The Road to Serfdom

Government of The Elites, By The Elites and For The Elites

By Monty Pelerin

In the short span of a century and a half, the US went from a government famously described by Abraham Lincoln as "of the people, by the people, for the people" to one "of the Elites, by the Elites, for the Elites."

Albert J. Nock referenced Lincoln's phrase as "probably the most effective single stroke of propaganda ever made in behalf of republican State prestige." Perhaps, but when Lincoln said it our country had at least some resemblance to Lincoln's description.

This country, founded on personal liberty, freedom and limited government, has morphed into a massive Social Welfare State rivaling the paragons of Socialism in Europe.  The concept of government serving the people no longer applies. The people now serve their government and its cronies.

The Founding Fathers would not recognize what has transpired in this country. Their creation and ideals have been savagely distorted if not destroyed forever. In its place stands the detested evil that results from increasingly unbridled power. The image of Leviathan ruthlessly ruling over its citizens is faintly visible.  Each violation of The Constitution and The Rule of Law only strengthens the growing monster.

Two Views of Government

Two diametrically opposed views of government played a role in our metamorphosis:

• 1. Government as Passive, Unbiased Referee
• 2. Government as Active Player

Government as Passive, Unbiased Referee

The concept of government as an honest broker used to be acceptable to many (although probably not the Founding Fathers). Fifty or sixty years ago this view was reflected in statements like: "If you can't trust your government, who can you trust?" Today, few make such statements outside of comedy club routines.

Even the libertarian Milton Friedman believed, for a time, that government could be an unbiased referee. When asked late in life about his biggest mistake, he replied that some early policy recommendations he made were based on this erroneous assumption.

If government were honest and unbiased, it would be reasonable to grant it a larger role than if it were not.  However, even this unrealistic assumption cannot justify the excessive government of today.

Government as Active Player

Public Choice Theorists, like Nobel Laureate James Buchanan and Gordon Tullock, provided an alternative view of government that was consistent with that of the Founders. They saw government as just another institution in the sense that it is populated by self-interested individuals. As such, it would be an active player in the economy and society to the extent possible.

So long as these individuals could benefit from outcomes, government could not be an honest broker. In their view, those who "serve" are no different from the "greedy" businessman who politicians regularly condemn.

This view of human nature drove the Founders to develop The Constitution, The Bill of Rights and the separation of powers in an attempt to contain misbehavior by government. Public Choice theory is merely a  modern intellectual affirmation of what our educated Founders knew two and one-half centuries ago.

Government is necessarily run by self-interested individuals until we discover a way to breed and elect angels.  Friedrich Hayek, among others, argued that a biased process attracts and enables the "worst" to succeed in government. (See "The Road to Serfdom" for his reasoning).

Passive and unbiased government is not impossible, merely highly improbable. Noble phrases like "public service" are should be seen as modern day examples of what Nock saw as self-serving propaganda.

What Does This Mean?

Public Choice theorists deal with the difficulties of providing the proper incentives and disincentives to prevent self-interest from exploiting positions in government.  Charles R. Anderson recently used a taxonomy that is consistent with Public Choice and history. He described two orientation of government --  principled versus pragmatic. 

Mr. Anderson's description of the two follows:

1) A government which is highly limited by principle in power and scope to the purpose of protecting the equal, sovereign rights to the individual to life, liberty, property, the ownership of one's own mind and body, and the pursuit of personal happiness. This is the legitimate government envisioned by the Declaration of Independence and the Constitution.

2) A so-called pragmatic government not restricted by principle to a limited scope and with few powers which is inclined to bestow special privileges on special interests. Such a government may be a democracy, an oligarchy, a one-party state, or a dictatorship and it must of necessity trample the rights of the individual because our personal interests are too diverse for government to foster all of our interests. It must pick which interests it will favor and which it will suppress.  It violates the principle that government should do no harm.

The principled view of government is equivalent to the ideal type of the Passive, Unbiased Referee. The pragmatic is government equivalent to Active Player. Viewed on a continuum, the US government began as principled and degenerated over time to pragmatic. Democracies of other countries seem to have followed a similar path.

