The Administrative State vs. the Social Insurance State

By Jason Brennan

In Libertarianism: What Everyone Needs to Know, I examine the question of which country is the most libertarian. I argue briefly that while the United States has the highest percentage of self-identified libertarians and uses the most libertarian rhetoric, it is not the most libertarian country in terms of its actual policies. Switzerland, Australia, Canada, and some others are much more libertarian (especially classical liberal-libertarian) than the United States.

Here’s a brief excerpt from an earlier draft:

The Wall Street Journal and Heritage Foundation produce an annual Index of Economic Freedom. They rate countries for their respect for property rights, freedom from corruption, business freedom, labor freedom, monetary freedom, trade freedom, investment freedom, financial freedom, fiscal freedom, and government spending. Hong Kong, Singapore, Australia, New Zealand, Switzerland, Canada, Chile, Mauritius, and Ireland have higher scores than the United States. The United States ranks only 10th overall.

This index may understate how anti-libertarian the United States is. After all, the index penalizes countries if their governments spend large amounts on social insurance. Yet classical liberals and neoclassical liberals are not in principle opposed to government social insurance. [That is, they will accept it under certain conditions.]

Thus, suppose we separate the idea of the administrative state—which tries to control, regulate, manipulate, and manage the economy—from the social insurance state—which provides tax-financed education, healthcare, or unemployment insurance. On the Index of Economic Freedom, many countries that rank lower than the US have far less extensive administrative states than the US. For instance, Denmark ranks much higher than the United States on property rights, freedom from corruption, business freedom, monetary freedom, trade freedom, investment freedom, and financial freedom. Luxembourg, the Netherlands, the United Kingdom, and many other countries beat the US on these measures as well. Thus, many other European countries might reasonably be considered more economically libertarian than the US.

The administrative state directly interferes with citizens’ economic liberty. To expand the scope of the administrative state’s power just is to limit the scope of individual citizens’ economic liberty*.

What about the social insurance state, especially one that works pretty well? If you regard all taxation as theft, then you’ll see the social insurance state as a direct assault on property rights. But, even then, the social insurance state does not, in itself, directly curtail most economic liberties. (Of course, if the government taxes almost all of your income away or sets a limit to how much you can own, then that will limit your effective economic liberty.)

We could imagine a political-economic regime in which there is a completely or largely unregulated free market but in which the government taxes people to provide social insurance and some other welfare benefits. On its face, this regime seem much congenial to classical liberalism than a regime that provides no welfare benefits, but which regulates most enterprises, sets prices, controls entry into markets, and imposes licensing rules.

*On economic liberty:

Libertarians claim that, as a matter of basic justice, people have the right to acquire, hold, use, give, and in many cases destroy personal property. They may decide what to eat, drink, and wear, and determine what kinds of entertainment and cultural experiences they will consume. They may acquire wealth for themselves or for others. They have the right to enter into a wide range of contracts for the exchange of goods and services. They may enter into and negotiate employment contracts (including wage rates, hours worked, working conditions, and so on) as they see fit. They may decide for themselves how to balance leisure and work. They may choose to join unions or not. They may manage their households as they see fit. They may create things for sale. They have the right to start, manage, and stop businesses, to sell franchises in such businesses, and to run such businesses for their own private ends in the way they regard as best. This includes the right to form certain kinds of joint ventures, including certain kinds of corporations and workers’ cooperatives. People may own private productive property, such as factories or machinery, and develop property for productive purposes. They may acquire, lend, take risks with, and profit from capital and financial instruments. They have the right to determine their own long-term financial plans, including retirement saving and investments in certain forms of insurance. Libertarians even believe that people have the right to sell sexual services or their own body parts, such as kidneys.

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