THE RECENT DEBATE ON STATE INTERVENTION IN ECONOMY

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The Montreal Review, February 2011

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"The Debate on Salt and Iron" is one of the most contemporary and amazing texts I have read recently. Two parties - one from the side of government, and another from the side of population - were arguing to what extent the state should interfere in private business.

In this debate, the pundits or the state policy critics argued that state monopolies and taxation "represent financial competition with the people which undermines their native honesty and promotes selfishness". They argued that state intervention in business encourages corruption and destroys morals.

The state official, the minister, on the other hand, excused the interfering policy with the goals of national security and the need for funds for national defence and military.

The pundits replied that big armies do not elevate national security; ideology and good government are the things that really matter. They reminded the officials that state monopolies and taxes were only considered as temporary measures.

The official replied that state intervention is beneficial for the economy anyway, since it regulates the market through management of supply and distribution, it regulates "consumption according to the urgency of the need."

The pundits immediately retorted, "the purpose of merchants is circulation and the purpose of artisans is making tools. These matters should not become a major concern of the government."

The minister told the pundits to go among the people and ask them what they think about the merchants.

But the pundits were unshakable - yes, perhaps the merchants are despised, but when government meddles in economy the cronies of central power "delight in profit, the officers become petty; and when the gentlemen are greedy, the common people steal. Thus to open the way for profit is to provide a ladder for the people to become criminals!"

The minister was unshakable too: "Transport officers were appointed in every administrative center to assist in speeding the delivery of tributes and taxes from distant regions," he said. "This was called the equitable marketing system. A receiving bureau was established at the capital for all commodities. Because goods were brought when prices were low and sold when prices were high, the government suffered no loss and the merchants could not speculate for profit. This was called the balancing standard. The balancing standard safeguards the people from unemployment; the equitable marketing system distributes their work fairly. Both of these measures are intended to even out goods and be a convenience for the people," thus "the people do not become criminals by opening the way to profit!"

The pundits did not agree, they said that state intervention creates inflation and market speculations, it encourages merchants to work secretly with government officials, and thus all idea of "balance in standard" becomes non applicable in practice...

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