Home Economy Economic Activity The price of tampering with free markets

The price of tampering with free markets

By

Thomas Tzitzouris

-

07/08/2022

When you mess with Mother Nature, she tends to mess back. Rampant inflation is just the latest example of what should now be common knowledge: We will never create an economic system better than free markets. Ignoring this sage wisdom, Americans have gone on a two-decade purge of the free market’s safety valves by ushering

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When you mess with Mother Nature, she tends to mess back. Rampant inflation is just the latest example of what should now be common knowledge: We will never create an economic system better than free markets. Ignoring this sage wisdom, Americans have gone on a two-decade purge of the free market’s safety valves by ushering in a surge in regulatory policies that punish industries such as banking and energy production, artificially low interest rates designed to facilitate massive budget deficits, and tax policy that has seen the effective tax rates for many middle-income Americans rise to 50%, with a combined tax rate well above 50% for some small-business owners. The result of this economic Frankenstein is inflation that’s now at a 40-year high, unemployment that has become more volatile over the last three business cycles and wealth inequality that’s now worse than before the tinkering began in the late 1990s. Rhode Islanders, as usual, have seen the worst of this policy experiment. Mike Stenhouse, CEO of the Rhode Island Center for Freedom and Prosperity, recently penned a piece on why energy bottlenecks in Rhode Island are persistent, are likely to worsen and are completely government-induced. The same is true of labor market rigidity, higher-than-average transportation costs and the relatively high cost of capital in the Ocean State, all of which worsen inflation for locals. Now Rhode Islanders, like all Americans, are forced to deal with the side effects of high inflation, and many options will be proposed as solutions. But citizens should keep this in mind – the hangover from excessive government control is not going to be cured with more government controls. Rather, inflation will be painful to beat back, and doing so will require less government influence in the economy, more free-market solutions, higher interest rates, higher unemployment and, in the next decade, more volatile business cycles and financial markets. Any solution short of this is simply the same type of free-lunch politics from central planning advocates that got us here in the first place. Thomas Tzitzouris is director at New York City-based Strategas Research Partners. He lives in Rhode Island.