What role does the Government play in determining the level of employment in a free society? - Granite Grok

What role does the Government play in determining the level of employment in a free society?

What Role Does the Government Play?

Can a society be free if its economy is not free? My assertion to you is America can do better. In order for that to happen, we must understand what is wrong. We need to want to understand where we went wrong. We need to agree on how we can best adjust to remedy the error we have made.

Hayek in “Road to Serfdom” wrote:

“There is finally, the supremely important problem of combating general fluctuations of economic activity and the recurrent waves of large scale unemployment which accompany them. This is, of course, one of the gravest and most pressing problems of our time. But, though its solution will require much planning in the good sense, it does not – or at least need not – require that special kind of planning which according to its advocates is to replace the market.”

The problem

The growth of socialism, the centralization and control of the economy through government intervention serves to kill the vigor of any economy. In America, the movement in this direction began in the early 20th century. The first major step came with the creation of the Federal Reserve System. It began operation in 1914. Its stated purpose is stabilizing the economy by controlling variations in the money supply.

The move toward centralization and control of the economy was further aided by the passage of the 16th Amendment to the U.S. Constitution. This amendment allows Congress to levy an income tax. Most importantly it removed the requirement for apportioning the tax among the states.

The who

Progressives like Hoover characterized the adjustments in the economy resulting from changes in the business cycle as the liquidation of labor. He opposed such an approach on the grounds that labor is not a commodity. It represents human bones. Lost in the social implications of the mischaracterization is economic reality.

With the growth of socialist economic intervention what we have seen is blame-shifting. This began with the under consumptionist views of Ford, Filene, Hoover, Foster and Catchings. Often an instrument of government intervention in the economy produces an unexpected or unwelcome result. When this occurs the responsibility for the undesired events is attributed to the market.

The what

The blame shift thereby sets the stage for further governmental economic intervention. Examples of government interventions into the economy which have had negative or unintended consequences include the Fair Labor Standards Act, Minimum Wage Laws, the Davis Bacon Act and many of the laws associated with the social safety net.

The process of refusing to hold the government economic intervention responsible for results produced by the interventions has been a recurrent theme. The ultimate intellectual rationale for much of this behavior has been Keynes’s General Theory. The General Theory was a rework of the earlier under consumptionist view. The difference between the views is re-naming the villain “over saving” rather than “underconsumption.” They are functionally two sides of one coin.


What role does the Government play in determining the level of employment in a free society? We know a society cannot be free if its economy is not free. America can do better than it is currently doing. In order for that to happen, we must move to remedy the errors we have made in the last century.