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Thursday, October 1, 2015

Humane Transitions to Freedom

What Do We Know about Dismantling the State?

The best, most humane way to dismantle the state is probably through a rapid and radical transformation. It’s an approach that some call “shock therapy.” But as preferable as shock therapy might be, reality typically offers much more limited options to roll back political power. Where to begin disintervening depends, of course, on the feasibility of those options.

But there are two other factors to consider. The first is whom we might wish to protect in the process of disintervening, and the second is the degree to which it’s even possible to protect them, given the limits of our ability to actually foresee the consequences of what we’re doing.

The Knowledge Problem in the Growth of Government

Much of the work in public choice and in Austrian political economy focuses on government growth. That’s understandable, as expanding political power poses such a threat to individual freedom and voluntary social cooperation. And, of course, government growth is much more common than government contraction.

Austrians in particular recognize that a fundamental problem facing any policy maker is the knowledge problem. Predicting even the most significant consequences of a new intervention — positive and negative — may be impossible.

But there have been important episodes in which the state has shrunk dramatically. Examples include New Zealand, Poland, and the Czech Republic in the 1990s and Sweden more recently. It’s important to realize, however, that the reformers in all of these countries encountered consequences that they could not have foreseen. The knowledge problem works both ways, and it seems to become more of a problem the less radical the reforms are. Shock therapy minimizes these complexities and is, in that sense, preferable to piecemeal change. (I’ve published a book, Dynamics of the Mixed Economy, that deals extensively with this topic.)

Radical change is worth fighting for because it is the most humane. Unfortunately, that’s not always possible.

The Alternative to Shock Therapy Isn’t Ideological Compromise

One thing I learned from my teacher at Grove City College, Hans Sennholz, is that there are better and worse ways to dismantle the state. Intervention has done decades of damage — damage that cannot be undone without someone feeling harmed. The job of the compassionate political economist is to try to find a way that will avoid making the most vulnerable and the least well-off bear the burden of transition.

(I believe this idea is much in the spirit of Henry Hazlitt, who urged those who benefit from the advances of innovation to help those who might be left behind.)

It won’t always be possible at every step of the way to do that, but it will be sometimes. In “Don’t Smash the State,” Freeman writer Steve Horwitz offers a good example:

When we fully comprehend how much the state has distorted and damaged people’s ability to earn a living, especially among those with limited skills, we should be careful in how we talk about which government activities to eliminate first. It’s easy to say, “End the welfare state,” but if we do that without removing the barriers to employment and upward mobility among those who rely on welfare, we are taking away crutches from the very people whose legs the state has broken.

This is in no way a call to surrender our principles to expediency or to populism or an argument to stop short of our goal of a totally free society. I’m an idealist and firmly believe that we can stick to our principles, not bow to political expediency, and still seek a path to the free society that will do the least harm to those most vulnerable.

We want to maintain our youthful idealism, but the reality is that we can only start from where we are now and do what we can do.

But the Knowledge Problem Works Both Ways

My good friend, Sheldon Richman, the prolific, hard-core-libertarian author, editor, and thinker, reminded me that the “knowledge problem” is highly relevant in this context.

Just as our lack of perfect knowledge makes it impossible to foresee some (though not all) catastrophic unintended consequences of interventionism, the same knowledge problem plagues those of us who might wish to see the dismantling of the state done in a way that will do the least harm to the least well-off (LH/LWO). In this process it’s just as hard to pick losers as it is to pick winners.

Minimum-wage laws or transfer payments for families that fall below the poverty line will cause problems even beyond the ones that good economists can foresee. The timing and location of those negative consequences is also highly uncertain.

Similarly, if you have a chance to push for a significant reduction the state’s authority over minimum wages, military spending, or monetary policy, to which would you choose to devote scarce resources, based on the LH/LWO principle? Since not all consequences are foreseeable, even the compassionate political economist might be confronted with an insurmountable challenge. But is it completely insurmountable?

As much as I’d like to have an answer, I’m afraid I’m not sure what it is. While good intentions aren’t enough, it’s important to have them. And to the extent that the negative consequences of disintervention on the least well-off are foreseeable and avoidable — and some are — there is scope for us to do the right thing. But if they aren’t, then shock therapy is not only the most practicable path to a free society; it may also be the most compassionate.

Image provided by Otis Historical Archives National Museum of Health and Medicine via Wikimedia Commons

Find a Portuguese translation of this article here.

  • Sanford Ikeda is a Professor and the Coordinator of the Economics Program at Purchase College of the State University of New York and a Visiting Scholar and Research Associate at New York University. He is a member of the FEE Faculty Network.