1. Reasons usually alleged for considering free market reforms politically impossible

There are various reasons which are usually put forward to argue that many libertarian reforms are not politically possible and thereby justify the maintenance of the status quo. Thus, for example, it is alleged that the theoretical reasons which support free market policies are, in general, very abstract and difficult to explain to the citizens. It is also argued that people are very reluctant to change, especially when the changes are based on abstract theories and the attainment of medium- and long-term results which, although it is understood that they will be favourable, are nevertheless felt to require “important sacrifices” at the beginning. All this means that politicians normally tend to err on the side of timidity and lack of conviction when presenting reforms which lead in the right direction: it is felt that the libertarian arguments leave too many flanks open to facile criticism, particularly with a socialist opposition which, in general, has shown itself to be unscrupulous and ready to have recourse to demagogic reasoning.

These and other arguments, which are the ones most commonly used by the politicians who consider making free market reforms, appear to have found, moreover, theoretical support in the contributions of the “Public Choice School”. In fact, several analyses made by the Public Choice School, provide a theoretical explanation of the difficulties in undertaking and culminating the appropriate reforms. Thus, among other aspects, they talk about what they call the “effect of the rationality of ignorance”, according to which, given the reduced probability that the single vote of an individual voter can influence the final result of the elections, the current democratic system encourages the citizens to, consciously or unconsciously, spare themselves the great effort implied by studying in the necessary depth the multiple complex issues which are discussed and debated at the political level (1). In contrast to this generalized omission on the part of the citizens, lobbies and “pressure groups” appear. They identify a strong interest in a specific area and successfully mobilize their forces to exert pressure and influence over the public authorities in order to obtain privileges at the cost of a “silent majority” that nobody bothers to defend. Likewise, there have been theories about the effect of the “governmental short-sightedness” which tends to arise from the fact that the priority of the politicians is to get into power and stay there at any cost, which explains that they take their decisions thinking only of the very short-term future (the next elections), making it almost inevitable that they often end up sacrificing the community’s long-term welfare in the interests of obtaining short-term “political advantages”. Lastly, it has been shown that bureaucratic bodies have a tendency to constantly over-expand and seek justification of the need for their existence and growth, as they do not depend on a profit and loss account and are not forced to ratify their services every day in the marketplace as any private company must, since their existence, funded through the State Budget, is guaranteed if they obtain sufficient political support (generally encouraged by a pressure group).

Leaving aside its evident scientific potentialities, which we are not going to discuss here, it is obvious that there is also a risk that the Public Choice School’s theoretical analysis tends to foment nihilism among those who want to devote their efforts to providing an impetus for short-term practical reforms in the right direction. In fact, it seems that the Public Choice theory explains and confirms that, in the political field, there exists a “vicious circle” which is very difficult to break. It shows that the politician, to a great extent, merely harvests an already existing state of public opinion which is felt to be very difficult to mobilize in the right direction in the short term, as a result of the combined effects of the “rationality of ignorance” and the activities of the privileged pressure groups themselves (to which the “effect of governmental short-sightedness” and the bureaucratic bodies’ tendency to over-expand with hardly any limit should be added). If the numerous frustrating experiences encountered by many politicians when trying to put free market reforms into practice are added to this vicious circle for which there is, apparently, a theoretical explanation, it is understandable that it is very easy for somebody to become sceptical or discouraged if he reaches the conclusion that the barrier of the “politically impossible” is very difficult, or even impossible, to cross.

Jesús Huerta de Soto
Professor of Political Economy
King Juan Carlos University of Madrid, Spain

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(1) In other words, the democratic system generates, in neoclassical terminology, a giant insoluble problem of “public good” or “free rider”, as each voter fully internalizes the high cost of voting responsibly with the necessary information, while almost all the benefits of his action are diluted among the rest of his fellow citizens, thus making it practically impossible that each individual voter can take advantage of the benefits of his action in acting as an informed and responsible voter.