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Sunday, April 1, 1984

A Reviewers Notebook: America by the Throat

In his America by the Throat: The Stranglehold of Federal Bureaucracy (Devin-Adair, Publishers, 143 Sound Beach Avenue, Old Greenwich, Conn. 06870, 190 pp., $14.95), President George Roche of Hillsdale College talks about an imaginary state of Rapinia. It is bureaucratically run, with orders going out from a Central Economic Planning Bureau. It happens to have four main frame computers, procured illegally from capitalist countries. The problem is what to feed into the computers that will enable the chief bureaucrats to decide on the disposition of available investment capital and energy.

The economy of Rapinia is out there waiting. The country needs steel I-beams, shoes, wheat, toothpaste, dental drills and hydroelectric dams. But in what order, and in what relative amounts? How shall the workers be apportioned to the various enterprises? Which factories will be entitled to what raw materials? “What,” asks Roche, “are two kilos of soap powder worth relative to a hectare of barley relative to a hydroelectric dam? How can one add up or make any calculations concerning an I-beam, wheat, and cosmetics? There is no common denominator for these things.”

In a market system they could be priced in terms of the money that individual purchasers would be willing to put out for the separate items. But this presumes free will on the part of individuals, and a private base from which to trade. In assuming that Rapinia is cut off from an international market (just how did the Rapinian bureaucrats ever get hold of those computers anyway?), the problem of economic calculation must become a nightmare. Decisions will be made by sheer guesswork and enforced by a police, a KGB, who are under orders from a planning board which itself is subject to prior decisions made by a political dictator. The dictator, of course, would have to think first of all in terms of his army. So we have missiles always coming before butter!

In describing his Rapinia, with all its troubles, George Roche acknowledges his tremendous debt to Ludwig von Mises, who raised the point about the dependence of economic calculation on a market system some sixty years ago. But Roche’s concern in depicting his imaginary Rapinia is not merely to endorse the Mises insight. The idea behind Roche’s book is to show how the urge to approach Rapinia as a limit corrupts the thinking of bureaucrats in free market states, making economic calculation more difficult as the empire-building talents of canny top bureaucrats manage to siphon off more and more of the national income.

To Ludwig von Mises George Roche has added Albert Jay Nock, who made key distinctions between political power and social power. The political power is coercive, and it grows all the time. When it begins to take more than 30 per cent of the national income for itself, it has disastrous effects on the incentives of those who still possess some social power. Invention lags. People seek special tax havens and turn to a new lawyer class to find ways of outwitting the bureaucrats.

The bureaucrats that keep growing may be well-intentioned, but rigidity is imposed on them by law. The bureaucrat must go by the book. If he departs from the rule, the letter of the law, he would be subject to investigation and a possible jail sentence.

The regulations imposed by the book are essentially sterile. Businesses grow by bold innovations made by individuals who are willing to take chances. The bureaucrat can’t understand the innovative mentality. If the law tells him that a toilet seat must be made a certain way, or that a mouse trap must conform to certain specifications, or that a window must be X number of inches off the floor, he will apply the rule quite arbitrarily. In so doing he may be freezing a design forever.

Examples of Waste

George Roche has a lot of good laughs at the bureaucrats’ expense. By law federal bureaucrats poured 76 million barrels of oil into a cave to create a mandated Strategic Petroleum Reserve. But the law had forgotten to specify that pumps must be installed to get the “reserve” out in a time of emergency. Every year, in accordance with regulations, the Department of Defense buys 48,000 heavy duty leather holsters for .45 caliber pistols. But it hasn’t gotten any new .45 pistols since 1945.

These things, culled mostly from Bill Buckley’s National Review, are funny in detail. But they cease to be funny when their cost to the taxpayer is considered.

And it is certainly not funny when bureaucracy strikes at Dr. Roche’s own college at Hillsdale in Michigan. Hillsdale has never taken a dime from the federal government in direct government support. But some of its students have borrowed education money from government sources on their own. This is their legal right, and Hillsdale has had no power to prevent it. But the bureaucrats, sticking to the letter of the law as interpreted by themselves, decided that any college that accepts a student who has had Federal funding must itself accept Federal rulings on such things as hiring quotas. Hillsdale, according to the bureaucrats, did not employ enough women. The little fact that there are not enough women Ph.D.s to go around meant nothing to the bureaucratic mind.

The rulebook approach insures that mistakes, when made by over-solicitous governments, can in Fiorello LaGuardia’s phrase be “beauts.” An environmental ruling designed to protect caribou in Alaska delayed the building of the needed trans-Alaska oil pipeline by five years at the very time that the Arabs of OPEC were getting away with their monopolistic price-fixing. Eventually the magazine published by the Smithsonian Institute sent a reporter up to the Alaskan North Slope to check on the caribous’ habits. The reporter discovered that the caribou, far from being bothered by the pipeline right-of-way, loved huddling on the new artificially raised land to get away from the mosquitoes.

The business of the bureaucrat, so Roche tells us, is to fund problems, not to solve them. The bureaucrat who wants to keep his job going would only be cutting his own throat if he were to work himself into premature retirement. So we come to Roche’s two laws. The first is that the supply of human misery will rise to meet the demand. The second is that the size of the bureaucracy increases in direct proportion to the additional misery it creates.

  • John Chamberlain (1903-1995) was an American journalist, business and economic historian, and author of number of works including The Roots of Capitalism (1959). Chamberlain also served as a founding editor of The Freeman magazine.