TCS Daily

Group Power

By Arnold Kling - May 4, 2006 12:00 AM

The economic basis of associational government is joint action. A group engaged in any common activity -- whether production, trade, or predation -- will organize itself for joint action whenever it is advantageous to do so. Unlike predatory government, associational government is government from below, it is voluntary, and it derives its authority from the will of the group. We will focus on the associational government of cities, but there were numerous other examples of associational government in preindustrial Europe. These included villages, parishes, artisan guilds, and merchant associations.
-- Meir Kohn

One probably should not pretend to reduce Meir Kohn's fascinating chapter on government in the Middle Ages to an aphorism, but the temptation is too great:

Nations are not built. Nations emerge.

Kohn's theory is that the associational state -- meaning limited government that is held accountable to the governed -- is built from the bottom up by smaller forms of associations. Government as we know it is not created by constitutions or democratic vote. Those institutions can help to maintain associational government once it is established, but associational government is possible in the first place only if people have a strong tradition of religious, commercial, and lesser governmental institutions. Tocqueville's observation that "Americans of all ages, all conditions, and all dispositions constantly form associations" perfectly describes a society that, according to Kohn, will tend to have associational government. For a similar argument about the importance of civil society as a precondition for democracy, see James Bennett's The Anglosphere Challenge, which I reviewed here.

If the associational state is an emergent phenomenon, then this has implications, obviously, for the war in Iraq. But it also has implications for economic development in Africa and for freedom of schooling in the United States.

Two Types of Government

Kohn arrived at his theory of associational government in the process of undertaking a broader study of the economic history of late medieval Europe. He describes it as a contest between two types of polities, beginning in the latter 1400's.

On the one hand, larger territories had economies of scale. They were badly ruled by autocrats, but their sheer size enabled them to raise powerful armies. These were predatory states.

On the other hand, city-states had an advantage in that they were well run. Rulers were not absolute. There were many checks and balances within the smaller polities. These were associational city-states.

As the autocratic states, such as France and Spain, required more revenue to finance wars, they tended to concede power to other elites. Thus, they became slightly less autocratic. Meanwhile, as the city-states attempted to merge in order to protect themselves, governments would tend to become more predatory. However, in some exceptional cases, notably the Netherlands and England, an "associational state" emerged, which combined the limits on governmental predation of the smaller polities with the military defense capability of the larger polities.

Kohn describes how the Dutch associational state differed from other medieval European governments.

"Under medieval constitutional government, territorial rulers had granted certain rights and freedoms to associational governments. In the new associational state, the situation was reversed. Now it was the associational governments that were sovereign, and it was they that delegated certain limited powers to the state that they created."

Kohn describes the contrast between the top-down state that emerged in France and the bottom-up state that emerged in England.

"In France, the lesser nobility merged with the bureaucracy to become a new predatory class dependent for its livelihood on the state. It was in their interest to strengthen state power. In England, the lesser nobility merged with the merchant elite, and was dependent for its livelihood on the market. It was in their interest to constrain state power and they were able to use parliament and the courts relatively effectively to do so."

Eventually, when the medieval era was over, there were two types of European states. The imperial states, like Spain and France, had a legacy of top-down rule. The associational states, like the Netherlands and (somewhat later) England, had a legacy of strong non-governmental sources of authority, which in turn limited the power of government.

The commercial and industrial revolutions took off earliest in the associational states. Associational government was stable to the extent that it guaranteed freedom of association. Strong non-state associations served as a check against expansion of state power. Associational government was economically powerful because of the strong protections against government confiscation of private property. Without predation, Kohn argues, economic growth tends to take place naturally.

The Benefits of Guilds

Freedom of association was also critical for solving many of the reputational problems necessary for trade among strangers to take place. In his latest book on the problems of underdeveloped nations, William Easterly describes a typical example.

"One type of cheating occurs when you cannot observe the quality of the good I am offering you. I could cheat you by...selling you tacos made under unsanitary conditions...If you had know the tacos might be unsanitary, you would have offered a lower price. If I adopted costly but safe food handling methods and sold you healthy tacos, but you couldn't observe my safe handling and still offered a low price, then I would be the one who lost out in the exchange."

As Easterly points out, this is the classic Lemons problem described by Nobel Laureate George Akerlof. It is frequently used as an argument for government intervention.

What Kohn points out (in other chapters) is that medieval guilds, which we think of as backward institutions, helped to solve the lemons problem long before government inspection came along. Each guild jealously guarded its reputation. If a member of a guild were caught selling a substandard product, he would lose his status as a guild member, and effectively lose his livelihood. If Mexico City had a "taco guild," then that guild would provide sanitary taco stands with its seal of approval, and you as a consumer could pay the appropriate price for a safe taco.

Guilds are considered backward because they also have the potential to fix prices. One could argue that the real estate agents' "guild" does that by standardizing commissions. However, Kohn argues that attempts by guilds to enforce codes of conduct that are anti-consumer tend to fail, because they are eroded by the competitive mechanism -- unless government steps in to help the guild restrict external competition.

Modern economics tends to be limited to a menu of two institutions: a market of separate, autonomous firms and consumers; and government. In fact, as the example of guilds illustrates, other institutions have always been with us. By overlooking these other forms of association, modern economists over-estimate the need for government intervention.

The Iraq Problem

We have a constitution, democratic government, and a belief that our police provide adequate security. We think that if Iraq had those things, then everything would be fine.

