[Modern] Liberals are led by the logic of their own argument to pursue economic policies that destroy the very foundations of the liberalism that they supposedly cherish. This is the tragedy that forms the core of the argument in The Road to Serfdom.
Historically, government’s primary function has been to exploit the industrious–anyone who works and trades in the market–for the sake of the political class, which prefers collecting subsidies to earning wages or profits. (This original class analysis was formulated by the laissez-faire theorists Charles Comte and Charles Dunoyer, students of the economist J. B. Say, in the first half of the nineteenth century). The privileges take the form of tariffs, licenses, monopolies, land grants, [patents], and other subsidies. These enable favored interests to increase their incomes beyond what the market would provide, either by forcibly extracting wealth from producers or by barring them from competitively serving consumers. The name for this privilege-based system is mercantilism, and in many ways it lives on today even in market-oriented economies, which is why they are often called mixed economies.
My Mercatus Center colleague Veronique de Rugy has some numbers on who benefits from that great geyser of corporate welfare, the U.S. Export-Import Bank . Vero’s analysis is especially important because a false narrative is now on the lose – one perpetuated by Ex-Im’s supporters – that most, or at least a huge chunk, of Ex-Im’s spending goes to “small” businesses. The idea behind this narrative, I suppose, is to muster support for government subsidies to protect those beloved but now beleaguered traditional mom’n’pop exporting firms.