The State as Impediment to Economic Progress

The history of the twentieth century has demonstrated conclusively that the state is not the vehicle for economic progress. It is when the state withdraws from interference with the private decisions of producers that wealth creation expands dramatically. The free market is successful as a system precisely because the state is restrained from hindering its intricate workings. Examining the colossal socialist failures of our time, Paul Johnson wrote, "The state has proved itself an insatiable spender, an unrivaled waster."¹ By contrast, those nations which have grown wealthy did so by restricting the avarice of the state and allowing private capital to form. Examples of this would be the United States, Japan, and Western Europe.²

The practices of these wealthy nations perfectly illustrate Lord Acton's comment that what is truly significant is not what the state accomplishes, but what it allows to be accomplished. An explosion in living standards and technology has transpired due to the drive of the free-market economy. No "five-year plan" directed from Washington, D.C. led to the historic growth of the U.S. economy in the 1980s. The boom occurred because the Reagan administration cut taxes and regulation, allowing the free market to function. It was what the state "didn't do" that permitted the prosperity. There are nations in Asia which until recently were poor and have grown wealthy through these same free-market policies. They are called "The Little Dragons": Hong Kong, Taiwan, South Korea, and Singapore.

All four of these nations lack natural resources. Hong Kong was also a colony of the British Crown. But Hong Kong raised its per capita income to about six times that of mainland China.³ They achieved this by a consistent free-market approach for more than 25 years. Singapore switched to free market policies in 1959 and by the early 1980s this nation's per capita income was rapidly approaching Japan's.⁴ Meanwhile, those nations which relied on the state for economic growth failed miserably. The Soviet Union collapsed due to economic incompetence. Communist China and North Korea have extremely low living standards for their peoples. This is because these nations made the tragic error of placing no limits upon the state.

The Soviet Union was a fascinating case in point. Previous dictatorships throughout history had been partially restrained by other social institutions such as the Church, aristocracy, and bourgeoisie. But all of these had been swept away by the triumphant Bolsheviks. The state controlled all property and the state alone possessed all rights.⁵ The Soviet Union's 1918 constitution was a fraud. Paul Johnson writes, "It contained no constitutional safeguards and gave nobody any rights against the state. The power of the state was unlimited, indivisible --no separation of legislative and executive function, no independent judiciary--and absolute."⁶ Not surprisingly, this system paved the way for one vicious man, Joseph Stalin, to become an absolute autocrat and dominate all aspects of the nation's life. The economy suffered accordingly. The peasants would not produce food because they received nothing of value in exchange for it. Thus, in 1929 Stalin ordered the genocide known as the collectivization of the peasants.⁷ Six million Ukrainians were starved to death.

The history of these United States, by contrast, shows how limited government with the separation of powers results in freedom and prosperity. Based upon the work of Montesquieu, the Founding Fathers devised a constitution in 1787 which not only separated the functions of the legislative, executive, and judicial branches, but provided checks and balances so that no single branch would dominate the others.⁸ James Madison wrote in Federalist Paper no. 47 that, "The accumulation of all powers, legislative, executive, and judiciary, in the same hands, whether of one, a few, or many, and whether hereditary, self-appointed, or elective, may justly be pronounced the very definition of tyranny."⁹ Madison defended the Constitution from critics who argued that it did not adequately separate the powers. He quoted Montesquieu, who taught that the legislative and executive powers must never by united in the same person or body because the ones who enact tyrannical laws may execute them tyrannically. If the judicial power was joined to the legislative, the citizens would be subject to arbitrary control by judges acting as legislators. Were the judicial joined to the executive power, judges could become oppressive.¹⁰

Religious faith also plays a key role in restraining the state. When there are strong and vibrant churches in a nation, then there is a powerful social institution not controlled by the state. A sphere of liberty exists, no matter how tyrannically the government behaves. The role of the Catholic Church in Poland from 1945 to 1989 is a classic example. In the Gospel of St. Mark, Jesus teaches, "Render therefore to Caesar the things that are Caesar's, and to God the things that are God's."¹¹ The things that belong to God do not also belong to Caesar. That is why states which seek to own everything persecute the Church.

