All Commentary
Thursday, May 1, 1958

Economy In Government

The author is Professor of Money and Credit at Claremont Men’s College, California. This is an excerpt from his address to the California Taxpayers’ Association at Los Angeles, February 18, 1958.

One major obstacle to achiev­ing true economy in govern­ment is the willingness of many people to accept superficially plaus­ible programs having multiple, and often mutually incompatible, ob­jectives. There is literally no end to the number of socially desirable projects governments can dream up. Each one can be clothed in the most fetching garments and sur­rounded by such an aura of right­eousness that opposition to it can be made to resemble attacking one’s sister and setting fire to the old homestead. But, if the ends we seek include the retention of our traditional liberties and self-re­spect, as well as the multitude of socially desirable projects, we may end up by achieving none of them in an effort to have all of them! Like Don Quixote, we seem deter­mined to ride off madly in all directions.

To overcome this kind of obsta­cle requires the establishment of priorities in our objectives. It re­quires a constant reappraisal and restatement of the raison d’être of our political and economic society. For example, some groups wish to increase the degree of centralized direction of political and economic affairs — in brief, they seek a high degree of socialization. In other words, some persons desire enough power to impose their values on other persons. They do not fear in­flation, or a government deficit ; in fact, they welcome both, for such conditions are quite likely to lead to demands for price-fixing, priori­ties, rationing, allocations, and so on, all of which are excellent in­struments of social control and economic subjugation.

There are others who believe an individual’s income is spent most efficiently, and most properly, when he spends it himself in such a manner as he may choose. This second group, in contrast to the first, favors greater economy in government as a means of reduc­ing taxes and thus minimizing the proportion of everyone’s income disposed of by political, decision.

Unfortunately, there also exists a third group that does not aim at socialized control and favors econ­omy in government in the abstract, but seeks to use the coercive pow­ers of government for its own particular advantage or special privilege. In this group lies the prime obstacle to economy in gov­ernment. To call upon government to exercise its powers on behalf of one group — whether labor, or farmers, or businessmen, or school teachers, or whatever — inevitably leads to further interference on behalf of others. The end product, as Henry Simons sagely pointed out two decades ago, is an accumu­lation of governmental regulation and interference which produces all of the disadvantages and none of the advantages of either a free society or socialism itself. We are running the danger, today more than ever before, of drifting into a society which, in performance, is the worst of both worlds.

A Matter of Principle

From the standpoint of moral principle I find it difficult to sub­scribe to the glorification of econ­omy per se. If it could be demon­strated that a centralized system was more efficient in all respects than a decentralized system with its division of sovereignty and separation of powers, I should still prefer the latter. Fortunately, this is not presently the case; in­stead, we can probably have our cake and eat it too. If we desire efficient production of the things people want to have, it is almost beyond dispute that a free and voluntary society is much more capable of accomplishing that goal than a directed, centralized system of imposed values.

It should be recognized, too, that there are two kinds of econ­omy in government; two ways, therefore, to economize. One is to achieve greater efficiency in the operations of government — in pro­ducing better defense for less money, in performing governmen­tal services of all kinds at lower cost, in reducing employee turn­over, and so forth. The second way is to reduce the functions per­formed by government and to keep all government activity as close to the individual as practicable. This means avoiding government ownership and operation of enterprises, avoiding subsidies whether direct or indirect, and whether or not they have pleasant names like aid to education, school lunches, or pensions for unmarried mothers.

There is, in my opinion, no ex­cuse for the agricultural subsidies, the TVA and public power sub­sidies, the public assistance pro­grams, the vast aid to education programs, the housing subsidies, the subsidies for water transpor­tation, the hidden and open subsi­dization in many items of public works, and the amazing subsidies to users of mail services. And if someone wishes to raise the ques­tion, I am prepared to argue that the largest part of the $60 billion of postwar foreign aid, instead of protecting this nation’s defense, has weakened our ability to achieve peace and to wage war, has lost us the respect of a large part of the world, and has seriously under­mined the political and moral bases of our very existence.

As early as 1800, Thomas Jef­ferson wisely observed in a letter to Gideon Granger:

“Our country is too large to have all its affairs directed by a single government…. if the prin­ciple were to prevail of a common law being in force in the United States (which principle possesses the General Government at once of all the powers of the State govern­ments and reduces us to a single consolidated government) it would become the most corrupt govern­ment on the earth….

“Let the General Government be reduced to foreign concerns only, and let our affairs be disentangled from those of all other nations, ex­cept as to commerce, which the merchants will manage the better the more they are left free to man­age for themselves, and our Gen­eral Government may be reduced to a very simple organization and a very inexpensive one…”




Ideas On Liberty
Despotic Government

It covers the surface of society with a network of small, com­plicated rules, minute and uniform, through which the most original minds and the most energetic characters cannot pene­trate, to rise above the crowd. The will of man is not shattered, but softened, bent, and guided: men are seldom forced by it to act, but they are constantly restrained from acting: such a power does not destroy, but it prevents existence; it does not tyrannize, but it compresses, enervates, extinguishes, and stupe­fies a people, till each nation is reduced to be nothing better than a flock of timid and industrious animals, of which the govern­ment is the shepherd.

Alexis De Tocqueville, Democracy in America