Page 2 of 2 THE BEAR'S
LAIR The cost of
politicians By Martin
Hutchinson
they brought. All were
decisions motivated by political factors, that had
huge adverse economic consequences (of course we
haven't yet seen the great bulk of those
consequences from the 1995-2007 episode.)
Finally the third area, economically
counterproductive decisions made in pursuit of
non-economic goals. Try World War I for a start,
on the parts of both Britain and the United
States. Neither
had
anything to gain economically or even politically
from participation in the war, yet in both cases
political blundering in pursuit of no
well-established principle caused untold economic
as well as personal harm. Similarly, the 2003
invasion of Iraq had no clear economic
justification - if it was undertaken to keep oil
prices down, then why are they running at four
times their level when the operation was
undertaken?
Both Venezuela and Canada have
in tar sands oil resources greater than those of
the entire Middle East; both countries are a lot
closer to the United States culturally and even
politically. Getting intervention in the Middle
East (and in general the Wilsonian pursuit of
global democracy) off the agenda is the greatest
service the next president could perform for the
US economy.
Finally, there is the design
of the tax system, whether it is the high marginal
income tax rates in Britain of the 1970s (over 90%
at the peak) or the huge subsidy for the housing
sector implicit in the home mortgage interest
deduction, or the barrier to corporate investment
inherent in the double taxation of dividends. All
these excrescences on the tax code were imposed by
politicians pursuing economically damaging value
agendas; all could usefully be removed from a tax
system that was anywhere close to economically
optimal.
So how could this problem be
addressed? There are two possible approaches. One
is to shrink the area of political decision-making
as much as possible, returning the nation's
problems to the private sector and eliminating
controlling and rent-seeking government agencies.
That was the approach followed by most US
presidents up to Calvin Coolidge (1923-29) - in
Coolidge's view "the business of America is
business" and government should keep out of the
way. If politicians don't control an economic
activity, they can only tax it, imposing highly
visible costs that are more or less unpopular;
their ability to impose costs by stealth through
regulation is eliminated.
When government
cannot be eliminated, structures should be
established that make resource allocation and
regulation as automatic as possible, so that
politics and lobbying can play little role. In
monetary policy for example, a fixed rule such as
the gold standard eliminates the highly political
Federal Reserve from monetary policy and makes
monetary tightening automatic when a bubble forms.
Even without a gold standard (which may be
too deflationary in a world with substantial
growth of population and economic activity) a
fixed statutory limit on money creation would be a
highly valuable control. This can be done; New
Zealand did it in its Reserve Bank of New Zealand
Act of 1989, and extended the freedom from
political manipulation directly into the political
realm by the Fiscal Responsibility Act of 1994.
In the United States, the line-item veto,
passed in 1996 and invalidated through bizarre
reasoning by a 6-3 Supreme Court vote in 1998,
would have provided under a competent president
(not always available, alas) at least some
protection from the worst excesses of lobbying and
Congressional log-rolling.
The other
approach to reducing the costs of politicians
would be to eliminate politics as far as possible
from the process of government by limiting the
number and frequency of elections.
Autocracy doesn't work, because it fails
to solve the succession problem and frequently
leads to abuse. Hereditary monarchy doesn't work,
because of the likelihood that only about a
quarter of monarchs will be competent - as Turkey
and China showed, the odds can be improved by
selective assassination, but that's probably not a
route one wants to pursue.
Nevertheless,
the democracy in the United States, in which
elections are held for even the minutest office,
but almost all senior officials are politically
appointed (thus greatly reducing the quality of
the civil service) and politicians spend the great
majority of their energy on fund-raising for
re-election, is a governmental system so likely to
abuse that it would never have been designed that
way (and indeed wasn't.)
One could imagine
a system, technically democratic, that worked
somewhat like the Catholic Church, in which only
the president/pope was elected, for a life term,
and election was by a college of cardinals
appointed (or in a democracy elected) continuously
or annually, with no high-profile and expensive
periodic elections.
The college of
cardinals would have no other function than
conducting elections of the chief magistrate. This
was the system proposed by the more conservative
Founding Fathers, which is why the electoral
college exists - it has also served the papacy
quite well for two millennia. Such a system would
provide democracy but almost no politics and would
thus hugely reduce the costs that politicians
impose.
The solutions are difficult, but
the problem is there and appears to be getting
worse. The number of lobbyists in Washington has
doubled since 2000 and the annual number of
Congressional spending earmarks has multiplied by
10 since 1994. As we turn our jaded attention once
again to the political process and the selection
of a government for 2009-13, it is worth
remembering: There must be a better way.
Martin Hutchinson is the author
of Great Conservatives (Academica Press,
2005) - details can be found at
www.greatconservatives.com.
(Republished with permission from PrudentBear.com.
Copyright 2005-07 David W Tice &
Associates.)
Head
Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
Central, Hong Kong Thailand Bureau:
11/13 Petchkasem Road, Hua Hin, Prachuab Kirikhan, Thailand 77110
