Economics of Liberty Front Page Opinions

Voluntary Arrangements Are Essential to Social Trust and Independence

Americans frequently hear the words independence and dependence in policy discussions. Since our country was in many ways defined by the Declaration of Independence, we naturally think of independence as good and dependence as bad. As a consequence, arguments to reduce our dependence on others—whether on “foreign oil” (until recently) or on Chinese suppliers of essential resources such as rare earths or surgical masks—often find a receptive audience.

Unfortunately, our understanding of the relationship between dependence and independence is often faulty.

Political independence from England that removed abusive powers and impositions of the Crown and Parliament was indeed good. But we do not escape political dependence by becoming independent of one power. Our dependence on the policies of the new government could have been an improvement, but could also have been more burdensome. That is why we adopted the Constitution, and then the Bill of Rights, to limit that possibility. Yet the extent to which government has power is the same extent that we are dependent on it, willingly or unwillingly.

Economic independence and dependence are also not the same as political independence and dependence. Economic independence is the power to choose the terms one is willing to cooperate with others on and to reject others. In that sense, political dependence is often what overrides economic independence by taking away citizens’ options. But economic independence—which at heart boils down to property rights over yourself and the fruits of your labor—does not eliminate economic dependence on those we deal with.

In other words, economic independence—the power to choose among offers to cooperate with you—is consistent with economic dependence on the exchange partner chosen—the risk that you could be harmed by changes in that party’s willing offers.

However, it is important to note the limits on potential harm. When arrangements are voluntary, others’ willing offers place an upper limit on damages from dependence on a particular “best” trading partner. To that extent, the potential “damage” only reflects the fact that the gains you were getting from a relationship, relative to your alternatives, may be reduced or eliminated in the future. It does not reflect a harm imposed on you, but the potential that future gains from a particular relationship may be less than they were before.

Voluntary arrangements—economic independence—prevent any “harm” beyond that. And it is important to note that such market arrangements create the only form of independence/dependence which offers that protection.

In contrast, consider dependence on government. Since governments have the power to coerce you, they can take away options that others would willingly offer you. And not only can this take away the best options you would have had, it can take away the alternatives that protect you from further harm in voluntary arrangements. It can take away everything.

So given that economic independence is consistent with dependence on trading partners who benefit us the most, and political independence from one government is consistent with dependence on another government, it is not a question of independence versus dependence, but of which form of independence/dependence will serve us better.

Other than by limiting robbery and fraud and the like, government cannot improve the offers we receive from others unless it coerces them. But that is an inherent abuse of self-owning individuals. And especially when we realize that we will not typically be the coercers, but the coerced, it can release a Pandora’s box of social evils on society.

The government can use that same coercive power to worsen or eliminate the offers we get from our preferred trading partners, harming us. They can also go further, worsening or eliminating the offers made by the various runners-up for our business. In other words, voluntary arrangements can only enhance our opportunities; government cannot enhance our mutual opportunities other than by better enforcing our property rights, but it can worsen or destroy them. Who would you rather be dependent on?

Further, note that policy arguments to “reducing our dependence” on someone else are excuses for imposing political restrictions that harm citizens. For instance, protectionism promoted in terms of “good” American producers versus “evil” foreigner producers ignores the fact we deal with others because they make us better off than our domestic alternatives. And taking those superior options away harms all Americans for whom that is true. It is really an arrangement between favored American producers and the government to harm American consumers and the suppliers that most benefit them.

Notice that dependence arguments are also defined as if it is not harmful to depend on other Americans, but harmful to depend on others. But do we really trust other Americans?

If so, why do we have so many laws and prisons to punish our neighbors if they act to harm us? The fact is that the primary thing that can allow us to trust our neighbors is denying them the ability to involuntarily impose arrangements on us. But that same defense of our self-ownership would also allow us to trust non-American trading partners. The damaging power of government coercion employed by some, necessarily against others, however, puts us almost totally at our rulers’ mercy, while at the same time giving us very little reason to trust them.

Gary M. Galles

Gary M. Galles

Gary M. Galles is a professor of economics at Pepperdine University. His recent books include Faulty Premises, Faulty Policies (2014) and Apostle of Peace (2013). He is a member of the FEE Faculty Network.

This article was originally published on FEE.org. Read the original article.

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