There Is No Freedom for Everyone

There are four necessary conditions for something to become money. To function as money, it must serve as a medium of exchange, a unit of account, a store of value, and a standard of payment. Among these, the most important is that it must serve as a medium of exchange, meaning that market participants must be willing to accept it in transactions involving goods and services for it to function as money. When individuals transact using money on the basis of trust, specialization becomes possible, reducing transaction costs compared to barter and improving efficiency. Financial instruments that enhance the economic efficiency of capitalism—money, promissory notes, bonds, stocks, funds, and the like—are all based on trust and enrich our quality of life. If an aspiring farmer with strong entrepreneurial spirit but no capital buys a cultivator with a bank loan through the financial intermediary known as a bank, farms with it, and repays the loan with interest, the bank in turn pays interest to its depositors with that money. When this kind of virtuous cycle of credit takes place, the economy grows.

The coronavirus put the brakes on the trust-based social system of modern capitalism. The “freedom for all” that President Moon Jae-in emphasized in his invited address to the 73rd World Health Assembly of the WHO takes the form of suppressing individual freedom for the benefit of the community. A defining feature of authoritarian, centralized policies is that they control behavior and thought on the assumption that trust between individuals is absent. Examples include self-quarantine, which restricts freedom of movement, the disclosure of infected patients’ travel routes, and the blaming of minority groups. Likewise, mask distribution, disaster relief payments, and an expansionary fiscal stance marked by the excessive use of supplementary budgets are authoritarian policies that stem from the government’s distrust of individuals. Judging that market participants’ demand (panic buying) or resource allocation (donations) is unsatisfactory, the government artificially intervenes in the market to distribute resources.

The problem is that the limitations of a planned economy and centralized regulation are clear. If the operation of entertainment venues is banned, illegally operating establishments emerge; if citizens’ movements are tracked through mobile phones, some people simply leave their phones behind when they go out. If disaster relief payments that can be used only at designated businesses are distributed in order to stimulate consumption, so-called “cash-for-vouchers” schemes arise, in which gift certificates are converted into cash at below-market prices. One might ask whether such violations of administrative regulations could simply be dealt with through criminal punishment. But overcriminalization and the mass production of criminals reduce the labor force and undermine economic efficiency. There is even research showing that 20% of poverty in the United States is attributable to overcriminalization. When public officials have discretion in the enforcement process, there is also a possibility that corruption will increase.

In the end, we have no choice but to rely on trust between individuals. Given the nature of a virus transmitted through airborne droplets, only each person’s sense of hygiene and civic consciousness can overcome this difficulty. As Rothbard said, “In market exchange, if people judge that there is nothing to gain, no one agrees to the transaction, so an exploitative relationship cannot be sustained.” Only transactions based on individual trust and freedom, rather than government-imposed regulation and control, are ethical and can guarantee efficiency and safety.

Original title: 모두를 위한 자유는 없다

Author: Seon-min Lee

Date: 2020-05-29

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=free_opinion&pn=14&idx=22779