With every grant of complete security to one group the insecurity of the rest necessarily increases. If you guarantee to some a fixed part of a variable cake, the share left to the rest is bound to fluctuate proportionally more than the size of the whole.

—Friedrich Hayek. The Road to Serfdom, 1944.

The quest for financial security is why people buy houses, save, invest, and study; it is a universal desire amongst all people. However, just because it is something all people want does not mean government should attempt to deliver it to them. This is because every attempt by government to deliver security to one group creates a cocoon of inefficiency that penalizes the rest of society. Even if the government undertakes to provide financial security to the whole of society—as it did in the Soviet Union—the result is still failure, just on a larger scale.

Business needs to be able to hire and fire staff at whim; this is how labor is reallocated to where it is needed and individuals learn to provide exceptional service. The disruption is traumatic for a short time for those who are involved, but it is a necessity. If it were not for the desire to find work, people would not be motivated to re-skill, to move location, and do all the dynamic things needed to adjust to changing circumstances.

In India the labor laws are so onerous that even if a worker rolls out a sleeping bag on the factory floor and goes to sleep, he cannot be sacked. The effect of such laws is hopeless poverty throughout most of India because it is unviable to employ people. Those with the skills to become factory owners instead open small, one-man stalls, and the employees they would have taken on instead go idle.

The situation is only marginally better in the Western world. In the United States the autoworker unions have used coercion and political corruption to obtain overly generous security for their members. They have health benefits, they have sickness benefits, they cannot be fired and they cannot even have their ‘tranquility’ on the job disturbed, so great is their ‘security.’ As a result American car makers cannot compete with Asian car makers, they are forced into debt, and the American taxpayer is forced to bail them out, transferring the cost of union workers’ security to the whole of society.

The cumulative result of the trade union movement’s extortion has been the same as widespread extortion anywhere else in history; it causes commerce to die. It is for this reason that the United States is seeing its industrial base transferred to Asia. In China the workers obtain their security through hard work.

It is no coincidence that during the Dark Ages, when the serf, the knight, the priest and the noble all had their absolutely secure place in society, the whole of society suffered stagnant backwardness. This is the polar opposite of a free society where no one belongs to a class, nor is anyone bound to a patch of land or to a job, nor are they entitled to financial security. People may be fired, but they quickly find work or establish their own businesses. The cumulative result is that no one starves and everyone’s standard of living continually increases.

It follows that whenever any group agitates for financial security, whether it is factory workers wanting laws to prevent them being laid off, or office workers wanting laws against unfair dismissal, or farmers wanting the government to guarantee prices through subsidies or tariffs, they are seeking these benefits at the expense of everyone else in society and should be refused.

This article is an extract from the book ‘Principles of Good Government’ by Matthew Bransgrove