The property which every man has in his own labor; as it is the original foundation of all other property, so it is the most sacred and inviolable … . To hinder him from employing this strength and dexterity in what manner he thinks proper without injury to his neighbor is a plain violation of this most sacred property.
—Adam Smith. An Inquiry into the Nature and Causes of the Wealth of Nations, 1776.
The moral imperative
A free market is a moral imperative for any free society. When two people wish to contract with each other, when they are not proposing to harm anyone else, society has no right to interfere. The government can, quite correctly, prohibit activities that harm others, but it may not carry out schemes for the general betterment at the expense of individual freedom.
It is for this reason that all economic planning is iniquitous. Such plans can only be executed by forcing the players to take part. Yet coercing an innocent individual is an act just as wicked when done by the government in pursuit of a societal goal as when performed by a mugger in pursuit of unearned money. Margaret Thatcher explained this moral dimension of economic freedom:
The economic success of the Western world is a product of its moral philosophy and practice. The economic results are better because the moral philosophy is superior. It is superior because it starts with the individual, with his uniqueness, his responsibility, and his capacity to choose. Surely this is infinitely preferable to the socialist-statist philosophy which sets up a centralized economic system to which the individual must conform, which subjugates him, directs him and denies him the right to free choice. (Speech to the Zurich Economic Society, 14 March 1977).
Whoever controls the right to buy and sell, to work or employ, to spend or save, to choose or abstain, controls everything a human is and can be. In a free country this control rightfully rests with the individual concerned. Every day, in trillions of decisions, individuals exercise control over their own destinies by deciding for themselves what they want to buy, where they want to live, where they want to work, and all other important questions in their lives.
Government should never undertake commercial activity
Private effort daily achieves results that astound the world. It is not only that joint companies do so much; it is not only that by them a whole kingdom is covered with railways in the same time that it takes the Admiralty to build a hundred-gun ship; but it is that public instrumentalities are outdone even by individuals. The often quoted contrast between the Academy whose forty members took fifty-six years to compile the French dictionary, while Dr. Johnson alone compiled the English one in eight.
—Herbert Spencer. Over Legislation, 1853.
The reason for the free market’s superiority is simple: the profit motive. Self-interest alone can sort the wheat from the chaff when it comes to choosing the best managerial minds, strategies, and tactics for commercial success. Adam Smith observed this truth more than two centuries ago:
Princes have frequently engaged in many other mercantile projects, and have been willing, like private persons, to mend their fortunes by becoming adventurers in the common branches of trade. They have scarce ever succeeded. The profusion with which the affairs of princes are always managed, renders it almost impossible that they should. The agents of a prince regard the wealth of their master as inexhaustible; are careless at what price they buy; are careless at what price they sell; are careless at what expense they transport his goods from one place to another … . No two characters seem more inconsistent than those of trader and sovereign. (An Inquiry into the Nature and Causes of the Wealth of Nations, 1776.)
Ignoring these words of wisdom, the British nearly destroyed themselves in the 1970s with the socialist dogma of state ownership of the means of production. It follows that neither experience nor reason can keep this folly at bay. Therefore, even as communist China embraces the free market exchanging mass famine for iPhones, we may be certain that humanity has not seen the last of the madness of government-run commercial undertakings.