Government

Problems of Government

Every day political issues and activities are discussed and debated. What is not often discussed is the underlying concept of government. We put a lot of faith in our government’s ability to solve serious problems and manage society effectively. It is a useful exercise to take a look at the origins of the concept of government and investigate its modern day functions, processes, and efficacy.

Contents:

  1. The Origin of Government
  2. What is the Proper Role of Government?
  3. The Nature of Government
  4. Government Regulation of Industry is Ineffective
  5. Democracy is Not Necessarily the Best System
  6. U.S. Checks and Balances Do Not Check and Balance
  7. Government Results Expose Government Failures
  8. The Concept of Government Should be Revisited

The Origin of Government

Looking at the historical reasons why government exists assist in the evaluation of its relevant roles in modern society. Below are key reasons for the emergence of government (circa 3500BC):

  1. Agriculture enabled the emergence of stationary civilizations (the attainment of food did not require geographic mobility)
  2. Families needed ways to most efficiently organize resources and communicate information (centralized resources, defense against outside attackers, planning, trade routes, etc), so they assigned leaders and groups to do so
  3. Clans/tribes turned into city states, city states turned into larger state societies
  4. Rule by consent turned to rule by coercion as leaders gained more power
  5. In-depth knowledge of concepts such as business and economic science didn’t exist, so the best structure for organizing society came through government
  6. Communication abilities such as the internet, telephone, books, etc didn’t exist, so reliance on government was integral for trading and information transfer

Because of these circumstances, government has been a natural fixture in all relatively successful societies in recorded history. Today, few question the requirement of a government system to fulfill certain roles in a successful and orderly society.

References for the above information:

Maps of Time: An Introduction to Big History by David Christian

Economy, Society, and History lecture series by Hans-Herman Hoppe of the Mises Institute

What is the Proper Role of Government?

Under the constitution, the U.S. government was intended to have limited involvement in society’s functions. Take a look at the assumed roles of government in the U.S. today along with their constitutional validity:

  1. Military
  2. Civil order
  3. Infrastructure – No ownership of transportation (roads, bridges, train lines, etc), water, energy, etc included in the constitution
  4. Education – No public education system included in the constitution
  5. Economy – No Federal Reserve or government market influence included in the constitution
  6. Social – No redistribution of wealth (Social Security, unemployment benefits, other welfare) included in the constitution
  7. Healthcare – No redistribution of wealth (Medicare, Medicaid) included in the constitution
  8. Environment – No mention of government protection of the environment in the constitution

The point is not for society to abandon attention to these categories, but to ask if any or all of their related functions can be fulfilled better without government involvement. Most immediately think these functions cannot be fulfilled without government involvement, but there are historical examples and theory that say that they can.

The Nature of Government

To depict the inherent nature of the government, below is a table comparing the attributes of government and private organizations.

Table 1: Public vs. Private Organizations

  Public (Government) Organization* Private (Business) Organization
Examples Public Schools, U.S. Postal Service, NASA, Medicare, Environmental Protection Agency, Federal Reserve, etc GE, Coca-Cola, IBM, FedEx, Fidelity, Wal-Mart, Amazon.com, Ebay, Goodyear, Black & Decker, etc.
Creation or innovation Creates very little that didn’t already exist from businesses. What it does create, it could not create without the assistance of business. Creates everything that you see and use that is manmade.
Organization incentive Incentive is based on reelection. Motivation is usually driven by special interests with the most dollars and leverage, and usually not toward optimizing value. Incentive is the profit from the products and services sold. The profit is based on an optimized level of value the consumer places on the purchase.
Organization accountability No quick or direct accountability for failure. The business will go out of business because consumers won’t purchase the products or service.
Personnel accountability No quick or direct accountability for failure of elected officials. Officers and employees are fired if they fail. Lower wage levels are given for less success or non-outright failure.
Personnel recruitment Personnel chosen based on political skills and political reasons. Higher level officials are often lawyers with no real-world experience running an organization or handling the subject matter to which they will be assigned in their position. Personnel is chosen based on skills and abilities to provide a product or service.
Competition The government (and its individual departments and agencies) is a monopoly backed by physical force. The government can and does decide to make itself the only organization within a given category. Competition is inherent and offers a constant drive for improving a given product or service to succeed and stave off failure.
Support for existence Taxes sustain the government. This  is the expropriation of people’s property through coercion or physical force. Voluntary exchange between consumers and business support the existence of private organizations.

