TCS Daily

Plunder in the New Year

By John Baden - January 1, 2008 12:00 AM

Many smart and well-intentioned people fault government for its injustices and inefficiencies. Because there are few incentives to economize, and many to mislead, waste and moral corruption are endemic to and inherent in political management. No nation has found a way in practice, or in principle, to foster efficiency and equity when decisions are make by political calculus. Across time and cultures, that¹s how the world works.
Given this, how might we cope?

If this bothers you for ethical, economic, and environmental reasons, and I believe it should, there are two obvious choices. The best personal strategy is to accept and get over the plight of politics. Alternatively, you could become an activist with a libertarian bent. If you elect the second option, understand that you¹re analogous to one who supports a Quaker military, a fighting force that renounces weapons of violence.

There is, however, one arena is which government is extremely efficient, that of plundering the weak and unorganized for the benefit of the wealthy and well organized. When democratic government is used to transfer wealth and preferential opportunities, we squander resources and debase ethical standards, but economize on bloodshed. Please understand this is a huge improvement compared to the historical alternatives and contemporary kleptocracies.

There is always a strong temptation to take national government beyond its minimal responsibilities; protecting the weak from the strong and promoting civil society through the rule of law. But when government expands beyond these activities, politics becomes a serious game of wealth and privilege transfers. Earmarks are the legislative analogues to bombs, bullets, and subsequent capture.

And that of course is exactly where we are. Consider the recent announcement on the website of Sen. Jon Tester, by all accounts a good man. ³Montana¹s two U.S. Senators secured nearly $112 million for the Big Sky State after negotiators...threatened to axe all federal funding for state-specific projects.... The measure not only funds important services in the federal government for the 2008 fiscal year, it sets aside $111.8 million for more than 120 individual projects across Montana....²

Senator Baucus added, ³Jon and I weren¹t about to let anyone meddle with projects that bring good-paying jobs and new opportunities to Montana.² And Tester further noted, ³I will always fight for good projects that make Montana a great place to do business and the best place in the world to raise a family.²

This is exactly what we were promised. Our senators are just doing their job‹and boasting about a job well done. (Baucus¹ recent email subject line was ³Bringing home the bacon.²)

The Farm Bill is a logical extension of this political logic. As NPR
reported: ³The House measure includes subsidies for 25 crops. Some of the largest payments go to growers of corn, soybeans, rice, and cotton. There also are high tariffs to protect domestic sugar producers. In recent years, farmers have received anywhere from $10 billion to $20 billion each year.²

The Economist magazine has coined a term for the result, ³agflation,² record high crop prices in a time of unprecedented abundance. Wheat prices have doubled this year and corn is at an all time high. It noted, ³The prairie farmers of the Midwest are looking forward to their Caribbean cruises.²

In economics as in ecology, it¹s difficult to do just one thing. The subsidies to American farmers create huge market distortions that harm the poor, especially those in the Third World. Nobel economist Gary Becker calculates that when food prices increase a third, on average, Americans will suffer a 3 percent reduction in living standards. In poor nations the loss will average 20 percent. For those on the edge of subsistence, this is a critical reduction.

We should be realistic about political behavior within our cultural and legal institutions. It won¹t improve even if ³we just elect better people.² Bad people aren¹t the root of the problem. It matters little who the people are‹once they get into office, they respond to the incentives they face.

Institutions generate information and incentives to act. Real reform requires institutional change. This is what we should earnestly seek in the New Year and beyond.


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