People will always be laid off or have their businesses go bankrupt or lose their investments. These unpleasant experiences are necessary to motivate people to exert themselves, to direct investments to profitable undertakings and to re-deploy resources away from incompetents and into the hands of the capable. Wherever the government seeks to insulate people from suffering, it dulls the effectiveness of negative feedback, which is essential to the proper functioning of a market economy.

When government insulates people from the consequences of their actions or the vicissitudes of fortune, it necessarily transfers the harm to others. The taxes required mean houses go unbuilt, children go unborn, holidays go untaken, dresses go unbought and parents are unable to afford to send their children to college. Visiting these evils on those who are fortunate and careful causes them to become dejected and apathetic. They come to realize that nothing can change their fate—not good luck, not bad luck, not hard work, not laziness. So they stop striving and instead wallow in poverty and despair. This is what happened behind the Iron Curtain, it is the state of affairs in North Korea and it is also seen—proportionate to the practice of wealth redistribution—throughout the world.

People who find themselves living in a poor neighborhood or in a dying industry should not be helped. Any assistance rendered to them can only cause harm. If they are unassisted and unmolested by taxes and government restrictions, they will naturally change their ways and improve their circumstances. The struggling family will leave the blighted inner city neighborhood and buy a house in the suburbs. Without rent control before long the slum neighborhoods will become gentrified. Those in uncompetitive industries will either become more efficient or go out of business, and the resources they occupied will be used for more profitable pursuits.

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