Unless the proper incentives and disincentives are in place, government will turn from principled to pragmatic. Putting them into place is difficult while keeping them in place is likely impossible. Individuals have incentives to break free from "rules" that prevent self indulgence. Whereas these same people make and enforce the rules, containing government is likely an intractable problem.

Over time, the binding constraints are changed to benefit those in power. That is what happened in the US. For political scientists this natural degenerative process of government may provide the basis for an interesting doctoral dissertation dealing with the cycle of civilizations and the rise and fall of nations.

There is a clear progression from pragmatic to corrupt government. There is no countervailing force to reverse this progression. Those wielding power have incentives only to expand power and personal benefits. No one outside of government has the power to overrule government. At some point in the accretion of power, the ballot box is obsolete.

No country or civilization of which I am aware has ever reversed this degenerative process. It is dangerous as Ludwig von Mises observed:

It is important to remember that government interference always means either violent action or the threat of such action. Government is in the last resort the employment of armed men, of policemen, gendarmes, soldiers, prison guards, and hangmen. The essential feature of government is the enforcement of its decrees by beating, killing, and imprisoning. Those who are asking for more government interference are asking ultimately for more compulsion and less freedom.

From a short-term perspective, the deterioration in government is barely noticeable. It proceeds slowly, in the same manner and to the same effect as rust or erosion. Looked at from a wider time perspective it is easy to see as some of these examples illustrate:

• In the late 1800s, President Grover Cleveland, when criticized by a member of his own party, responded: "What is the use of being elected or re-elected unless you stand for something?" Contrast that with Rahm Emanuel's statement in 2008: "Never let a good crisis go to waste." In Cleveland's time there was still a sense of "doing the right thing." Today politics and self-interest are the ends. "Right" is anything which advances a political agenda.
• Prior to 1913, there was no permanent income tax or Federal Reserve in this country. Government ran mostly balanced budgets, funding operations via excise taxes and tariffs. When government debts were incurred, they were usually paid off within several years.
• Inflation was an oddity before the Federal Reserve. During the nineteenth century, arguably the fastest growth period in our history, declining prices were the norm. Only during the War of 1812 and the Civil War in the 1860s was inflation a problem. Even with those wars, prices were lower at the end of that century than the beginning.
• Since the formation of the Federal Reserve about 100 years ago, inflation is a constant. The Fed has systematically destroyed the purchasing power of the dollar and with it many types of savings. This institution, sold to the American public as necessary to protect the dollar, has destroyed 95 cents of every dollar since its formation.
• The nature of government and our attitudes toward it have changed dramatically. President John F. Kennedy's views would not be acceptable to today's Democrat party. He could be considered too conservative for many modern-day Republicans.
• The humorous definition of a "great statesman" used to be a "dead politician." For politicians who have expired within the last fifty or so years, there are few great statesment, even by this gratuitous definition.

Attacks on the Rule of Law and the Constitution, coupled with the general decline in ethical norms, enabled the inmates to take control of the asylum. Now we face a situation described rather bluntly by D. Sherman Okst:

Plutocracy allows them to do what you and I would be jailed for doing.  Being a legislator today is a get out of jail and get rich card. Congress isn't a place to serve the public, it isn't where you go to honor your country - it is where you go to earn wealth 150% faster than the American that serves you while you screw them. 

There is no viable political solution. Choosing between Corruption Faster (Democrats) and Corruption Slower (Republicans) does not change the destination, merely the rate at which the public is plundered. Government is too large and too powerful to allow itself to be dismantled via the ballot box. Yet it is also too large, too inefficient and too insolvent to survive.

A mercy killing, administered by an economic collapse, will provide a meaningful opportunity to address the political problem and return to limited government. Such an event, unfortunately, also opens the possibility of a totalitarian state.

Great pain lies ahead. The only issue is whether it will be short-term (say ten years) or long-term as in the old Soviet Union. Be aware of what lies ahead and prepare as best you can.