*Note that a public organization includes private organizations that were created or are subsidized by the government. The definition also includes organizations that were once private, but now are minority or majority owned by the government. Examples of these hybrid organizations are Fannie Mae, Freddie Mac, AIG, Florida Power & Light, General Motors, Boeing, etc.

 Accountability is Minimal in Government

Although most government members may have best intentions in mind, they are human and can still make mistakes and be bad at their jobs. The lack of accountability inherent in government does not allow for the efficient correction of a given failed initiative.

When the following fail (lawful failure), there are rarely, if ever, immediate or direct consequences:

  1. Political parties
  2. Departments and agencies
  3. Officials (President, Administration, Judiciary, Senators, Congressmen, Committees)
  4. Employees

Consequences are often overlooked, ignored, and if ever addressed, it may be years before the failed individual or group is replaced through election. Additionally, election does not guarantee their dismissal.

Government Incentive is Warped

Incentive for a government role or position to be successful is largely based on:

  1. Reelection
  2. The swapping of favors or special privilege
  3. Financial contributions and influence from special interests (businesses seeking special advantage, political and non-political groups with moral positions, lobbyists, etc)
  4. Incentive is not tied to measured results

Short terms of office incent focus toward short-term problems and issues (‘hot topics’ of the day) while sacrificing focus on long-term problems because they:

  1. Provide immediate tangibility and appeal to the population to capture votes for reelection
  2. Self-serve the politician for optimal lifestyle during the time they hold the office

There is no direct mutual incentive or trade of value between those that are to receive service from the government (citizens/taxpayers) and those in the government that are supposed to provide it.

Government Fosters Immorality

The key reasons government fosters corruption and immorality are that it is a system that:

  1. Lacks accountability
  2. Lacks aligned incentives
  3. Exists and operates only through coercion and involuntary, unearned payment (taxes and inflation)

Government Regulation of Industry is Ineffective

There are several reasons the government uses to justify its regulatory intervention in private business:

  1. Military – the need for technologies that provide military advantage over other nations
  2. Economy – the need to prevent poverty and promote economic well-being
  3. Safety – the protection of consumers
  4. Social – the redistribution of wealth to those in need (welfare, Social Security, Medicare, etc.)
  5. Environment – the prevention of pollution and environmental safety hazards

Again, there is no mention of private business or economic government intervention within the constitution. However, the government assumes these roles preaching the protection of its citizens and then turns around to implement them without the ability to do so efficiently.

Government regulation is ineffective for similar reasons that the government itself is ineffective:

  1. Regulation is not created efficiently – there is no direct economic incentive or accountability to drive efficiency
  2. Regulation is not adjusted efficiently when flaws are found – there is no direct economic incentive or accountability to drive efficiency
  3. Fosters regulatory arbitrage – a regulated institution taking advantage of the difference between its economic risk and the regulatory position.
  4. Fosters regulatory capture – a government regulatory agency created to act in the public interest instead acts in favor of the commercial or special interests (businesses looking for advantage, environmental groups, etc) that dominate the industry or sector it is charged with regulating
  5. Fosters rent seeking – occurs when an individual, organization, or firm seeks to make money by manipulating the legal environment rather than by trade or production
  6. When regulation can be created for irrational or irrelevant reasons, businesses face unneeded risk from potential regulation that can harm their business, which will influence their business decisions (including whether to do business in the given industry at all).
  7. Businesses are likely to migrate to less regulated areas of the given industry or economy. The lack of regulation (including the lack of private regulation because of anticipated government regulation) enables more potential for corruption and related catastrophic economic effects.
  8. The government has a monopoly on regulation – there are no competing regulatory bodies to weed out poor regulation and allow the best regulation to emerge. For example, if the SEC were a private organization competing against another organization with similar oversight, there would be incentive to do a great job of regulating. Many of the above government regulation problems would be solved through regulatory competition.

Companies are devoting increasing amounts of money and resources to politics for the purpose of influencing regulation for competitive advantage. Productive areas of the economy are then deprived of these dollars and resources causing productivity and progress to decline.

