Big Government Is The Problem, Not The Solution

Authored by Daniel Lacalle,

Socialism has never reduced prices or improved affordability. Never. Interventionism is the root of all inflationary and scarcity problems. Only competition, open markets and technology can reduce prices and ease the bottlenecks created by governments through asphyxiating regulations and taxes.

Zohran Mamdani stated that “there is no problem big enough that the government cannot solve.” The evidence is the opposite. There is no problem that government intervention does not make worse. Government intervention is the cause of inflationary crises, not the cure.

Uncontrolled spending is printing money and inevitably leads to the destruction of the purchasing power of the currency, lower real wages and higher inflation. Add to it regulations that limit competition and affordable supply and taxes that make small business uncompetitive and the distortions created by governments playing God led to chronic inflation.

The explanation is simple. Economic challenges require competition, creative destruction and open markets to generate benefits for all citizens. Giving increasing economic power to bureaucrats that have no skin in the game and always resort to higher taxes and more spending is the recipe for stagnation and a debt crisis.

Mamdami fails to explain that socialist France has the biggest government in the OECD, the highest taxes, and a hugely intervened economy. It is in stagnation; it has a deep debt crisis, a high cost of living, and soaring social discontent. Not only France. The evidence of the failure of the “social state” is clear in Germany, the UK, Canada and many other developed economies that forgot that wealth is not a cake to divide. You either create wealth or destroy it.

Many cite China as an example of socialism that works. However, China does not prove that socialism works; it proves that abandoning socialism works. China’s economic system is what many socialists, like Mamdani, Sanders or AOC, call “rampant capitalism”. In fact, some of China’s most complicated challenges, like overcapacity, come from state central planning.

At the core of the problem is the idea that the government is a better allocator of wealth and prosperity than the market. The evidence is overwhelming. An interventionist government will always overspend, malinvest and pass the cost to taxpayers and citizens because the politicians do not suffer the consequences of their mistakes. Socialism is always justified based on its alleged good intentions, while capitalism is criticised for its worst results. The trick? Once you try socialism, you cannot get it out when it fails, as it always does.

Interventionism always erodes prosperity, undermines freedom, and destabilises the very foundations that politicians claim to defend. However, by the time citizens realise they have been tricked, the politicians’ power is too large.

Mamdani’s sentence rests on the view that bureaucratic action can overcome any obstacle by sheer will and allegedly unlimited resources. However, history repeatedly shows that attempts at imposing big government control led to negative consequences. Government spending is out of control and interventionist administrations refuse to cut expenditures or balance budgets. Instead, they increase bureaucratic power, betting on limitless spending, knowing the long-term costs are passed down to citizens rather than politicians.

Politicians benefit from increasing state power; this incentive perpetuates cycles of intervention that leave a trail of debt while politicians reap the benefits.

Socialism has only one objective: control. The goal is to create dependent citizens that must bow down to politicians and keep quiet because they have no power. Only the few politically connected thrive at the expense of the middle class, small businesses, and workers, who suffer the costs of inflation, taxation, and lost opportunity.

Socialist politicians always blame the rich, but the wealthy are not their objective, as they know they can leave the country and settle elsewhere. What socialist politicians really want is to destroy the middle class, because independent and economically free citizens are critical and do not want more government intervention. The middle class must be obliterated and create a dependent subclass.

The easiest way to end the middle class is with massive state spending on so-called “stimulus plans” that bleed small businesses dry and destroy the middle class via inflation, taxes, and bureaucracy, leaving only debt and stagnation.

One of the most destructive outcomes of government intervention is chronic inflation. Rothbard explains how the government, by issuing currency to pay for rising deficits, imposes a “hidden tax” on everyone who holds money or earns wages. Politicians are never concerned about debts and deficits because inflation stealthily erodes obligations by devaluing currency, shifting the financial burden to working families. This constant debasement is not a fatality but a deliberate policy choice that allows states to live far beyond their means, become larger, and create a dependent subclass through the erosion of purchasing power and the impoverishment of society.

Governments in social democracies have exceeded their three limits:

• Economic Limit: Government interventionism distorts prices, weakens real wages, and perverts incentives. Rothbard shows that state intervention necessarily misallocates resources because it cannot rationally price goods or services absent market signals. The result is inefficiency, waste, and lost opportunities for innovation and prosperity.

• Fiscal Limit: Interventionists operate under the illusion of unlimited fiscal resources, running chronic deficits, and claiming they can “stimulate” economies without cost. But as government liabilities rise, interest expenses soar, limiting growth and crowding out private investment. Tax increases are not a tool to reduce debt but to justify it, and the end result is stagnation and a debt crisis.

• Inflationary Limit: To finance their ambitions, states print ever more money, perpetuating inflation. No interventionist government voluntarily reduces spending or cuts debt; they simply debase their currency, eroding savings and wages. Thus, they undermine confidence in money itself, destroying the economy in a short period of time.

Instead of enhancing equality, opportunity, or prosperity, state interventionism erodes them. Socialism, under the disguise of protecting the most vulnerable, destroys the middle class and makes the poor even poorer. Policies to force equality via intervention only “level down”; bureaucracies grow while innovation and productivity slump.

Government control does not lead to progress but to stagnation and currency destruction.

Chronic inflation, fiscal imbalances and economic stagnation are not solved by government intervention; they are created by it. Furthermore, when citizens find that socialism fails, they cannot escape from it.