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“Politics is a zero-sum game where the object is to divide up a static amount of pre-existing goods and power…The free-market is not a zero-sum game. It’s goods increase; the people who work in it ultimately aim to please the customer, not the power holder, and all gain.”—Rev Robert Sirico

There is no dichotomy between capitalism and democracy. In fact, the most democratic countries in Europe, Asia, Africa, and the Americas have the freest markets, and the most vibrant philanthropic complexes, while the least democratic and most repressive regimes have the most extensive restrictions on private economic transactions pledging to create a worker's paradise, all the while ultimately creating only hell on Earth.

Some believe that government spending creates the same benefit to society that free-market spending does. There is a big difference. Noble Laureate James M. Buchanan pointed out the basic difference as one where: "Politics differs categorically from free markets in that with political competition, there are mutually exclusive sets of losers and winners." 

Transfer of wealth occurs when taxpayers are forced to support an individual, group or industry. And, as is almost always the case, when those are inefficient, ineffective, not one's choice or supported with funds denied the taxpayer, less is created, wealth is dissipated in total. Subsequently, the standard of living for society in total is lowered. This remains true in any form of economy, from communism to capitalism.

Simply put, the theory of government spending, supported technically with the faulty logic of Keynesian Economics, basically operates by taking money from free-market participants and redistributing it. The result, due to the fact that it costs something to redistribute and that government usually doesn’t (and shouldn’t) undertake action to add value, is that for every dollar the government takes, it returns in general something LESS than one dollar to the economy. In other words, there is a net loss to society. In contrast, the free market (also called "the private sector") uses a dollar and adds value to it, by creating products, services, innovation, efficiency, etc. through supply and demand. The result is that every dollar the free market acts upon results in a return in general of something MORE than a dollar. In other words a net gain to society. This important difference has significant ramifications.

This failure to recognize that government basically only redistributes wealth and doesn't create any, and must do so by the threat or act of coercion, force and sometimes violence, is only part of the problem. The other part of the problem is the erroneous belief that government has in sum an altruistic nature. This error allows the believers of government is the solution to, at best, excuse their ignoring the fact that government in sum primarily uses its power and funds to diminish the freedom, the choices, the property rights, the diversity, the incentives, the initiative, the responsibility and at times even the safety of its subjects. To mistakenly attribute an altruistic nature to government is the result of not recognizing the fact that government is the ultimate monopoly, and like all monopolies is subject to the whims of those few who are in the necessary positions of power and influence. True to form, government too cannot escape the traits, common to all monopolies, of corruption, inefficiency, or a strong commitment to the status quo, which is the antithesis of prosperity.  Mark Skousen put it more politely: "When private market decision-making is turned over to government, waste and mal-investment are likely results because the state, not operating under competitive conditions, is severely handicapped in determining the real costs and benefits of capital projects."

The consequential logic then is that government programs, which shape lives and have significant influence on the choices individuals make, distorts all forms of social interaction. So then, the main costs of government aren't just the obvious ones of taxes, price inflation, or interest on debt. It is the more incipient loss of opportunity and freedom, to both the individual and society as a whole, which compounds the longer the time frame.

To be sure, government is necessary, especially for an open and free society. A free-market does not mean a free for all; it requires some ground rules.  However, government's best role is one where it is generally limited to that of referee rather than an owner/manager. "A government that limits social-value regulation, regulation that results in an explosion of rights claims, entitlements and taxation along with the heavy burden of excessive litigation" as D. Bergin & J. Stanislaw see it. To advocate more than that, to demand "more and bigger government" simply fuels its desire to forever expand in the interference in individual's lives. And, like every other human enterprise, individuals who run government, who have the ultimate control over our lives, will not act only with benevolence, nor with god-like insight and control, nor even to a better degree than the individual, when given power. Again, human history screams that lesson.

The truth is that the more the free-market is constrained, the more government must provide and the more corruptible the government becomes. Why? Because as the role of government as provider becomes entrenched, expectations of its handouts increase by its citizens. Once this process is established, government and its intervention can only grow larger, vigorously resisting downsizing. As institutions move away from the free-market and towards political interference, rent seeking (which fosters individual behavior that is designed to maximize waste rather than surplus) emerges as a significant social phenomenon. Given enough incentive (or return) potential recipients, instead of acting with passive acceptance, will actively engage in renting seeking. It is then that the motivated entrepreneur will find a way to convince government that he deserves its favor, a monopoly right in essence, keeping other potential entrants out. But when the body politic begins to get overly concerned with the distribution of the government "pie,” it is then political power begins to concentrate on gains from law-breaking, idealized anarchy, or from other processes that can only prevent the "pie" from being expanded for all as it does with the free market. When this happens, deficient value is created, indeed, a net total destruction of value ultimately occurs. The amount of the resulting negative value is a proportional function to the scope and range of interference with and relative size of the government in comparison to the free-market.

In contrast, free-market monopolies are prevented when government action is restricted to protecting individual rights, personal & property, and enforcing voluntarily negotiated private contracts. Then the market process will dominate behavior and ensure that any excessive control or profits (or "rents") that appear will be dissipated by the forces of competition.  Furthermore, the dynamic free-market process will also then develop growth and orderly change.

If allowed to function within a set of laws & institutions that reward merit, protect individual property and enforce contracts, a free-market will even trump education and change culture. It will allocate resources among alternative uses so as to ensure tolerably efficient results. To the extent that a free-market is allowed to allocate resources among uses, political allocation is not required. Joseph A. Schumpeter confirmed that noting: "Nothing should be more obvious than that the business entity cannot function properly and according to design when its most important parameters of action are transferred to the political sphere and there dealt with according to the requirements of the political game or, more serious still, according to the ideas of social planners."

In the free-market, individuals, more or less, make decisions on how much & what quality of any good or service should be supplied or purchased according to their reasoned capabilities, needs, wants and alternatives, made with voluntary aspects. The theory that an unhampered free-market may err does not prove that it does, or imply that the state could do better, if not worse. To the contrary, large-scale breakdowns in economic order can generally be explained by government intervention in the free-market, in particular through manipulation of money and credit. A system of merit, law and property rights, which permits voluntary exchange, would have provided a more palatable remedy to the futile attempts by government to square a circle. The opposite criterion is often employed when the decision is made by government. Government decisions can and do evolve to be purely arbitrary.

Albert J. Nock has shown that history is basically a race between government and a free and open society, between beneficent fruits of peaceful & voluntary production and creativity on the one hand, and the crippling & parasitic blight of government power upon the voluntary & productive social process. The lesson to be earned from over 4,000 years of human history is that political allocation does not eliminate contrived scarcity or bad results, though conversely its unintended consequences often produce more of them.

The free market is not pain-free. But the benefits of growth and progress do not come to those who huddle in government welfare. In politics, personal or special interest group agendas (needs or wants) simply replace one set with another, which is contrary to the net sum of what’s called the will of the people, which is best represented and served by the free market. Adam Smith's message is still valid today, that government interference in the economy is generally harmful and that the public's interest is best served by competition among private buyers.

In other words, society cannot rest its future on noble motives alone, but must use the strongest motives in the best possible way. Prosperity increases when: the labor supply increases; labor specializes; labor quality increases; investment and innovation continue "...the uniform, constant, and uninterrupted effort of every man to better his condition...is powerful enough to maintain natural progress towards improvement in spite of both the extravagance of governments and of the greatest errors of its administration..." Perhaps B. Egger summed it up best: "Once the beliefs and values essential to the maintenance of a free-market economy gain a foothold, we no longer need be concerned about economic growth. Nobody will be able to prevent it."