• Inviting the bears into the wolves’ lair
  • There is no such thing as a market failure
  • WEF cures are worse than the disease

The film The Party, starring Peter Sellers, is about the disastrous consequences of getting your party’s guest list wrong. Thanks to a bureaucratic oversight, a socially awkward actor, who was supposed to be fired for his misdeeds on set, instead gets invited to a rather swanky event at his Hollywood producer’s home. Utter chaos ensues. Much the same thing seems to have happened at Davos this year…

First, someone got the guest list horribly wrong. The World Economic Forum (WEF) invited its own worst enemies into its lair. Not everyone accepted the invitation, with Andrew Bridgen MP having better things to do.

But Argentina’s new president, Javier Milei, did show up. And boy did he give them a pasting…

As entertaining as it was to watch, it was Milei’s bizarre attempt to convert his listeners that truly surprised me.

Trying to convince the WEF of libertarian ideals is like trying to convince communists to privatise agriculture. You need a lot of deaths to happen as a result of its policies before it’ll reconsider. That’s why Milei succeeded in Argentina, where the people have experienced the WEF’s ideology first-hand for decades now.

But Milei’s effort reminded me of Greece’s former Finance Minister Yanis Varoufakis when he tried to explain theories of economics at bailout meetings with the EU, the International Monetary Fund and the European Central Bank. They just politely ignored him and got back to crunching their hard numbers.

And so I suspect that Milei wasn’t talking to the crowd at all. He had a message for all of us. Here’s what he said: “The essential problem of the West today is not just that we need to come to grips with those who, even after the fall of the Berlin Wall and the overwhelming empirical evidence, continue to advocate for impoverishing socialism.”

Indeed, it seems the fall of the Berlin Wall and the failure of socialism were little more than a setback for Western governments. They’ve been busy creeping leftward ever since.

But it was Milei’s explanation for why they had made this mistake that got especially interesting. That’s because it undermines the theory of government intervention in our lives – the very purpose of the WEF. It seeks to come up with interventions in our lives to improve the state of things. But what if that’s inherently a fool’s errand?

Milei explained that the WEF’s assumptions rest on something economists call a “market failure”. Something that the free market fails to address using its usual methods of supply, demand and profit motive.

After all, who would build the roads or the lighthouses if the government didn’t do it? Who would provide air traffic control, account for environmental damage or protect babies from medicines that cause birth defects if the government didn’t?

But Milei regards this as a flawed concept:

Under the pretext of a supposed market failure, regulations are introduced. These regulations create distortions in the price system, prevent economic calculus, and therefore also prevent saving, investment and growth.

This problem lies mainly in the fact that not even supposed libertarian economists understand what the market is because if they did understand, it would quickly be seen that it’s impossible for there to be market failures.

The market is not a mere graph describing a curve of supply and demand. The market is a mechanism for social cooperation, where you voluntarily exchange ownership rights. Therefore based on this definition, talking about a market failure is an oxymoron. There are no market failures.

If transactions are voluntary, the only context in which there can be market failure is if there is coercion and the only one that is able to coerce generally is the state, which holds a monopoly on violence.

Consequently, if someone considers that there is a market failure, I would suggest that they check to see if there is state intervention involved. And if they find that that’s not the case, I would suggest that they check again, because obviously there’s a mistake. Market failures do not exist.

That last paragraph encapsulates the underlying theme of my own writing. The idea that the government’s cure is worse than the disease and that the government probably created the disease in some bio-weapons lab in the first place – probably overseas – to avoid scrutiny.

Milei’s point is that market failures are a fiction – true heresy to economists today. The mistake they make is to assume that free markets are purely about transactions. But they’re about culture, reputation, relationships and countless other factors that no economist has ever included in their analysis.

If people began to realise that it was government intervention that caused the problems in their lives, that would trigger a political and economic revolution. Because they wouldn’t turn to another government to solve the problems the previous government had created. They wouldn’t demand different government policies. They would actually demand less government instead.

This is something the WEF crowd could not stomach, given that they’ve been busy meddling in people’s lives for so long.

But Milei wasn’t the only one causing trouble at Davos. The president of the conservative think tank Heritage Foundation seemed even less diplomatic. He pointed out how the WEF’s past efforts on issues such as climate change, migration and denying democratic will were causing utter chaos – the cure being worse than the disease. It’s no wonder their theme for the event was “rebuilding trust”. They’d betrayed it.

Saudi Finance Minister Mohammed Al-Jadaan joined in on the criticism. He pointed out that the West’s attempts to hit net zero in each of their countries were a bit narrow-minded: “This is just hypocrisy. You are here in a heated hall, but 600 million people in Africa do not have electricity. You cannot tell them to eat cake instead of bread!”

It seems that leaders around the world are finally getting the message. The people have experienced the consequences of their governments’ misguided policies and are, therefore, not interested in more of the same. They want less, not different, intervention.

But how can people really stand against government as an entity?

Well, money is another one of those “market failures” that economists like to cite. I mean, you can’t let the private sector and the free market create and manage money, can you? It’s a public good, meaning the government must provide it.

Actually, the history of money, like the history of lighthouses, supports the idea that the private sector did a good job of providing this crucial good… until the government came along and confiscated the industry…

Again, if people realise that they don’t need governments to solve the problems that ail them and that the private sector would do a better job, then they may begin to demand less government, not different government. This would be an extraordinary change of direction.

When it comes to money, we may already be on the cusp of reversing the economic coup that nationalised the currency. And, if I’m right about a political backlash against the sorts of interventionism that’s been coming out of Davos for decades, this may well be the avenue for people to pursue their freedom.

Until next time,

Nick Hubble
Editor, Fortune & Freedom