Freeman

IT JUST AIN'T SO

There’s Too Little Trust in Government?

OCTOBER 22, 2010 by CHARLES JOHNSON

Filed Under : Subsidies

There is one point on which I can unequivocally agree with E. J. Dionne, Jr.’s, column “Can We Reverse the Tide on Government Distrust?”: “So far, the Obama administration has missed the opportunity to demonstrate . . . how it is changing the way government works. How is its approach to . . . regulations different from what was done before? . . . How are its priorities different?”

How indeed?

Two years in, if there’s any noticeable difference between Bush’s policies of corporate privilege, endless warfare, bailouts, executive power, and bureaucratic expansion, and Obama’s policies of corporate privilege, endless warfare, bailouts, executive power, and bureaucratic expansion, I’d like to know where to find it. The difference between me and Dionne is that Dionne is apparently surprised by this outcome—why hasn’t Obama done better? At issue is what used to be called “Good Government”—the problem of ensuring that a centralized managerial State, with expansive powers to intervene in all matters economic, social, or hygienic, will be run cleanly, and competently, by qualified experts. Dionne insists that financial market meltdowns, oil spills, and coal-mine disasters reveal the catastrophic results of a few years of Bush-era government neglect. Those of us who remember the Bush administration may have a hard time accepting the claim that it was an era in which government was not doing enough; and we see these headline-grabbing catastrophes as only the tail end of a decades-long crisis—a bipartisan, politically created crisis of institutional incentives and industry “best practice-ism,” generated, nurtured, and protected by government itself.

So when Dionne reviews a few headlines—the financial-market meltdown, the Gulf oil spill, the coal-mine explosion at Upper Big Branch—he suggests that “It’s hard to argue that the difficulties we confront were caused by an excessively powerful ‘big’ government.”

Really? Let’s try.

“Deregulated” Wall Street collapsed in 2007 after years of unsustainable bubbles and malinvestment by a handful of immensely powerful big players. The real crisis was not just the “crunch,” but the shell game and misallocation that preceded it. The shell game flourished through a private-public partnership between government central banking, cartelized financial industry incumbents, and the industry-connected regulatory enforcers of the government money monopoly. The crash certainly revealed powerful corporations acting recklessly. But how did they get so powerful, and why were they willing to take those risks? Because government has, for decades, as a matter of policy, encouraged their dominance, invited their investments, subsidized their loan markets, put them near the inflation spigot, and subsidized their risk-taking with the promise of tax-funded bailouts. In a freed market, “deregulated” Wall Street’s concentrated wealth and reckless business model would not exist.

British Petroleum (BP), as a corporation, exists because governments created it—the Shah of Iran granted a company owned by the government of the United Kingdom a monopoly concession. The UK government kept its ownership stake until the 1980s. Like all other Big Oil companies, BP extracts the oil it sells mainly from government-controlled land and sea, through monopoly concessions, bureaucratic bidding processes, and politically granted leases. Oil companies use government protection, liability caps, and escrow funds to insulate their businesses from paying the economic and social costs of their actions. In a freed market BP’s concentrated wealth and reckless business model would not exist.

Massey and other Big Coal companies also depend on government leases and use government permits to absolve them of the environmental costs they inflict on their neighbors—including the damage that mountaintop removal mining causes to downstream property owners. They also rely on a regulatory structure that has taken control over workplace safety disputes out of the hands of workers and given it to a politically appointed, industry-dominated bureaucracy, the Mining Safety and Health Administration (MSHA). Where miners’ unions reacted to unsafe conditions by walking out and crippling production until issues were resolved, the MSHA issues an ineffectual fine and tells workers to keep on working in hope and faith. In a freed market Massey’s concentrated wealth and reckless business model would not exist.

Dionne may present his article as a commentary on recent news, but the headlines are only carelessly chosen illustrations for a message that seems copied out of a children’s civics textbook circa 1948. Elected government’s task is to “stand up for the many against the few,” to “make sure that corporations are properly supervised,” and to “protect those with weaker bargaining positions . . . against the harm that those in stronger bargaining positions might inflict.” Our problem is simply that we do not trust the political means enough. According to Dionne, if we are ever to solve these politically created crises, we need to know “that government in a free society is not a distant force but, rather, something that all of us influence and shape.”

To be sure, government is not very distant from the downtown offices of the Washington Post. For the rest of us, though, access is somewhat more limited, and not “all of us” have the same influence in shaping government policy. That is done by political insiders and economic incumbents: As scholars like Gabriel Kolko and Butler Shafer have repeatedly shown, government regulatory bodies from the FTC to the MSHA to the SEC have consistently been captured by the incumbents in the industries they are supposed to regulate, systematically rigging government regulations in such a way as to build up cartels, exclude competition, and protect businessmen from liability for harmful practices.

Even with the record of regulatory capture and industry-driven policy, Dionne, like many Progressives, simply insists that politicians need even more trust and fewer restraints on action to give them the independence to do the right thing. You might call this kind of Progressivism a theory of trickle-down politics: When government devotes the overwhelming majority of its power and resources to foolish or destructive programs directed by concentrated interests—subsidies, bailouts, anticompetitive regulations, or an ever-growing military-industrial “National Security” complex—the proposed solution is to give that same government even more strength and greater resources to dispose of, hoping that some of the surplus will eventually make it through the net of insider control to reach programs that offer a pittance to the little guy.

Individualists know that when you reward the institutions that created crisis, you are going to get more crises. Greater regulatory powers will only make government more attractive to industry incumbents; the more politics is involved in industry, the more that political pull pays off for the industrialists. The root causes of the crises we’ve faced in recent years are not problems of competence or corruption. They are problems of cartelization and capture. The solution is not more trust in government; it’s to realize there are things that just cannot be accomplished politically, which should instead be addressed through decentralized, peaceful social cooperation.

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