Recent Regulation Failures

A few examples of regulatory problems directly relevant to today’s events are:

  1. Loopholes within the SEC made the Madoff scam more likely:
    1. How to stop the next Madoff – Ayn Rand Center (2009)
    2. Close securities law loophole – The Post and Carrier (2008)
    3. Madoff and the Failure of the SEC – The Mises Institute (2008)
  2. Since their creation in 1968, Fannie May and Freddie Mac (GSEs) have had exemptions from SEC oversight (including Sarbanes-Oxley), ratio requirements, and state and local taxes, while receiving the privilege of access to a line of credit through the U.S. Treasury. In the meantime, their competitors did not have these exemptions and privileges. This double standard gave the GSEs unfair competitive advantage. Also, they were less likely to get caught for corruption than their private competitors that were required to comply.
    1. What are the Origins of Freddie Mac and Fannie Mae? – History News Network (2003)
    2. Housing Bill Would Apply Sarbanes-Oxley Governance to Fannie Mae and Freddie Mac; Require SEC to Report on Fair Value Accounting – Jim Hamilton’s World of Securities Regulation (2008)
  3. SEC and monopolistic regulation of credit rating agencies increased the probability of low integrity mortgage-related securities ratings.

Regulation is Needed

This analysis is not meant to conclude that there should be no regulation of industry. The point is to show that government is not the institution to do it. Instead, free market principals enable a system of competitive regulatory institutions that constantly adjust to ever-changing market and consumer demands and only exist and succeed if they do their jobs well.

Democracy is not Necessarily the best System

The U.S. was founded as a constitutional republic (not a democracy), which means that the government was to be limited to powers that preserved and defended the individual rights of its citizens. Citizens were not to be governed by the majority of the population, but by the rule of law. The Founding Fathers knew the many flaws of majority rule and defined the constitution and Bill of Rights to protect the rights of the individual.

The system of government paraded today has moved away from the intentions of the constitution to a majority rules democracy.

What’s the nature of democracy?

Example: John and Sarah decide they would like to have Bob (who has done nothing to John or Sarah) hit over the head with a hammer. They vote to do so and Bob is subsequently hit over the head. This type of injustice can and does happen on a large scale in a democracy.

What happens when citizens vote?

  1. Voter decisions can be manipulated by politicians and propaganda
  2. Many vote without full information on the issues
  3. Some let emotions and irrationality guide them
  4. Many let their moral principles (which differ from many others) guide them
  5. In the unlikely case that all voters are fully and accurately informed and attuned to their moral principles, the majority’s decision will still harm the minority.
  6. Once the vote is passed, what is the likelihood that the promised action will be completed or completed correctly?

In a democratic system, because the majority rules:

  1. It doesn’t matter if the majority’s position is wrong for themselves
  2. It doesn’t matter if the majority’s position is right for themselves, but wrong for the minority

In a close vote, the majority may not win. The electoral college system can allow the minority to win, so in this case the majority is or feels harmed.

The Immorality of Majority Rule – Social Statics: or, The Conditions essential to Happiness specified, and the First of them Developed (1851)

Political Parties are Whimsical Monopolies

The U.S. has 2 major political parties that frequently change positions and principals, even swapping at points in history.

This obfuscation can make it very difficult for the busy citizen to be clear about their political affiliation. Additionally, the current political party system in the U.S. makes the emergence of a third party extremely difficult and unlikely. Party alliances with businesses and special interests create a self-sustaining machine supported by endless reservoirs of money and influential ability.

Busy citizens often do not have time to think through the intricacies of the parties, their solutions, and their ability to implement the solutions. Even if they see that the differences of current parties do not matter (both choices are poor for the future), they often believe there can be no alternative choice and stick with what they believe to have worked in the past.

The Libertarian Heritage: The American Revolution and Classical Liberalism – For a New Liberty: The Libertarian Manifesto

The New Deal and the Emergence of the Old Right – The Betrayal of the American Right (1991)

Voting for the Person, not the Party

Many claim that the character of the person running, rather than the party, drives their vote choice. This is a noble mindset. However, it defeats the purpose because:

  1. The candidate of high character aligned themselves with a party that may not necessarily be in line with the voter’s morals and ideals.
  2. The candidate surrounds their self with an administration that may not have the same intentions or motivations.
  3. Their actions while in office could still have little impact as an opposing party dominating the Congress can make moot their ambitions.

Democracy Allows the Buildup of Power

Slowly but surely through election term after election term, political election campaigns promise large segments of people certain benefits that those people cannot help but desire. Slowly but surely new laws are passed to implement these benefits. Slowly but surely the government is able to build its reach and power in all areas of society.

Additionally, in our country and others that claim to uphold a democracy, democracy seems to inevitably devolve toward socialism. The short article below theorizes on this notion part humorously and part seriously – even going a step beyond to tyranny.

