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The Self-Regulating Economy

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01/01/2005Llewellyn H. Rockwell Jr.

The Free Market 26, no. 1 (January 2005)


It is the conviction of the liberal intellectual tradition dating back to the Middle Ages that society contains within itself the capacity for internal self-management. This is in contrast to the claims of the sociology literature, which posits that human society is riddled with conflict between groups: races, ages, ethnicities, and abilities. The sociologists have sliced and diced the human population to such an extent that it would seem impossible for anyone to get along at all, and certainly not in times of emergency.

The workings of the free market are the best illustration of why the "conflict theory" of society is wrong. The market economy is made up of millions and billions of small exchanges that take place toward the mutual betterment of everyone involved.

There are many paths to human cooperation. It can take commercial forms or it can take the form of charity, and within each of those we see thousands of variations of forms. In the end, society works to accomplish amazing things by bringing together the individual efforts of every person and property owner, and it does it all without central command or coordination.

Consider the scene after a natural disaster such as a hurricane. Within a week, thanks to the work of human cooperation, we find that most places have restored normalcy and order and even beauty. All that is left to do involves plantings and more fundamental building projects of various sorts. But the settings have been fully prepared. The recovery is well on its way.

People love to brag and talk and go on about all the horrors created by natural disasters, but the truly marvelous and newsworthy thing is not the disaster but the wonderful manner in which it is repaired: by voluntary human effort.

The public parks, the school grounds, and the land claimed by the state is usually cleaned up in far longer time. But these days this is for a reason that goes beyond the usual bureaucratic incompetence. Every community seeks disaster assistance, money that usually ends up in the hands of local governments where officials pass it out to their friends. The newspapers cooperate in this creation of phony disasters in the hope of getting big bucks from the likes of the Federal Emergency Management Agency.

The morning after Ivan, our local paper headline read in massive type: DEVASTATION. It showed a picture of a man carrying sticks across his lawn, an awning from a burger joint flipped up due to wind, and a tree that had tipped over onto someone’s porch. This was not exactly the kind of devastation that would take hundreds of millions of taxpayer dollars to fix. But everyone knows that after the storm, all official institutions have to play up damage as much as possible in order to gain the attention of federal authorities.

The whole enterprise of disaster aid has become one of the great rackets of modern government. Today we have the disgusting spectacle of senators and presidents coming to visit weather-injured places, as if they have within their capacity the ability to size up damage and make provisions for making it all correct. We are supposed to believe that they know more about the proper course of action than insurance adjusters and property owners.

If we had honest politicians, they would say: "Of course I’m sorry about what happened to that beach in Florida, but my presence there would only distract from the essential work being done by owners and their insurers. I don’t know anything about the topic, and even if I did, I would not want to steal from some to give to others to realize my political priorities."

Like dictators and führers, politicians always come to the scene of a natural disaster carrying a wad of cash. William Anderson documents that this scam really took off during the Clinton presidency, but these days government sits through every natural disaster with bated breath, hoping for a chance to do what it does best: grab power and hand out other people’s money to friends of the state. As for the actual rebuilding, it is done by private enterprise, and in a timely and efficient manner. It is the social means (to use Oppenheimer’s phrase) that rebuilds and restores, not the state.

The biggest barrier to all social cooperation is something far more costly than natural disasters and even great criminals combined: government itself. It daily interferes with the path of progress through taxes, regulations, distortions such as subsidies and price controls, as well as wars and trade barriers. It is helpful to think of the way free enterprise responds to government: it’s the way society responds to a natural disaster. Yes, some people get rich off government. But taken as a whole, it is a disastrous cost on society that must be overcome.

Government is not productive. It is not creative. It does not bring blessings. Government spending drains resources from society, taking from those in whose hands it has the highest value and putting into the hands of people who serve the state. Regulation forestalls choice. Taxation loots from people the reward of work and productive endeavor.

Most destructive of all is war, and yet it is war that people are most likely to credit with bringing prosperity. But as Mises says, "War prosperity is like the prosperity that an earthquake or a plague brings. The earthquake means good business for construction workers, and cholera improves the business of physicians, pharmacists, and undertakers; but no one has for that reason yet sought to celebrate earthquakes and cholera as stimulators of the productive forces in the general interest."

Of course he wrote that in 1919. Today, I’m sure we would have no problem finding people who say such preposterous things. Austrians are unique in having great clarity about the damage caused by government. And yet sometimes even Austrians have a tendency to underestimate the power of free enterprise to overcome obstacles to serve the world and bring prosperity to the multitudes. I doubt that even the most ardent fan of free markets would have imagined that ex-Red China could be transformed in such a short period of time, that Eastern Europe would undergo a total upheaval toward prosperity in a mere ten years, that New York could so quickly bounce back after 9-11, that the recovery after the dot com bust would be so rapid.

We should never forget, in the midst of all our warnings about government power, that government is deeply incompetent, and laughably so. As lovers of liberty, it is essential that we constantly warn about the dangers presented by the state. But it is also our job to constantly say, in as many ways as we can, that it does not have to be this way.

The state is not the foundation of society, it is not the source of our security, it does not bring about prosperity, and it does not protect us. Government instead stands outside of society and lives off its proceeds, and does so for its own benefit and not that of society. To understand this and impart this message to the current generation of students that benefits so enormously from the blessings wrought by the market is surely a task worthy of all our efforts.

If you can understand how a small community can recover from a hurricane without the aid of government, or if you can understand how a magnificently productive global economy can grow and thrive and provide for billions, without the aid of a global state, then you understand a very critical point. It is this: society and all its works can thrive without central management by a coercive apparatus. If people have liberty, property, and law, they have the basis of what it takes to make a civilization. Anything that compromises those institutions is a force for de-civilization.

After a natural disaster hits, we open our doors to see a space desperately in need of clean up.

With regard to government in the world today, we see something very similar. Let us open our doors and look without flinching at the terrible mess that the state has made of our world. To those who say this is beautiful and productive, let us explain why this is not so.

Let us point to wars and poverty, mass sickness and disease, and explain their cause. Let us stand up to those who would celebrate destruction and show that it is unnecessary and terribly tragic. And let us not despair when we see a world torn asunder by the state, but rather see the evidence of invention and creativity which surrounds us, and look for every opportunity for rebuilding. 


Llewellyn H. Rockwell, Jr. is president of the Mises Institute. This is an excerpt from his speech at the Supporters Summit of 2004 (


Contact Llewellyn H. Rockwell Jr.

Llewellyn H. Rockwell, Jr., is founder and chairman of the Mises Institute in Auburn, Alabama, and editor of

Cite This Article

Rockwell, Llewellyn H. "The Self-Regulating Economy." The Free Market 26, no. 1 (January 2005).