Protection vs. Prosperity: The Cost of Government Overreach

4 min read

Some businesses fail, and people lose jobs. In response, politicians often argue that the government must protect workers. However, economist Allison Schrager warns that such protection can ultimately harm both safety and prosperity. In her new book, Worth the Risk, Schrager argues that government regulations deter risk-takers, who are the driving force behind innovation and economic growth.

The Downside of Protection

Several states have expanded the WARN Act, making it harder for companies to lay off workers. Schrager points out that this kind of protection has a downside: it creates a risk-averse society where people are less likely to take chances that could lead to innovation and prosperity. She explains, ‘There is no prosperity, no growth… no ‘upside’ without risking loss.’

She uses the example of tightrope walker Nik Wallenda, who recently voiced concerns about the increasing number of governmental rules that are affecting his circus. Wallenda says, ‘What really scares me now are governmental rules.’ He worries that endless regulations will bankrupt his business, as he explains, ‘It’s just unbelievable! They tell us who we have to use to dump our trash… We’re now required to have three sheriffs on staff the entire time. Government has its hands in everything.’

Wallenda compares the burden of regulations to the risks he takes in his performances, saying, ‘Spending the money that it took to take over the Big Apple Circus was scarier than walking across the Grand Canyon without safety devices.’ He adds, ‘We feel that we are doing the right thing by creating these regulations, but the reality is: we’re handcuffing our freedom.’

Youth and the American Dream

Many young people today are drawn to the idea of protection, but Schrager argues that this mindset is at odds with the American dream. She spoke to college students, saying, ‘The American dream was taking risks. It was never a guarantee.’ One student responded, ‘Your American dream is my nightmare!’

She notes that the belief that following the rules and getting the right schooling will lead to success is a misconception. A recent Gallup Poll shows that since 2010, the percentage of young U.S. adults who consider themselves to be ‘thriving’ has dropped from 64% to 45%. Schrager explains, ‘We shouldn’t be surprised they’re also less satisfied, feeling like they can’t get ahead. If you make sure everyone’s safe and protected, you rob them of realizing their full self.’

Europe’s Economic Decline and Regulatory Burden

Europe, which once had a larger economy than the United States, has fallen behind in the last two decades. Schrager attributes this decline to excessive regulations that protect workers but hinder innovation and flexibility. For example, a rule in Europe forced a German company to rehire an employee who had stolen from them, illustrating how rigid regulations can stifle business.

Europe’s job market is less flexible than the U.S., and its citizens are often burdened by debt and an aging population. Schrager says, ‘They have enormous debts they can’t pay. They have an aging population they can’t pay for, and they don’t have growth.’ She also highlights the role of bankruptcy laws, which in the U.S. make it easier for risk-takers to fail and try again.

Capitalism vs. Socialism

Schrager argues that socialism, as promoted by figures like Senator Bernie Sanders, is based on a false promise of guaranteed prosperity. She says, ‘The heart of socialism is the exact same lie that’s behind almost every financial scam: ‘You will have everything guaranteed. But you’ll also have growth and prosperity.’ It just doesn’t work that way.’

She notes that capitalism, while brutal, offers the promise of potential and growth. Even historical figures like Henry Ford and Milton Hershey faced bankruptcy before achieving success. Schrager explains, ‘In other countries, you go bankrupt and you can never try again. They might go after your personal assets. There’s also a huge social stigma. It’s much harder to get capital again.’

The Risk of Safety

Wallenda warns that excessive safety measures can become dangerous in themselves. He says, ‘We can become so safe, that it becomes dangerous again.’ This sentiment aligns with Schrager’s view that the current trend in the U.S. is becoming more like Europe, where regulations have stifled growth and innovation.

As Schrager concludes, ‘Capitalism, it’s brutal. It doesn’t offer any guarantees. Bad things happen, you lose money, but you also have that promise of potential, of growth.’ The challenge, she argues, is to find a balance between protection and the freedom to innovate and prosper.

Source: PJ Media

Written by

Connor Davis