Is This Our 1914 Moment?

A friend recently asked me how I can be so positive about the world’s progress yet so desperately pessimistic about the long-lasting horrors that will come from last year’s authoritarian power grab

And it’s true: it’s a dissonance I often struggle with – the joy at the flourishing wonders of the world, coupled with the desperate fear of decline. I can go from pondering last year’s permanent loss of freedom to idealistically proclaim a century of liberty and an age of patronage prospering outside the rotten institutions of government. 

Is this the mark of a schizophrenic mind or is there a deeper method at work? Is it possible to hold two thoughts in our heads at once?

I have no doubt that the 2020 government invasions of every aspect of life – monetary, fiscal, regulatory, medical, or whether you may leave your country, your state, or even your house – won’t (fully) roll back. Temporary government policies never do; this is the new normal. For years after World War II, the British government maintained price controls and rations, fearing what would happen if they left things like food items to the whims of the market. Rather than rolling them back once the war ended, bread rationing was introduced in July 1946 – over a year after WWII ended in Europe – and it took until 1954 for all rations to be removed. Rent control in many European countries was introduced as emergency measures, but when the original arguments for their use no longer applied, the policies found new constituents and insiders to support them. Sweden levied a confiscatory top-rate tax on high earners after its 1990s banking crisis to help bring public finances back in order, strictly temporary for four years only, but the tax wasn’t abolished until last year – a mere twenty-one years overdue, and way after the public finances were in the clear.  

At airports, we all still hop through contorted security screenings – or at least did, until governments squeezed our ability and desire to fly – that are surprisingly ineffective at the task they ostensibly perform. (Taking off our shoes prevented how many terrorist attacks? That arbitrary 100 ml liquid limit has saved how many lives from which boogeyman?).

Every country’s political scene is riddled with examples like these: leftover rules, a heavy and incomprehensible tax code, a bloated bureaucracy of incompetent public “servants.” Public choice economists like James Buchanan and Gordon Tullock and those inspired by them have convincingly shown that it isn’t an accident. Once temporary government assistance is introduced, or temporary taxes levied, exiting those policies angers their new benefactors and the established bureaucracies, who by the time the original “emergency” has passed have found new arguments for why the larger government presence is absolutely critical. This is what Robert Higgs means by the size of government ratcheting up: it rapidly increases during an emergency, with few people able to object, and once the emergency is over, some non-trivial portion of the powers remain, never to be abolished. Result? An ever-expanding government. 

And what did you expect? Politics is a game that shifts the natural and inherent relationship between human beings. Ordinarily, people in their commercial or civic engagements have strong incentives to harmonize, to avoid conflict, streamline, make efficiency gains, and reach workable consensus; they have skin in the game, bear responsibility and costs for the (negative) outcomes of their actions, and often simply want to get on with their lives. Politicians, involved in their sinister games, disrupt this harmony: they do not have skin in the game (at least not above the minor risk that voters will make them leave that particular office in a few years’ time); they rarely suffer the consequences of their actions; they have little incentive to harmonize or downplay conflicts and routinely exaggerate them for personal grandeur, heightened self-importance, or signal their virtues to voters.  

What keeps this ever-growing disaster at bay is entrepreneurs’ innovating around the obstacles that government officials put in their path. It’s individuals finding new ways to do things, of outwitting the slow-moving behemoth that is government administration and process, of outsourcing their processes to friendlier jurisdictions. In the 1990s and 2000s, record labels used government and laws of intellectual properties to hunt file-sharers and decentralized so-called criminals for facilitating pirated music and movies, but it took the persistent work of convenient services like iTunes and Spotify to make people want to pay for music. 

Take the Microsoft-Netscape trust-busting case. In the late 1990s, government officials, working off legal frameworks a century old, accused Microsoft of harmfully monopolizing their various lines of business. By the time the government bureaucrats and lawyers had gotten through the legal system and determined that Microsoft had abused its monopoly position, the argument was moot as the technological world had moved on: competition had undermined whatever fleeting monopoly Microsoft may or may not have had. Rajshree Agarwal writes for Forbes about the recent reemergence of such monopoly myths: 

People stuck in the present frequently underestimate the potential for new companies to come along and disrupt existing monopolies. They see government intervention as the only way.

We have four centuries of evidence that, over time and on net, the market process that enriches us gradually overtakes the government power that impoverishes us. But during this time, we can have long periods where government power makes life worse, over and above what innovation, growth, and individual ingenuity could marshal. Compared to the wonders of today, few people would argue that the pre-1914 world – despite small governments, no passports, and sound money – was better than today’s – with record-high life expectancy, technology that would dazzle our ancestors, and lower-than-ever world poverty – but we went through three or six decades of government power outstripping the flourishing power of the market, of art, of knowledge, and civic society. 

That’s how I reconcile my seemingly contradictory position. Over long stretches of time – the ones that occupy a historian’s mind – things inevitably get better. Not, as Harvard’s Steven Pinker powerfully puts it, that “everything gets better for everyone everywhere all the time.” That, he rightly points out, “would not be progress. That would be a miracle.” This didn’t use to be the case: sustainably positive economic growth is a fairly new thing. Up until 1300, or 1600, or 1750, or 1850 (depending on which historical account you think best captures the past) your average person’s material well-being didn’t improve over time, but since then it routinely has. Finding out precisely how and why this happens is the great riddle of Big Picture human stories

Smacked through this upward centuries-long trajectory, interrupting it and pausing it, are the government horrors of the past – wars, genocides and holocausts; slavery, discrimination, and state schooling; property confiscations, property denials, and environmental disasters; terrible tax regimes, monetary debasements, and regulatory mania. 

Over long stretches of time, what governments do or don’t do is irrelevant. Everything is swamped by the powers of compounded economic growth, entrepreneurship, innovation, cultural values, and value creation. Over shorter time frames – like our disastrous pandemic year, the banking and property market policies that led to the financial crisis in 2007/8, or the warmongering politicians of 1914 – governments can ruin lots of existing well-being and ensure that plenty more remains unrealized

We don’t yet know if last year’s government power-grabbing disasters were a blip in the long-term trend, a year and behavior we can one day laugh at – like we today mostly do about the 1961 Bay of Pigs invasion or Neville Chamberlain’s 1938 “Peace for our time” declaration. Perhaps. But they could also be the modern equivalent of 1914 – the war to end all wars, where “We’ll be back by Christmas” is to be replaced by the “Two weeks to flatten curve,” that unfathomably stretched into years or decades. It took Europe some 50 years to recover from that initial governmental blunder and in many ways it never did. 

Let’s hope that Trump and Biden are harmless Kennedys and not Herbert Henry Asquith, the British Prime Minister of 1914. I have my doubts.

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