The Dark at the End of the Tunnel – LewRockwell.com (2008)

Additional information analyzing the problems of democracy:

Introduction to Democracy, The God That Failed by Hans-Hermann Hoppe (2001)

Democracy: The God That Failed by Hans-Hermann Hoppe (2001)

Liberty versus Democracy – The Mises Institute (2007)

Does Democracy Promote Peace? – The Mises Institute (2001)

U.S. Checks and Balances do not Check and Balance

The Executive, Legislative, and Judicial branches of the U.S. government are intended to provide checks and balances that will prevent the concentration of power within the government. The inherent problem with this concept is that all 3 branches are within the same institution – the U.S. government.

The problems of political party affiliation, personal and political interests, etc apply to enhance the potential of collusion among individuals between branches.

For example, with a Legislative and Executive branch made up of the same political party (and in some cases different political parties), there can be collusion for the approval of a federal judge to influence the makeup of the Supreme Court. Another example is possible collusion between the executive and judicial branches to influence a given ruling.

As outlined earlier, there is no true incentive to expose collusion between branches. The 3 branches are policing themselves, and there is no competing group or body intimate enough with their activities to keep them in check.

Government Results Expose Government Failures

Measurability of Results

In order to receive benefit from a given system, there must be an ability to judge the results of that system based on measurable criteria. In the case of the U.S. government, the Government Accountability Office (GAO) using the Government Performance Results Act of 1993 comes the closest to fulfilling this requirement. However, when looking closely at the procedures of this act you will find that:

  1. The measurement criteria and goals are defined by the agency being measured. This cannot possibly lead to a proper instillation of incentive and accountability since the agency is free to determine standards that will be easiest to meet.
  2. The GAO itself does not have an overseer measuring its own results. How can we be certain that the GAO is successful in its assessments and actions of other organizations when itself is not held to a standard of measurable goals and results?

It is telling that a government system even needs an organization like the GAO to drive the measurement of results. Inherent within a business is the measurability of results, the most significant of which is a business’s ability to survive and profit because of the positive value its customers have placed upon it.

Government Failures

Below are several significant examples of the government’s failure to run a given organization, achieve a given goal, or address or solve a given problem.

  • The government rates many of its own programs as ineffective and then does nothing to correct or remove them. Congress last year refused to consider a 25 percent cut for 220 federal programs the government rated as ineffective, passing up a savings of $17 billion a year.
  • The U.S. Postal Service is a colossal failure. This is a great example of a fairly non-complex business that is extremely poorly run. How can we expect the government to run complex organizations and programs? Additionally, in the event of a USPS bankruptcy and because of its monopoly, there are no other competing organizations readily available to fill its void.
    • Debt may do what rain, heat, gloom can’t – Associated Press (2009)
  •  NASA has been ineffective since Apollo 13
    • The Failure of NASA: And A Way Out – SpaceDaily (2003)
  • Economic Government Failures
  • Environmental Government Failures
  • Healthcare Regulation Government Failures
  • Industry Regulation Government Failures

What do you expect from in institution that has no direct accountability or incentive while many of its activities are unmeasurable?

The problem is attempting to centrally plan a wide variety of resources and processes among a large geographic area consisting of a wide range of individuals with a wide range of interests, abilities, beliefs, wants, and needs. This problem of central planning not only applies on the federal level, but also to state and local governments.

The question isn’t necessarily how many government programs have failed, but instead how many have succeeded.

Talk About Your Perspective of Government

Arbitrary Vote invites you to submit recent examples government failures or successes for discussion and debate. Also, feel free to discuss if you think your examples could be better accommodated through free market business activity and ideas.

Organizations Providing Transparency of Government

The organizations below will help you analyze where your tax dollars are going, what influenced your money’s path within government, and the effectiveness of the programs supported by your funding.

Daylight Network

Sunlight Foundation

OpenSecrets.org

MAPLight.org

The Concept of Government Should be Revisited

As outlined above:

  1. The inherent nature of government fosters inefficiency within itself
  2. The inherent nature of government breeds immorality within itself
  3. The U.S. democratic government model enhances this inefficiency and immorality and reaches where it was not intended to reach
  4. The results that the U.S. government produces back up the reasoning around its inherent flaws

America’s government was founded as the most hands-off government model in modern history. Even in the case of such freedom, America’s model has devolved to produce largely similar characteristics and results to those of historical and current world governments. It is becoming increasingly apparent that the current roles, nature, and concept of government should be vigorously revisited.