Remembering The Economic Part of Checks and Balances

It is safe to say most Americans understand there is a limit to the power of government.  There is no consensus, however, on what that limit is or even how that limit is maintained.

There is a limited scope of activities afforded to the federal government in the Constitution itself.  Article 1, Section 8 is the touchstone list “delegated” powers afforded to Congress.  The “necessary and proper” clause of that same section has historically been the legislative escape clause for Congresses looking beyond its short constitutional charter of powers.

The very structure of the Constitution also affords a restraint on just how much the government can “get done.”  James Madison’s prudential observations in Federalist 51 highlights how the separation of powers pits one department of the government against the other in an internal struggle to keep each other from encroaching on the other’s authority.  Making “ambition to counteract ambition,” results in one more restraint on government power and overreach.

And there is the simple yet overlooked reason why there is a limit on government power: we have a written constitution.  If there is little or no restriction on government, why have anything written down?  Furthermore, if Congress may pass any law not strictly prohibited in Article 1, why have a handful of permitted powers listed in the first place?

One of the most overlooked and effective checks on the power of the government is the notion and existence of private property and its voluntary exchange among private individuals—what we call the free market capitalism.  When there is a clear delineation between what is private and what is public, there is a clear limit on what activities in which the government may and may not engage.

Ludwig von Mises, in his classic exposition, Liberalism: The Classical Tradition, remarks:

"There is an inherent tendency in all governmental power to recognize no restraints on it operation and to extend the sphere of its dominion as much as possible...If only private property did not stand in the way!  Private property creates for the individual a sphere in which he is free of the state.  It sets limits to the operation of the authoritarian will.  It allows other fores to arise side by side with and in opposition to political power...It is the soil in which the seeds of freedom are nurtured and in which the automony of the individual and ultimaely all intellectual and material progress are rooted." [Emphasis added.]

The recognition of and respect for private property sets a “No Trespassing” sign (or, for you Lord of The Rings geeks—like myself—a Gandolf-like You Shall Not Pass! declaration) between ourselves and our economy and the authoritarian proclivities of government.  Hence, the vital importance of insisting on economic freedom: If we are free to voluntarily exchange our property among ourselves, we create forces outside of and in opposition to the power of government.  We create one more check on the power of government.

Think of it as an economic checks and balances.  We, the People create and maintain the free market economy through the voluntary exchange of our private property, making arbitrary government actions less likely.

In Capitalism and Freedom, Milton Friedman also stresses the importance of private property and its resulting free market as an economic counter force to the power of government: "History suggests only that capitalism is a necessary condition for political freedom." 

Why?:  In a free market society economic power is widely dispersed among many millions of hands in which government has a limited role prescribed by law.

If government comes to direct and control the economy by laying claim to too much of our private property, it comes to control both political and economic power over our lives.  Economic power is then transferred from millions of hands working through voluntary exchange who hold no coercive power over each other, and concentrated into a few sets of hands in government regulatory agencies who already possess coercive political power.  

“By removing the organization of economic activity from the control of political authority, the market eliminates this source of coercive power.  It enables economic strength to be a check to political power rather than a reinforcement.” [Emphasis added.]

Thus, the folly of believing we can remain free by being only vigilant about civil rights such as free speech and freedom of religion but neglecting to jealously guard our economic freedom and private property rights.  We cannot afford the confluence of political power and economic power in the same hands.

We need to be mindful of our economic contribution to the “checks and balances” on our government.

Three more things need discussed here: the insidious power of government-sponsored monopolies, the 16th Amendment, and what passes for legitimate government regulation.  Let’s save those for other Chalk Talks.