Leviathan and Crises – Donald J. Boudreaux (03/31/2020)

My intrepid Mercatus Center colleague – and fellow AIER columnist – Veronique de Rugy e-mailed to me recently this lament:

Even acknowledging the public health crisis, in many cases on dubious authority state and local officials are closing stores and imposing all sorts of restrictions on people. Trump also is obviously not thinking very carefully about what is constitutional for him to do or not. For instance, he has no powers to reopen everything by Easter. Meanwhile, his decisions feel quite hectic. Yesterday he considered, for instance, closing parts of NJ, NY and CT. He reversed course later in the day. Also, Congress and the president are using this crisis as an excuse to dole-out whatever goodies they see fit. America will be transformed by this political hyperactivity, and not for the best. Yet people seem to accept their fate and the risk of tremendous and permanent expansion of government powers without much if any objections.

So true.

Vero’s e-mail brought yet again to mind a book that I’ve lately been pondering quite a lot: economic historian Robert Higgs’s 1987 volume, Crisis and Leviathan. In this richly documented work, Higgs convincingly shows that with each national crisis government power ratchets up. The crisis might be fully genuine or inflated or utterly mythical; it matters not. Whenever there prevails widespread belief that a crisis looms, people turn to the state for help. And turning to the state for help during times of crisis always results, in practice, in granting to the state new powers.

Let’s avoid the immediate and existential danger; we’ll worry about the precedents, costs, and other consequences of today’s crisis-mode actions later – such is the popular attitude.

Typically, the quantum of additional powers granted to – or seized by – government during each crisis shrinks somewhat when the crisis passes. Normal times, after all, aren’t crisis times. But never do such additions to state power fully disappear. Government’s exercise of these powers is perceived as having been key to escaping the crisis – so such powers become more widely regarded as being beneficial. Fear of such powers is lessened.

The fact that this happy perception of the consequences of such powers is, at least to some degree, always an illusion conjured by the propaganda that government officials inevitably deploy to justify their exercise of their new powers is irrelevant. If people believe that this new grant of power and that new expansion of authority as used by government officials were both effective and necessary to the nation’s escape from Armageddon, people naturally lose some of the skepticism they had, pre-crisis, about such power and authority. 

As summarized by Higgs, “each time the government expands its effective authority over economic decision-making, it sets in motion a variety of economic, institutional, and ideological adjustments whose common denominator is a diminished resistance to Bigger Government.”

HistoryMatters

This resulting ratcheting upward of state power depends significantly upon historical circumstances. These circumstances obviously include triggering events, such as when the words or deeds of some foreign government provoke military action, when devastating hurricanes and other natural disasters strike, or when pandemics sweep in. But these circumstances include also the attitudes and personalities of the individuals who are currently charged with making policy decisions.

Consider that had the largely non-interventionist Pres. Calvin Coolidge’s 16-year-old son not died suddenly from a staph infection at the White House in 1924, Coolidge might have chosen to run for re-election in 1928. And had he won, he surely would have responded with fewer unprecedented interventions than were unleashed by the “Progressive”-minded Pres. Herbert Hoover.

As implied by an argument that Higgs offers in another important book – Depression, War, and Cold War (2006) – it’s likely that a less-interventionist response to the economic events of late 1929 and the early 1930s would have avoided transforming an economic downturn into an unprecedented Great Depression. In turn, the New Deal might never have happened.

But happen it did.

Contrary, therefore, to the conventional wisdom of ECON 999, state power isn’t created and used only according to objective, detached, scientific criteria. Politicians and bureaucrats are not altruistic ciphers, standing above the tempest of historical contingencies, surveying reality and intervening only if, when, and to the extent that they detect, with their scientific tools, “social” costs and benefits diverging from “private” costs and benefits. 

No, says Higgs: “None of the standard theories recognizes the extent to which the development of Big Government was a matter not of logic, however complicated and multidimensional, but of history…. [R]eal political and socioeconomic dynamics are ‘messier,’ more open to exogenous influences or shocks and less determinate in their outcomes than the theorists suppose. Critical events may turn on nothing more substantial than the whim of a President or the ideology of a single Supreme Court justice.”

Furthermore, as the example of Calvin Coolidge and Herbert Hoover suggests, those individuals who obtain and retain positions of power in government tend to be those who are most interested in possessing and exercising such power. For each crisis, then, the likelihood is that the ideology of the holders of power prompts them, not to keep their power in check, but to expand it. And as power expands in a ratcheting-upward way, power becomes ever-more valuable and intoxicating to possess – meaning that competition to grab power becomes ever-more intense. This increasingly intense competition for power, in turn, selects those persons who are both most hungry for power and least bound by ethical restraints in pursuing and using it.

Growing Accustomed Even to Unwarranted Burdens

Only further encouraging this ratcheting-up of state power is an unfortunate decision-making trait in voters identified by economics Nobel-laureate James Buchanan. In his relatively unknown but deeply insightful 1967 book, Public Finance In Democratic Process, Buchanan argued that when voters become accustomed to any existing tax, they thereby become less resistant to using the proceeds of that tax to fund new projects. And so if the original project for which the tax was instituted shrinks in importance such that government need spend less money on that project, rather than have the tax shrink, government instead finds new projects to fund with the revenues from the existing tax. Buchanan argues that the same citizens who would object to funding new projects with a new tax are typically content to fund new projects with an old tax.

Anticipating the thesis developed much more fully twenty years later by Robert Higgs, Buchanan wrote:

Experience suggests that, almost universally, tax and public spending rates which are increased, temporarily, to meet wartime or other emergency fiscal needs remain substantially higher in post-war, post-emergency periods than before…. Wartime spending needs are such that the threshold of decision can be crossed with newly imposed taxes or with substantial increases in rate levels of existing taxes. The additional real costs, in opportunity cost terms, of the expanded spending program is accepted in the emergency setting. Once these needs disappear, however, the bias is shifted in favor of a continued high level of public activity, as opposed to a return to some pre-emergency balance between the public and private sector. Not having to undergo the apparent sacrifice of real resources generated by new tax financing, the individual is more willing, in post-emergency periods, to approve spending on the provision of services than he should have been in the pre-emergency setting.

The relevance of Higgs’s and Buchanan’s insights into today’s crisis is evident.

THIS ARTICLE ORIGINALLY POSTED HERE.



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