumulated over the pandemic and the growing inflation caused by more demand, and cash on hand, than supply. It has to happen if our economy and social services are to thrive.
And, of course, we’ll continue to debate utopia.
