The Price of the Mega-State

The recent Supreme Court decision that “ruled that the government may not ban political spending by corporations in candidate elections” is a true victory for freedom of speech.

What many people do not realize, however, is that both sides in this dispute had important and valid points. The terrible truth of the matter is that a large complex government is incompatible with political and personal freedom. It is not just the economic freedom in various sectors that is threatened by a large welfare and regulatory state. (Most classical liberal-oriented economists well understand the effect on economic liberty.) However, those other freedoms that modern-day social democrats (aka “liberals”) value are also threatened.

The majority of the Court are right to say that campaign finance laws that restrict the freedom of corporations (and presumably labor unions) to participate in the campaigns for political candidates is a violation of freedom of speech. This is a basic freedom in a representative democracy. No amount of sophistry about whether corporations are real human beings, and so forth, is worthy of us. (See Ilya Somin’s post at the Volokh Conspiracy.) Corporations are just associations of human beings. Why should other institutions of civil society be rendered mute by the apparatus of compulsion and coercion?

On the other hand, corporations and labor unions are not generally friends of freedom and the market. They want, as Adam Smith understood, special privileges: protection from competition by new entrants, special tax treatment, regulations that make their lives easier, and so forth. Public Choice economists have made many contributions to the theoretical and empirical analysis of these matters. (I must say the majority of the economics profession, even at this late date, still seems to be living in the fantasy world of optimal social-welfare enhancing policies. Let that pass.)

As I have previously blogged, the ideals of the rule of law are degraded by the exigencies of the welfare-state, not only in the process of logrolling but in the process of making arbitrary, special-interest exceptions to rules of all kinds. Mega-states necessarily go beyond the proper realm of government: the general welfare – the benefit of each and all.

So the decision the majority handed down has its costs. The decision the dissenters would have handed down also would have had its costs. Both are very high. And they are the result of the size and scope of the modern American state. There is no good solution, except to cut down the size of the state in a very substantial way.

As long as we have freedom of speech (which I hope we shall continue to have) special interests will use their funds to get the proverbial concentrated benefits matched by dispersed, but greater, losses. Special interest legislation will more and more displace any semblance of the general interest.

What we need is to create or restore a secular “religion” or dogma. We need a dogma of laissez-faire. As long as John Maynard Keynes’s argument in “The End of Laissez-Faire” is accepted (that is, we should put away the old classical liberal dogmas and decide each issue on its own merits), the special interests will be there to convince a “pragmatic” public that their policies are the ones that, on the merits, warrant support.

I am not arguing for a non-rebuttable dogma, but a strong presumption. Government officials and politicians should feel a sense of trepidation when they propose schemes for our betterment.

Unfortunately, it is not possible simply to construct such a public attitude. Nevertheless, I think that intellectuals can do their part. We should discard the idea that it is more “scientific” or more “objective” to follow an issue-by-issue approach to politics. We ought to recognize the instability of the “on its own merits” policy regime.  We need to focus on general rules that inhibit state action. We need to accept the lessons of constitutional political economy, public choice theory and slippery-slope analysis. We need a secular “religion” of laissez-faire.

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About Mario Rizzo 75 Articles

Affiliation: New York University

Dr. Mario J. Rizzo is associate professor of economics and co-director of the Austrian Economics Program at New York University. He was also a fellow in law and economics at the University of Chicago and at Yale University.

Professor Rizzo's major fields of research has been law-and economics and ethics-and economics, as well as Austrian economics. He has been the director of at least fifteen major research conferences, the proceedings of which have often been published.

Professor Rizzo received his BA from Fordham University, and his MA and PhD from the University of Chicago.

Visit: Mario Rizzo's Page

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