Can Civil Disobedience Kill the Regulatory Goliath?

Will businesses stand up for liberty?

Charles Murray, in his new book, By the People: Rebuilding Liberty without Permission, argues that America’s constitutional checks on the growth of spending, taxation, and regulation have largely been undermined.

The result, he fears, is an America moving rapidly toward the kinder, gentler tyranny Alexis de Tocqueville warned about. Murray focuses — wisely in my view — on the massive expansion of federal regulations as the vehicle hurtling us down that road.

Murray documents how the regulatory state, by shifting legislative powers to the Executive, has given Congress the green light to pass broad laws that are little more than aspirational resolutions — for better workplace safety, improved public health, energy conservation, clean air, safe drugs and food, you name it — while leaving the writing of rules to achieve these goals to anonymous, off-stage executive bureaucrats.

Given this hollowing out of the Constitution, and the cultural and political changes that drove it, Murray concludes that America is so far down the road to serfdom that the political process can no longer restore the Founders’ vision of an institutionally constrained federal government.

A solution, if one exists, must rely on massive civil disobedience and a populist and moral critique of regulatory predation. Yet, is it prudent to fully dismiss “normal” political approaches?

Murray’s first section, “Coming to Terms with Where We Stand,” tells the story of how Progressives, chafing at the limited government institutions bequeathed by the Founders, gutted constraints on federal power and unleashed the technocratic Leviathan, staffed by civil servants trained in scientific management and protected from political interference by the independent agency system. This is an oft-cited and depressing history but one that Murray summarizes well.

His second section, “Opening a New Front,” develops his civil disobedience proposal, including the creation of a new group, the Madison Fund, to manage and finance that work and take on some support functions, such as educational and public affairs efforts.

The moral case for civil disobedience, he argues, stems from citizens’ growing alienation from a government they feel no longer represents them. A government that has lost our trust, he argues, has lost legitimacy, which justifies civil disobedience.

Murray suggests the Madison Fund might also offer “insurance” against regulatory predation, much like malpractice insurance gives professionals some financial protection from the threat of lawsuits. However, the diversity and complexity of regulations makes estimating risks, and thus setting premiums, very difficult.

In fact, insurance as an alternative to regulation was once explored for Superfund and largely abandoned for these reasons. Moreover, the criminalization of many regulatory violations casts doubt on the ability of such insurance to survive in a hostile regulatory environment.

Murray suggests that many regulations are unenforceable, because there are far more parties subject to regulations than there are enforcers. As with highway speed limits, he notes, most drivers will rarely be ticketed as long as they go with the flow. Therefore, if large numbers can be induced to violate any specific regulation, that regulation will become unenforceable.

Perhaps, but while the “flow defense” often works, some communities, rather than ease regulatory enforcement, create “speed traps” and impose large fines. Fierce, random enforcement is another way of ensuring less costly enforcement of compliance and makes Murray’s campaign less viable.

Still, Murray hopes that organized resistance to overregulation might push lawmakers and regulators to adopt less burdensome regulatory practices. His cautious optimism stems from Herbert Stein’s famous quote, “If something cannot go on forever, it will stop.”

And as Murray notes, America’s regulatory burden is already massive, citing the Competitive Enterprise Institute’s recent estimate of federal regulatory costs at around $1.8 trillion annually. This suggests a “stop” may be imminent.

Murray is also cautiously optimistic that faith in the Progressive vision is fading. Progressivism was first premised on the notion that government guidance could ensure uninterrupted progress. Advances in the social and administrative sciences would enable the best and the brightest to regulate markets in the public interest. Civil service reforms would prevent ineptitude and corruption. Independent regulatory agencies would prevent political cronyism.

Murray argues that the experiences of the last century have not been kind to these beliefs, resulting in progressivism losing some of its former appeal.

I’m less sure, given the current popularity of progressive firebrands like Elizabeth Warren and Bernie Sanders. And the recently created Consumer Financial Protection Board is an exemplar progressive agency — run by experts with no accountability to elected officials, with a staggering and ever-widening array of regulatory powers, and self-financing to boot!

Murray next turns to the question of which criteria should determine those regulations suitable for challenge. Given the radical tone of Murray’s book, one might have expected an endorsement of a broad frontal attack on the regulatory Leviathan. Yet surprisingly, Murray’s target list is fairly narrow.

He sees the original flurry of regulations in the late 19th century as largely warranted. He exempts Internal Revenue Service regulations, seeing taxes as a legitimate role of government. He appears to endorse regulations designed to address issues related to externalities and public goods. He also argues against challenging regulations that enjoy overwhelming popular support. These exemptions mean a less aggressive challenge to the regulatory state.

Murray’s exclusion criteria appear to be influenced by the successful strategy of the Institute for Justice (IJ), which has carved out an important niche challenging regulations that meet Murray’s rather restrictive criteria. IJ selects regulations that many see as unjust, seeks out clients likely to be viewed sympathetically by the public, and manages media strategies to frame their cases as examples of noble Davids fighting brutal regulatory Goliaths.

Yet, the Institute for Justice is not alone in its use of litigation to challenge regulations. To a limited extent, the free market movement already has created a “Madison Fund.” Free market policy organizations — the Pacific Legal Foundation, Becket Fund, Center for Individual Rights, Goldwater Institute, my own organization, the Competitive Enterprise Institute, and others — are taking on other complex regulatory challenges, with varying degrees of success and popular support. Murray might have discussed these efforts in greater detail.

