Freeman

ARTICLE

The New Bondage

APRIL 01, 1982 by JOSEPH S. FULDA

Joseph Fulda is an NSF Fellow at Columbia University. This analysis is based on a letter to The New York Times (August 2, 1981).

In a courageous address to the delegates of the NAACP convention, President Reagan spoke of “a new form of bondage” and offered blacks, as he did all Americans, a greater measure of economic liberty. The New York Times was quick to notice that the selfsame programs responsible for the new bondage form the President’s much-vaunted safety net. But there is no contradiction. The President was making a sensitive point about the nature of government nets. “One moment they’re under you, the next moment they’re on top of you,” he was reminding us.

The realization that dependence on the state invariably leads to subservience to the state may come hard in countries whose democratic forms often lend themselves to a most mischievous confusion of government with society. But as Hamilton noted, “power over a man’s subsistence amounts to a power over his will.” Such power is what Hoover meant when he wrote of “the terror of effective deprival to any man of his business and his livelihood.” These men understood that the dependence of free men and women on the state for their sustenance, what we might call the paradox of democratic socialism, would soon undermine the blessings of liberty in which they believed so fervently, each in his own way. It is in this context that the new bondage must be understood, for those to whom we give as much as those from whom we take are stripped of some of their dignity and personal freedom.

Let us examine the underpinnings of the new bondage. The annals of government intervention will show a decided propensity on the part of government to control what it does not support. Such diverse entities as local governments, business enterprises, private schools, and our lives come under this head. But rare indeed is the agency of government which proffers support without demanding a measure of control. Nor has such control been found unconstitutional; as one judge wrote, “It is hardly lack of due process for the Government to regulate that which it subsidizes.” One can even argue, as Senator Barry Goldwater has, that the appropriation of tax monies ethically requires some regulation of their use. Legally, ethically, and historically, then, subsidy and regulation have been inextricably intertwined. Such an observation, to be sure, is no argument for the regulation attendant upon subsidy, but rather an argument against subsidies in the first instance.

Sacrificing Self-Reliance in Return for Government Aid

Examples of the subsidy-regulation nexus abound. New York City, the Chrysler Corporation, and the national endowments have each sacrificed something very dear to the American tradition in return for the financial blessings of the state: a tradition of self-government older than America herself, the autonomy of private enterprise, and artistic integrity.

Under the system of regulated subsidies, government has extended itself into all the nooks and crannies of heretofore private life: charity, education, medical care, agriculture, trade, production, scholarship, art, and family relations. We tell our poor where to live—in housing segregated by social class—and how much to eat—and thus how much to weigh. We tell parents what their children must learn—the virtues of the state, the new morality, and our debt to ape-like creatures—and what they should eat for lunch. We tell our elderly what transportation to use and when to use it—malfunctioning state-run systems at odd hours. We decide what medical procedures to allow—unnecessary operations, for example—and when home care can be funded—when salutary and relatively inexpensive, but even then only with presidential intercession. We tell our farmers what crops are desirable—tobacco, for example—and what crops must be restricted—peanuts, for example. We tell our business community what merits encouragement—enterprises so forlorn as to attract no investors without subsidy—and what deserves discouragement—companies so successful that they can outproduce and undersell their competition. We fashion all these specifications and regulations as citizens of a democratic state; we must live under them as members of a free society.

Subsidies Lead to Control

But inasmuch as the decision to accept a subsidy is voluntary, can the regulation attendant upon it truly be thought inconsistent with the philosophy of liberty? The answer, I believe, is in the affirmative and for three reasons. First, we have already remarked on the tendency of the state to regulate that which it does not subsidize. Such regulations often arise from the proverbial transmutation of the carrot into the stick.

All too often the real object of government is not to subsidize what the politicians believe a worthwhile enterprise or endeavor, but to regulate what is still a free enterprise or a social endeavor, with the subsidy a choice means to that typical end. Thus, what begins as a condition for Federal contracts may end as a condition for doing business with one’s neighbor. What begins with subsidy as the reward for compliance with social goals may end with fines as the punishment for deviating from public policy. What begins when the state has not yet exhausted its resources and overtaxed its populace will remain long after the resources to support what has been taken over are gone.

It will be useful to contrast the regulated state subsidy with private employment or gifts granted in return for adherence to conditions established by the giver. The private employer cannot impose his conditions of employment on anyone who does not seek employment with him. The giver of gifts can withhold his largesse but can impose no fines. The state, on the other hand, is ever ready to cross the sharp moral line which divides not giving from taking.

It is for this reason, too, that those concerned with the growth of government should be wary of the state’s assumption of additional functions, even if they are completely voluntary. Thus, even those government services or enterprises which are used only by those who so choose and which are completely funded by user fees are suspect. The Postal Service, after all, began with neither a monopoly nor a subsidy, but has long since acquired both. As long as the entity which owns and operates an enterprise is also the entity with coercive powers, what begins in freedom may end in compulsion.

A second objection to the regulation which attends subsidy is that the regulations issued often conflict with the rightful management of the tax monies involved. Thus racial guidelines for companies with government contracts, while voluntary, are an inefficient—not to mention immoral—use of public funds. Whether the contract is for sanitation or defense, it is best fulfilled without regard to social or political goals which misallocate resources.

