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The Real Purpose of Government

At its heart, it’s about saving capitalism from itself.

Ronald Reagan being sworn in as president in 1985.
(AP/Ron Edmonds)
Government in a democracy is essentially a conservative institution. It is responsible for creating and sustaining markets, enforcing contracts, protecting private property, and producing systems of education and infrastructure that allow commerce to function efficiently.

The current conventional wisdom that liberals are pro-government and conservatives are anti- is frequently traced to President Ronald Reagan’s often-invoked notion that government is the problem, not the solution. But when you read Reagan’s first inaugural address, delivered in 1981 in the middle of a crushing recession, what he actually said was this: “In this present crisis, government is not the solution to our problem; government is the problem.” This was not a blanket condemnation of government, but a reaction to a specific situation in which the federal government seemed particularly ineffective. Reagan went on to say that “it’s not my intention to do away with government. It is rather to make it work.”

Near the end of his speech, Reagan invoked the first Republican president, Abraham Lincoln. Lincoln had his own clear and, I think, conservative ideas of government. He wrote that government should do the things that individuals could not do for themselves, including “maintaining roads, bridges and the like” and dealing with “noncompliance with contracts.”

Lincoln’s lawyer-like invocation of the evils of contract noncompliance hints at a theme that Governing columnist Alex Marshall has made explicit in his most recent book. In The Surprising Design of Market Economies, Marshall demonstrates that free markets are created by, and cannot exist without, governments. Governments, he writes, create the legal framework trading requires, provide police and courts to enforce laws and contracts, and build the “commons” -- roads, bridges, ports and other facilities necessary for commerce.

The relationship of government to markets is an ongoing one that requires continual intervention from government to maintain order and stability. This is because markets are inherently disruptive. The term “creative destruction,” used by Joseph Schumpeter in his 1942 book Capitalism, Socialism and Democracy, describes “the process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one.” Schumpeter thought that the creative-destructive processes inherent in capitalism would eventually lead to its destruction. The fact that this has not occurred -- or at least not yet -- is the result of government’s continuing ability to intervene, moderating the disruptive impacts of the ever-changing market economy.

Schumpeter misunderstood the effectiveness with which the political process -- often as the result of clashes provoked by liberals -- could preserve government’s essentially conservative functions. In 1932, in the terrible crisis of the Great Depression, the leading progressive of his time, Huey Long of Louisiana, argued on the Senate floor that his was “no campaign to soak the rich; it is a campaign to save the rich.” He was essentially working to prevent the collapse of capitalism. Is there a more conservative idea than that?

Mark Funkhouser, a former publisher of Governing and former mayor of Kansas City, is president of Funkhouse & Associates, an independent consulting firm. He can be reached at
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