Solzhenitsyn describes how in the early 1920s the Soviet government insisted that the Orthodox Church must turn over all of its valuables not in liturgical use, ostensibly to help famine victims in the Volga. The Patriarch agreed to do so on the voluntary basis. But when the Soviets made forced requisitions, the Patriarch refused to comply. When a compromise was worked out in Petrograd that maintained the principle of voluntary donation, higher ranking Communist officials angrily rejected it. They said, "We don't need your donations! And there won't be any negotiations with you! Everything belongs to the government--and the government will take whatever it considers necessary."¹²

The Liberation theologians of Latin America have never had to learn this lesson. They despise the free-market economy and advocate some form of socialism as the solution to the problem of poverty in their region. Their writings demonstrate no recognition of the importance of limiting government. On the contrary, they desire to give the state a greatly enhanced role in their nations. As Michael Novak observes, the Liberation theologians have no clear ideas about how to protect liberty from being crushed by an all-powerful state. The American Founding Fathers went to great lengths to safeguard freedom by debating and enacting such principles as separation of powers and checks and balances among the branches of government.

By contrast, the liberation theologians appear to be uninterested in these vital matters which are the primary concerns of Alexander Hamilton, James Madison, and John Jay in The Federalist Papers. Novak writes, "In this respect, the books of liberation theologians are disappointing. They say they are interested in praxis. But one learns very little from them about the practical institutions they will put in place the day after the revolution that they seek. Institutionally, how will they protect human rights? Institutionally, how will they achieve the economic growth that raises up the poor?"¹³

A religious voice which clearly does recognize the importance of limitations upon government is that of Pope John Paul II. His social encyclical of 1991, Centesimus Annus, was outspoken in its defense of the free-market economy and constitutional democracy. It also criticized unsparingly socialism and the welfare state.¹⁴ A Polish priest, Father Maciej Zieba, writes that the pope is advancing the same brand of "ordered liberty" advocated by Lord Acton. The pontiff teaches that liberty must not be separated from truth. Comments Zieba, "... it is not too much to say that, on the hundredth anniversary of Rerum Novarum, John Paul II has proposed to the world a Catholic version of liberalism. It is, I am persuaded, the liberalism that we need."¹⁵

The teaching of Pope John XXIII supports the statement of Lord Acton that the individuals are above the state. In reviewing John XXIII's social encyclical Mater et Magistra, Father Robert Sirico observes that the Pontiff teaches that all social institutions have individual men as their end. This places the Catholic tradition far more in alignment with classical liberalism and its defense of the individual against subordination to the group than to any past or present brand of collectivism.¹⁶ Friedrich Hayek, in his 1944 classic The Road to Serfdom, wrote that while the great nineteenth century liberals such as Lord Acton abhorred power, to the collectivist it is the ultimate objective. Hayek points out that, "... many liberal socialists are guided in their endeavors by the tragic illusion that by depriving private individuals of the power they possess in an individualist system, and by transferring this power to society, they can thereby extinguish power."¹⁷

But the power held by the new social planners is far greater than that which was possessed by the private persons, because the government planners are a single body exercising all the power formerly held by many different bodies of private individuals. Hayek argues forcefully that economic and political aims must be kept separate in order to ensure liberty.¹⁸ No sincere Christian social theorist advocates radical individualism. The traditional American approach places a high value upon those vital social institutions of family, community, church, and school. These mediating institutions protect, teach, nurture, and discipline the individual so that he or she can achieve one's highest potential. A solitary individual would be helpless and would have no alternative but to turn to the state to have his or her needs met.

The best way to restrain the state is for private institutions such as the family and the church to create order in the souls of individuals. This order in the souls of the people leads to an ordered liberty in the state and a decline in pressures for government activism. It is the decay of these mediating institutions, especially the family, which has led to increased demand for state action. However, the state is not about to perform the functions of the healthy family and liberty is reduced by a large and intrusive government. What Margaret Thatcher referred to disparagingly as "the nanny state" is becoming a reality in these United States.

The wisdom of Lord Acton's observation that, "The more conscience comes to the front, the more we consider not what the state accomplishes, but what it allows to be accomplished" is little appreciated in our contemporary America. There is currently a wave of public support for a proposed national health care plan which would in effect allow the federal government to take over the health care industry. The plan is in total violation of the principle of subsidiarity, a key concept in Catholic social teaching. It takes a problem to the highest possible level when other proposals to solve the problem at the level of the consumer have not even been attempted. The American public needs to remember that our greatness as a nation is dependent upon private initiative and personal freedom, not the dictates of a bureaucratic Welfare State.

David A. Bosnich (first place winner) is a seminarian at the Byzantine Catholic Seminary of Sts. Cyril and Methodius in Pittsburgh. Ordained a deacon in May 1994, Mr. Bosnich seeks to serve the Archdiocese of Pittsburgh following his priestly ordination. Graduating magna cum laude from LaRouche College, he served in the military from 1982 to 1986.