Again the contrast with the private sector is helpful. A private business may indeed set any conditions it desires for contractors who wish to do business with it, for it operates with its own funds, has no public trust, and will moreover likely be severely penalized by the market if it persists in operating by uneconomic criteria. The state’s funding, on the other hand, is obtained not by mutual consent based on recognition of the efficient use of resources, but by that unilateral system of resource absorption known as taxation. Thus a public trust to utilize funds economically arises.

A Lack of Choice

Third, there comes the realization that acceptance of the subsidy is often not, after all, a full and free choice. Is the decision to send one’s children to public school—to accept the state education subsidy—fully voluntary, or is the decision influenced by the forcible extraction of public school tuition monies via taxation? Not only does one have the sense that one has paid for the subsidy—that it is not a subsidy taken from others at all—one has been forcibly deprived of the resources to purchase the service on the market. State compulsory education laws leave no recourse, in the absence of such resources, but to patronize government schools.

Consider, as another example, our beleaguered automobile manufacturers. These once- successful giants have been saddled with a myriad of uneconomic regulations. Their ability to borrow funds for needed modernization has been hampered by incessant government issues. Their ability to use their own capital to modernize has been checked by a tax code biased against capital formation. Worst of all, for decades the demand for their product lines was distorted by an energy policy of price controls; the false signals which ensued led these overly trusting com panies on down the road to ruination. After the state has thus crippled their ability to operate without subsidies, it beckons, privilege in hand; all it asks for in return is yet more control. More often than not, the large, failing enterprises that government “saves” and ultimately runs are in need of saving only from the consequences of prior government intervention. Again, this is no argument for subsidies to such enterprises, but rather an argument against the controls accompanying such subsidies while they continue.

Likewise, the poor man will find his needs attended to by a host of paternalistic agencies offering in-kind benefits that drastically circumscribe consumer choice. Why is it that in this fair land populated by a generous people, private charity, which the chroniclers of voluntarism tell us was once plentiful, is no longer adequate? Government consumes the major portion of personal income, ostensibly for eleemosynary purposes, that is why. As Albert Jay Nock observed some fifty years ago, we are as likely to refer the man in need of aid to the appropriate government agency as to aid him ourselves. By absorbing such a large portion of our resources, Nock continued, government usurps social and interpersonal initiatives as well. Indeed, it is no small tribute to the American character that so much that is worthy is still supported privately, without subsidy or favor, despite confiscatory taxation.

In sum, then, while the decision to accept a subsidy is not made under duress, a great many coercive measures in some manner or other impinge on it. The element of volition in the regulations which are the price of subsidy is part of the insidious and seductive nature of subsi dies, not a cause to disregard the President’s warning.

Treated Disrespectfully

Nor are the motive forces behind the new bondage entirely benign. In part, such programs as in-kind benefits, categorical grants, and regulated subsidies derive from a decidedly illiberal view of those being aided. That is the view that having failed at self-sufficient production, the poor are not able to direct their own consumption wisely either. It is the view that the state, with the aid of professionals and social scientists who understand such things, must therefore “help” them plan their lives. It is likewise the view that those local majorities which dare to differ with the national majority on such issues as educational priorities, the balance between liberty and security, the balance between the free exercise of religion and the proscription of its establishment, or the primacy of freedom of association are not to be trusted with the customary full faith and credit. The farmers cannot farm, the traders cannot trade, and the manufacturers cannot manufacture as well as can the “experts” in and around government, proponents of this view seem to be saying.

To a greater extent, though, these programs are the natural result of a corrupted democracy, in which the liberties and properties of individuals, once believed inalienable, are regularly put to the trial of a majority vote. The election of representatives by district rather than at large localizes their political base. Thus, social, economic, ethnic, religious, occupational, or interest groups, which in a larger area would form insignificant minority factions, are able, separately or in coalition, to gain political control over the district. (“By a faction,” wrote Madison in the tenth Federalist paper, “I understand a number of citizens, whether amounting to a majority or a minority of the whole, who are united and actuated by some common impulse of passion, or of interest, adverse to the rights of other citizens, or to the permanent and aggregate interests of the community.”) The factious spirit, further promoted by the hypostatization of groups so common in the political discourse of the day, is then reflected in the likes of quotas, entitlements, and class action suits.

Serving Special Interests

The turmoil of factions, which are today known as special interest groups, is also largely responsible for the new bondage. In-kind programs and categorical grants permit the easy identification, coagulation, and milking of these interest groups by politicians. Politicians, in turn, are easily swayed to commit ever-greater depredations on the public treasury by factions which form a substantial part of their support. Further, in-kind programs, categorical grants, and regulated subsidies are particularly amenable to the bureaucratic empire building against which Jefferson and Tocqueville warned. If a man would have power over the activities of society, he would search no farther than these baited hooks.

In contrast, only the poor would benefit from a single cash grant program, not the bureaucrats whose fiefdoms would be swept away, not the milk producers or construction workers assured a market without the fullness of competition, not the educators paid wages exactable from government only. Only the localities would benefit from block grants, not the supervising Federal agents, not the intermediating state agents, not the implementing local agents, nor again the natural constituencies of the many categories that the Congress has so painstakingly isolated over the years.

This should come as no surprise, for the system of unlimited democracy in the name of charity is in reality a system whereby some benefit from the failures, misfortunes, and dependency of others. When subsidies are granted without specification or regulation, only those subsidized benefit. That is why such subsidies so rarely emerge from the political process.

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April 1982

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