However, suppose that we take the view that associational states are not built, but instead they emerge from strong non-state associations. In that case, one could argue that America is trying to apply the plaster of a constitution and elections in Iraq before there is any structure to its civil society. The institutions that need to be strengthened first are the non-state institutions. Most of those will have to be developed by Iraqis themselves, building on their own traditions and customs.

It seems safe to assume that Saddam Hussein's rule probably did not encourage the development of vibrant non-state institutions. This means that the process by which a nation emerges in Iraq could be long and difficult. Such a presumption is borne out by an assessment by retired General Barry McCaffrey, as quoted by Wretchard of the Belmont Club blog.

"There is total lack of trust among the families, the tribes, and the sectarian factions created by the 35 years of despotism and isolation of the criminal Saddam regime. This is a traumatized society with a malignant political culture."

African Development

It is ironic that so many people who are skeptical of the Iraq project nonetheless believe in large, top-down aid programs for Africa. Easterly, who is skeptical of both, argues that Africans themselves must arrive at solutions to their economic problems. He points to the long history of failure of outside attempts to promote development through aid.

Easterly points to the connection between bad government and underdevelopment. He also suggests that even when aid donors seek to promote good government, their efforts come to little good and in fact seem more likely to cause harm.

Using Kohn's model, the legacy of colonialism in Africa is a set of predatory imperial states. We in the West tend to view the central government as a force for good. But that is true, if at all, only in associational states, built from the bottom up. In predatory states, central government is a harmful entity. We cannot treat these predatory states as merely underdeveloped versions of our associational states. They are a different breed altogether.

My take on Kohn's model is that the first priority for dealing with predatory states in Africa and elsewhere has to be to avoid doing anything that might strengthen the government. Those who want to help must do our utmost to strengthen non-government associations. These could be religious organizations, private corporations, families, or any indigenous networks.

One shudders at the thought of the United Nations, with its General Assembly and various commissions dominated by predatory states. Such an organization can be relied upon to do the very opposite of what is necessary to promote civil society, peace, and prosperity.

Freedom of Schooling

Reading Kohn's chapter has reinforced my appreciation for America's non-state associations. Thank goodness for our families, religions, private enterprises, and other institutions. It makes me even more focused on the need to be wary of government efforts that undermine private associations, whether this effect is intentional or not.

Probably the most important freedom to secure in the coming decades will be freedom of schooling. My worst nightmare would be a public school system that succeeds in replacing families and religion with state indoctrination. Perhaps, as the economist Deirdre McCloskey suggested, the new state religion will be environmentalism.

As the proportion of sound families falls (a phenomenon that itself may be due to government policy -- but I need to save at least one topic for another essay), schools become more influential. At some point, perhaps soon, the election cycle will favor the Democrats. Then we may discover the full impact of No Child Left Behind.

I encourage readers to study Meir Kohn's current research. It brings new force to the case for freedom of association.

Arnold Kling is an adjunct scholar with the Cato Institute and a frequent contributor to TCS Daily. His latest book, Crisis of Abundance, is on health care policy.



Wow great article
Government has taken out many mutual aid societies and it is now slowly replacing family, all in the name of charity. Consider: one of Social security’s effects is that though children still provide for their parents buy paying the SS tax, the parents look to government and honor and show appreciation to government for the benefit not their children. They do not see that the money is coming from their children and it has become shameful to rely directly on your children in retirement but perfectly OK if the money passes through government. Even the economics of this are bad because some families would be better off providing in kind benefits (like housing) to their parents rather than money (which is what SS gives).

A point on education, I see vouchers as a threat to free education. It would tend to give some control of currently private schools to government and would tend to squeeze out the growing phenomenon of home schooling. Home schooling is morphing into micro schooling where families through associations share the task of schooling and is thus rapidly improving.

SS and paying for school
I had several discussions with my wife's grandmother.
She was absolutely convinced that the money she was getting from SS was the money that her husband had been putting in while he was working. It didn't matter what evidence I presented to her. She remembered FDR stating that the recipients of SS were just getting there own money back, and that settled it.

An alternative to vouchers, is to make educational expenses deductable. To help the low income, they could perhaps make this deduction work like the child/dependant deduction. If the amount of your deduction exceeds the amount of taxes paid, then you get a check for the difference.

You don't need govt to set and enforce standards
As UL has proven.

interesting piece, but Meir Kohn was not the first...
to recognize the rise of associational government. Ludwig Von Mises, Hayek and others of the Austrian School long ago noted this tendency to voluntary association and governance and described them as "spontaneous" organizations as opposed to forced or centralized ones. The remarkable variety of distinct languages from around the world serve as perfect examples of spontaneously evolved adaptations.

In the US today we are witnessing the replacement of voluntary, spontaneously evolved associations with the one size fits all proscriptions of an emerging fascist administrative state.

Principle of
...Subsidium - been known for years.

Another alternative to vouchers
The alternative that I like to vouchers is: the parents with school age children not in public schools get a deduction per child equal to the average cost of a year of governments schooling (about $7,000).

SS Comic Idea
I came up with the idea for a comic displaying this, but as I have no artistic ability I'll just describe it. Who knows, maybe somebody will actually draw it.

Frame 1: Son with elderly mother.
Son (holding wallet): Are you sure I can't help you out?
Mother: No, no. I'll be just fine.

Frame 2: Mother with large scary guy (SS on his shirt)
Mother: Hey, where's my check?
Scary Guy: One second, Ma'am.

Frame 3: Scary Guy brutally mugs the son.

Frame 4: Scary guy hands mother the money.

TCS Daily Archives