The Separation of Economy and State

The modern world looks back on centuries of religious persecution with horror. Thomas Hobbes’s 17th century work on political theory, “Leviathan,” features the image of a kingly figure holding a sword in one hand and a bishop’s crosier in the other—the very personification of political and religious authority. But the American Bill of Rights introduced a healthy separation of Church and State, rightly understood as a limit on government authority over matters of conscience. It is time for the same principle to be applied to the economic realm.

A 2004 study showed that oil wealth is heavily correlated with corrupt, oppressive governments in Africa. These countries exhibited a similar pattern: parties compete for control over oil, then redistribute the profits in whatever way will best secure their power. Various interests in these “rentier states” are forced to depend entirely on the ruling regime for survival; the rule of law is nonexistent.

Though the study blames “resource abundance,” it is misleading to conclude that resources themselves are enemies of democracy. Resources are simply means of production and exchange and are therefore valuable assets for economic growth, which many studies have shown to be helpful in democratization.

The oil-rich third world is not stuck in poverty because of oil; they are stuck because of centralized control of their national wealth.

When a state exercises control over a nation’s wealth—in whatever form that takes—its power is almost unlimited, and without some very strong accountability mechanism, there is little hope for liberty or equality. Citizens become subjects, parties become regimes, and leaders become rulers.

The reason is fairly straightforward: he who holds the keys to wealth, authority and prestige also holds the keys to poverty, oppression and disgrace. He can use them to lock and unlock doors of opportunity for his friends and enemies. Society must cater to his every wish, and interest groups must clamor for his favor. Democracy and rule of law cannot exist under this system.

It is frightening, then, that so many free nations are moving in exactly this direction, albeit more subtly. As long as they draw attention to corrupt African dictators they can pretend to be the virtuous pioneers of progress, working toward greater economic equality. But state-enforced “equality” is neither progressive nor equal, and it requires the same corrupt tactics used by dictators.

A government that imposes high taxes is literally confiscating the nation’s wealth. When it begins redistributing this wealth in the form of subsidies, tax breaks and earmarks, it takes on characteristics of the African warlords. When it assumes the power to regulate industries according to a personal agenda, it becomes the gamemaker. And when we see dramatic swells of special interests pouring into Washington to lobby Congress and the President, how long do we have before the American experiment crumbles?

Karl Marx, the father of communism, demanded that the state take over the “means of production” to ensure justice and equality, but this tactic has produced neither because the state is not a neutral agent; its levers are pulled by men, not gods.

State redistributionism is a tempting but perverse application of our moral obligations precisely because it requires state control. This creates the very mechanisms that are destroying some African nations,and is now threatening nations whose wealth is based not in natural resources, but in a tradition of work ethic and capitalism.

Under free enterprise, the competitive arena is the marketplace, where power is fragmented and entirely dependent on consumer satisfaction. Even the most powerful companies eventually fall, and they are peacefully replaced with something better. Moreover, opportunity is only as far away as a good idea and a little hard work.

But if a centralized government prevents competition in the marketplace, it moves into either the black market or the White House. One creates a corrupt and dangerous criminal culture, the other creates a corrupt and dangerous political culture. But in the end, what’s the difference? They both lead to the dissolution of the rule of law.

If democracy and justice are to be preserved, it may be time to finish the work that America’s founders began with the First Amendment. They discovered that a state-governed church was inimical to both. Two and a half centuries later, we are learning that a state-governed economy is also detrimental to liberty, equality and virtue. Applying firm limits on the government’s ability to collect and redistribute the nation’s resources may be the defining issue of our generation. Marx was right about one thing: workers of the world unite!

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