Free Market Institute of the Pacific

Exploring Business, Economics, and Freedom

Corruption and the Destruction of Free Markets

In 1946 the Phillipines went from being a U.S. Commonwealth to becoming an independent nation. At that time, expectations were high for the new sovereign state, particularly among economists and business investors who felt the Phillipines were destined to become one of the wealthiest and most prosperous countries in the Pacific basin.

Time has proven the forecasts to be wrong. The reason for this failure is obvious and universally understood. The nation failed to become an economic giant due to corruption in their government.

The U.S. is facing a major immigration crisis today from the near unstoppable flood of illegals coming across the border from Mexico. They are mainly people trapped in poverty and in fear of violence from drug cartels and criminal enterprises (but also include a shocking percentage of criminals and terrorists taking advantage of the confusion). Why is the poverty so rampant? Why does the violence exist unabated?

Again, the answer is obvious and universally understood. The Mexican government has been corrupt for generations. The nation is one of the largest, economically, in the world, and yet the wealth is used to grease the wheels of political machines and enrich criminals. The people are oppressed, impoverished, and afraid.

Anti-free market “thinkers” insist that corruption is the end result of free markets. Certainly free markets without the rule of law will produce corrupt business practices...but a free market with a freely accessible legal system, open to all and discriminating to none, should always hold corruption at bay. In fact, such a free market punishes corruption and rewards ethics in the long run. It’s been the means the U.S. has used to become the economic powerhouse of the world.

So there is a value to government overwatch, through law enforcement, and infrastructure via the creation of a system of courts where issues can be settled in a peaceful manner. But corruption only seems to take firm hold in a culture when the government leads the way. This is simply historical reality and illustrates the double-edged sword of trusting in government.

History also teaches us that corruption in government eventually leads to economic failure as the free market becomes a victim to bribery, coercion, loss of competition, and violence. The downslide begins with business people who use government funding and regulation to favor their firms over competitors. Soon, money is being sucked from the market, in the form of taxes, and given to select companies which then use that advantage to create monopolies and to funnel money back to the same politicians who secretely aided them. This is the first level of corruption.

With enough time and a complacent public, the politicians will become interest holders in non-profits, associations, businesses, and other organizations that are funneled money through government agencies. At that point, when the politicos are multi-millionaires, and they are firmly in the pockets of powerful special interest groups, corruption becomes entrenched and the free market must struggle to remain alive. That free market, of course, supplies the actual wealth that the corrupt politicians and their cronies are sucking up...so the cycle eventually collapses...poverty rains down on everyone not in their small circle, and unrest and violence generally follow. From that point on, a handful of politicos and cronies become rulers and stay in power only by keeping the people impoverished and afraid.

Anyone who thinks this phenomenon can’t happen in the U.S. has not been paying attention. Over the last few decades, intensely anti-western and anti-freedom organizations have been carefully inserting their tentacles into the politics of the nation. Mostly in the Democratic party in the U.S. these radical types have grown fat and rich on taxpayer funding of their “foundations” through “grants” that have amounted to billions of dollars. They include organizations with stated purposes of destroying free-market culture, of abolishing the U.S. constitution, and of “leveling the world-wide playing field” through the slow erosion and destruction of the U.S. economy.

Nearly every one of these organizations goes under the guise of some social issue; social justice, peace, environmentalism, global climate panic...these are the most common cover stories used to grab at power.

They now have great influence in the U.S. congress...where a re-write of the massive energy tax, or Cap and Trade, bill was just re-introduced. This bill is the crowning achievement of all who hate freedom and free-markets. It’s now called the “American Energy Act” and its taxing provisions will crush business investment and growth in the U.S. for decades to come. But it will pour trillions of our dollars into the coffers of a handful of international mega-corporations that will produce nothing of value in return. The politicians and their friends will dip into the stash and take out millions for themselves.

Then the “playing field” can be “leveled”...in essence the U.S. will be forced to become what Mexico and the Phillipines became voluntarily.

When one looks at the players in this game...and they are a surprisingly small group who are pulling the strings...their wealth is the notable shared attribute. The other attribute?...their wealth was not earned by creating products, jobs, or services of value. It was, in nearly every instance, wealth sucked from the free market as taxes and redistributed through proxies.

This is government corruption boiled down to its most basic form...legal money laundering. Then the funds are used partly to elect the correct corrupt officials into office to keep the circle intact.

Through such a seemingly simple process, which has taken years to prepare and is now close to fruition, can even the most powerful of economies be destroyed. As the free market is purposefully collapsed, to satisfy the hunger of a few for personal power and wealth, the people will lose not only their livelihoods...but their most basic freedoms along with them.