Politics Vs the Market: Which Way to Go?

Published on 12th December 2006

Kenya’s Parliament gave President Mwai Kibaki a hefty pay rise in a move that came under sharp criticism from a number of quarters. Holy Family Basilica’s Father Samuel Mukua said that increasing the President’s pay was ill-timed especially at a time when many were dying of aids, floods, drought and hunger.

“If we keep quiet and leave our politicians unchecked, they will increase taxes, their salaries and the problems in this country,” he said. 

Being a politician means never having to say sorry, since what you did was supposedly with the best of intentions, and thus you have nothing to be ashamed of. When politicians talk about bringing peace to the world, their real interest is subsidizing military contactors; they speak of empowering minorities when their real aim is empowering leaders of special interest groups. 

There is a big difference between the market and politics. Politics provides a package deal. We may like one party's stand on freedom to relate, but its economics may appall us. We may like another party's economics, but its position on the rule of law may be frightening. We cannot pick and choose as we can in the market. We vote once every five years. After this, we are saddled with that party, for better or for worse. We may have liked something about the party at election time, but it could have changed thereafter. In politics, we see millions unhappy with decisions taken.  

Politics does not create wealth — it only taxes and spends. As a result, some gain; others lose. Those who gain are small, organized, vocal groups while the losers are the large, unorganized masses. Thus, politics is usually a 'negative sum game.’ With trade however, everyone gains.  

Helping those who can’t help themselves is a paraphrase of Karl Marx’s famous dictum: “From each according to his ability, to each according to his need.” Once that principle is adopted, more and more people will want to be part of the needy, rather than part of the able. Nearly everyone prefers to be on the “to” side of transfers than  the “from” side. 

In the market, there is complete and total unanimity. Since no one used force, both sides of every deal agreed to it. Not a single buyer or seller in a free market can complain that the decision to buy or sell was one to which he was not in complete agreement. Each decision taken is in complete sovereignty. One is free to choose between various players without force from the firm. There is continuous competition as opposed  to politics where the competition is only periodic.  

Voters do not vote with the same amount of care and attention that they pay to market transactions. When one goes to buy a bicycle, he makes sure he gets a good one because if he does not, he will directly suffer. As a result, he checks out various makes and prices, reads reviews and consults friends before making the purchase.  

Voters display 'rational ignorance.' They do not take the pains to go through every manifesto, hear all the candidates' chatter and check their criminal records. They find it rational not to know about politics since their vote may not affect anything. Smart editors have found this out and now politics no longer monopolizes the front page.

What is the way forward? Politics should be cut down to size and markets given full room.   

Why does the market work much better than politics? Here is one reason: If you discovered a better, simpler, less expensive solution to Africa’s poverty, would you take your plan to a private firm where you would get an OK and a check in three days or to the government where your plan could be bottled up in a committee for three years-and even after approval, would not be implemented by you, but by some company with better political connections than you have? 

When somebody says that the free market has failed, he means that free individuals, making their own voluntary choices have failed to do what he wants. Consumers have failed to buy what he thinks they should buy while producers have failed to offer what he wants offered. As a result, he would like them to be overruled and be forced to do what he thinks is best. 

Politics or the market. Which is ideal?

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