The Moral Case Against Dumb Government Intervention

Commentary, Poverty, Frontier Centre

On a recent trip to Casablanca to visit relatives, I waited in my brother’s car one morning while he dashed into the bank. It was then I noticed a young woman with a small child on the street, begging. It’s not an uncommon sight in Morocco, or in Canada, but unlike Canada, where it’s often able-bodied young males with their full wits, those seeking a handout in Morocco were either elderly women or young mothers who quite properly trigger sympathy.

The mother was approached by a doctor in the clinic across from where she sat. At this point, I hadn’t yet figured out whether she was begging. She was not unkempt and I initially thought she might be waiting for someone; when the physician appeared, I guessed it might be her husband. The impression was reinforced by his air of familiarity with her child.

It soon become obvious that the doctor’s interaction with the infant and mother was just that of a kind physician informally inquiring as to their well-being; he’d obviously had some regular interaction with them before, thus, the familiarity. So I got out of the car and gave her some money; she shyly said thank you in Arabic.

But I walked away angry. Not just because of the helplessness one feels when confronted by abject poverty even when one lamely tries to make a difference in isolated cases, but because I am also aware of how governments around the world spend a plethora of public money on dumb intervention instead of smart intervention.

The list is long, but as of late, dumb intervention includes massive bailouts for automakers—$4 billion in Canada and $17 billion in the United States with similar huge sums proposed in Europe—that do nothing to improve the lives of citizens but merely pick favourites in a recession at a cost to everyone else.

There is an economic case to be made against such folly. For example, corporate welfare doesn’t create new jobs or save old ones; it only redistributes them and a tremendous cost to others. Save General Motors from bankruptcy and layoffs will take place at Ford or Toyota, this because the bailout won’t create an additional demand for new cars. But there is also a moral case to be made against such intervention: it diverts scarce resources—which too often becomes “public” resources, away from justifiable intervention.

Spend billions on the automotive sector to play such public shell games and on the domestic level, that’s fiscal room that can’t be used in a neutral manner to reduce every business’ taxes and thus help all companies and their employees survive the recession.

Or internationally, those billions cannot now be used to provide clean water or to fight malaria in Africa for nations that can’t afford such costs. It can’t be used for our troops in Afghanistan to provide security for those who don’t wish to be ruled by radicals. It can’t be used for any number of needs that number in the millions. If politicians cannot decide which priority is truly most pressing, they should at least leave such billions in our pockets so Canadians can make their own choices about which causes and people to help.

This is not a mere academic debate over fiscal priorities. When developed countries like Canada, the United States, or jurisdictions like the European Union engage in corporate welfare, they make it more difficult for poorer nations to compete, to create wealth, and to provide for the poorest of their own poor. (The OECD estimates the amount of business subsidies annually to be at least $300 billion U.S. worldwide.) Insofar as poor countries then respond to subsidies doled out by rich nations and divert scarce public resources, there are real, literal consequences at the street level.

A distinction needs to be made between smart government intervention and dumb government intervention. The problem with the dumb variety is not just that it is unfair—which it is; the problem is not just that it is economically inefficient—which it is; it is not just that dumb intervention is the result of the politically-connected and at a cost to those without such links; it is not just that such errant intervention is political puffery and preening; the critical indictment of dumb government intervention—that which snatches away limited resources from justifiable public or private priorities—is that it is fundamentally immoral.