Catallaxy Files

US President Barack Obama’s second inauguration speech received plenty of criticism from classical liberals and American political conservatives, and for good reason. The speech was, to my way of thinking, a deliberately shameless rhetorical exhibition of collectivism, an outmoded instinct which, in the modern context, invariably justifies an extensive role for government in economic and social affairs alien to the distinctly pro‑liberty founding principles of the United States.

Many critical responses have been made about Obama’s ideology following the inauguration, and prior to it, including here in Australia on this blogsite. More criticisms will surely come, especially if Obama uses the State of the Union address to again portray a collectivist vision for the United States.

In the meantime, readers might be interested in a recent contribution, by Charles Lane of The Washington Post, which cleverly applies some of the major principles of political scientist Mancur Olson’s public choice theories in critiquing the Obama world-view (HT: Don Boudreaux, Café Hayek). Some passages from the piece are as follows:

As Olson explained, the interests that unite large groups are necessarily of the lowest-common-denominator variety. Therefore the concrete benefits of collective action to any individual are usually small compared with the costs — in time, effort and money — of participation. “Free-riding” is a constant threat — as the difficulties of collecting union dues illustrates.

By contrast, small groups are good at collective action. It costs less to organize a few people around a narrow, but intensely felt, shared concern. For each member, the potential benefits of joint action are more likely to outweigh the costs, whether or not success comes at the larger society’s expense.

Hence, the housing lobby, the farm lobby and all the special-interest groups that swarm Congress. Hence, too, the conspicuous absence of an effective lobby on behalf of all taxpayers or, for that matter, all poor people.

So when Obama called on Americans to once again act “as one nation, and one people,” he was, at best, stating an aspiration.

…

Washington is besieged by mutually offsetting lobbies representing almost every conceivable segment of society. Some (e.g., teacher unions) collect under the Democratic Party banner; some (e.g., independent oil operators) tilt Republican; and many (Wall Street, agribusiness, hospitals) have their hooks in both parties.

As Olson warned, our stable democracy suffers from “crowded agendas and bargaining tables” — too crowded to agree on the problem, much less a solution. Or so the repeated failure to strike a “grand bargain” on fiscal policy would suggest.

Obama was surely right to maintain that there is such a thing as a public good: infrastructure, social equality, national and global security. He was also right that government is better suited than markets to provide some of these — contrary to the most simplistic Republican rhetoric.

But the president’s paean to collective action lacked Olson’s realism. The question is not just how much more government we need or want, if any. It’s also how much more government we can afford, in light of its purposes and given the risks Olson identified — which have already materialized in the form of unsustainable but politically untouchable entitlement programs.

Mr Lane draws from two famous Olson books, The Logic of Collective Action and The Rise and Decline of Nations. While the scourge of word limitations may have prevented him from doing so, I think a third Olson publication, Power and Prosperity, could usefully serve to round out any Olson‑inspired response to Obama’s collectivist follies.

Recall Obama’s inaugural speech statement that ‘preserving our individual freedoms ultimately requires collective action,’ not to mention other infamous statements such as ‘if you’ve got a business – you didn’t build that! Somebody else made that happen.’ These statements appear to imply, erroneously it needs to be added, that markets cannot exist without the state, and its organisational apparatus known as government, having initially established a range of formal institutions and provided an array of goods and services enabling private commercial trading relations.

However, a long (but perhaps increasingly smaller) set of historians, political economists, sociologists and other academics, including Olson, understood that collectivists, such as Obama, have got the nature of the state‑market nexus completely back to front, to put it mildly. This is because a coercive state that successfully extracts surpluses from the economically productive populace, in the guise of taxation and other forms of tribute, requires the existence of that economically productive populace in the first place.

In Power and Prosperity, Olson describes the modern state as the descendent of ‘stationary bandits’ who settled down amongst the productive, suppressing their previously opportunistic acts of raping and pillaging from village to village. By monopolising the means of violence in the settlement, the stationary bandits discovered they held an encompassing interest in the economic success of the productive in their midst; by implementing low taxes and providing some core goods and services (e.g., law enforcement, infrastructure) the resultant state could reap satisfactory revenues from the population.

Now, there have been many ruinous examples in human history of stationary bandits forgetting the basic lessons of statecraft, especially with regard to the frequent tendency of governments to impose excessive taxation driving away entrepreneurs and investors, as well as financing or providing goods and services of low or negative value. We also have a great many precedents in effective non‑state collective actions today and in the past, ranging from law enforcement through to charitable giving, and technological developments, breaking down the necessity for governmental financing and provision of outputs, which Olson’s theory does not sufficiently acknowledge.

Even with these caveats noted, the basic point I want to make here is sustained.

The modern collectivist argument that everything private relies upon government cannot be true, because the state is necessarily a force for predation and extraction. The great problem in the post‑Cold War West is that the conceptual putting the cart before the horse by collectivists lays the rhetorical groundwork for excessive taxation and regulation, and wasteful spending, that in practice deforms entrepreneurial vitality and dilutes economic opportunities for the masses.

Olson understood all of this, but to what extent is there an appreciation of these matters by others today? If Obama and the armies of others who think like him is any guide, the extent of appreciation for the true nature of markets and governments is far from great.