Murray seems to believe that common sense provides adequate guidance for sorting out “good” from “bad” regulations and that Americans oppose many of the bad ones.

Yet, recent debates over financial, health, and environmental regulations cast doubt on this. Many feel that America is overregulated, but support specific regulations — such as for example, the left’s support for more restrictive environmental and financial regulations and the right’s calls for tighter security and immigration restrictions.

Citing polling data, Murray finds reason for optimism in the fact that trust in government is declining and that businesses view regulations as increasingly burdensome. But that does not necessarily indicate support for a specific reform agenda. Congress, too, has lost the trust of the American people, yet more than 90 percent of all Members of Congress are routinely reelected.

Lacking widespread support, Murray’s massive civil disobedience proposal is unlikely to prove a viable strategy. America’s early history experienced such an attempt to fend off federal taxation — the Whiskey Rebellion of the 1790s. It enjoyed considerable local support, but was nonetheless quickly suppressed.

Murray argues that an expanded effort might change all this. His proposed new and well-funded Madison Fund would organize protests, help businesses and individuals targeted by regulation, insure vulnerable parties against regulatory abuse, and ultimately strip regulators of their “white hat” public image.

It would help, but as noted, many free market organizations are already doing much of this. Moreover, would many businessmen want to directly confront their overseers? And even if they did, would the public see them sympathetically?

Murray seeks to addresses these challenges by drawing an analogy with the role civil disobedience, such as lunch counter sit-ins, played in advancing the civil rights movement. But this analogy falls short. The civil rights movement enjoyed widespread media, intellectual, and public support, including by many economic interests. Yet, it still took decades and required both a state-by-state as well as a national approach to bear fruit. Regulatory reform lacks this broad intellectual support and needs greater organized business support than it has received.

Murray’s third and final section, “A Propitious Moment,” suggests reasons why his proposals need not be quixotic. America’s continued diversity, he suggests, makes one-size-fits-all regulation less attractive to large segments of the population.

Technological innovations have rendered largely obsolete regulatory interventions intended to address information asymmetries and allowed entrepreneurs to bypass regulatory roadblocks, creating consumer constituencies before the regulators notice. Uber is a great example of both achievements.

Murray has identified the regulatory challenge facing America. But his proposed reform strategy needs to be better developed if it is to achieve success. In my view, he is too optimistic about public attitudes toward the regulatory estate and the prospects for changing them. For instance, he suggests the federal bureaucracy is increasingly demoralized. Perhaps in some cases, but individuals and businesses at the regulatory reform frontier still find regulators to be self-confident, well-prepared, and aggressive.

Moreover, while the future Madison Fund might launch dozens of cases, regulations continue to proliferate. Murray seems to hope that the creative marketing of these cases will increase public anger at regulatory overreach, but they may not, given that many regulatory agencies still enjoy widespread public support. In fact, such efforts could even backfire, as irate regulators place resisting firms in the agency’s crosshairs.

There are other approaches to reform, including legislation, such as the Regulations from the Executive In Need of Scrutiny (REINS) Act, which would require Congress to vote on all regulations with $100 million or more in estimated annual costs (a threshold I’d like to see drop over time).

Congress could also explore a one-in-one-out requirement for new rules, such as one now being tried in Canada, or even the one-in-two-out policy tried in the United Kingdom. States might also establish state regulatory ombudsmen to argue against both existing and new state regulations and to challenge on behalf of the state costly and restrictive federal regulations — that is, states might create their own Madison Groups.

Murray deals only briefly with the business community’s role in the regulatory reform struggle. He notes, as economist Joseph Schumpeter did long ago, that, in the political world, business has too often been passive, or slipped into cronyism. Murray discusses the many reasons for this passivity. Firms are vulnerable to political retaliation, media attacks, shareholder activism, and consumer boycotts.

Yet, Schumpeter also noted that business has critical resources — personnel, information, marketing and communication skills — needed for political success. And, as Murray notes, factors such as the slowing of innovation and the need for greater flexibility to operate in a global economy may be persuading some in the business community that this is a fight they must join and win. To do so, they need to ally with free market policy groups.

There are mutual advantages to such an alliance. Free market policy organizations are less vulnerable to political pressures, more credible as spokespeople, and skilled at crafting and promoting the narratives needed to advance the moral and intellectual case for reform.

Meanwhile, businesspeople possess the localized knowledge, resources, and real-world experience to convey the human costs of overregulation. Businesses also enjoy cooperative links with their customers, employees, suppliers, and investors — relationships that give them both an audience and the clout to advance powerful narratives.

In democratic market economies, most policy changes result from alliances of economic and moral interests. And indeed, such “Bootlegger and Baptist” alliances have long been a standard strategy used by those seeking greater political control of the economy. The cooperative efforts of trial lawyers and environmentalists, of consumer advocates and labor unions, explain much of the growth in regulation over the last decades. Our challenge, developed by Murray so well, is to learn from their successes.

Murray’s enthusiasm for reform is commendable, but those excited by his audacious plan must hope that he will lead an effort to advance it further. Stimulating resistance to regulation is key, but more will be needed to actually roll back Leviathan. The Progressives were successful in crafting the regulatory path to their goals, marketing that policy and gaining the influence and popular support to make it the dominant reality.

Murray’s and our challenge is to find an equally effective strategy for economic liberalization. And Murray is well placed to suggest those next steps, having laid the intellectual groundwork for welfare reform in the 1990s, with his classic book, Losing Ground. Could Murray’s latest book provide the foundation for a new Doer/Thinker alliance? Stay tuned.

This review first appeared at CapX.co.