Reinventing Statism

By Llewellyn H. Rockwell, Jr.

"Orwellian" language is designed to fool the public and enhance the power of the state. Now, under Clinton, we have Orwellian economics. Government spending is "investment," higher taxes are "growth," and central planning is "collective entrepreneurialism." Unfortunately, many otherwise savvy people have been fooled by this language into mistaking social democrats for free marketeers.

David Osborne, the author of Reinventing Government, is the guru of this process. Our "fundamental problem," he says, is "not too much government," but "the wrong kind of government," bureaucratic rather than "entrepreneurial."

In the market, the entrepreneur is the risk-bearing innovator who seeks to satisfy future consumer demand – and profits or loses by the accuracy of his predictions. But this can have nothing to do with the risk – transferring institution called government, which gets its money, regardless of consumer satisfaction, through taxes.

But to Osborne, not only can government be entrepreneurial, federal employees will then be public spirited and productive. Welcome, in other words, to cloud cuckoo land.

Government cannot, by its very nature, be anything but bureaucratic, as Max Weber and Ludwig von Mises have shown. Government gets its money not in the market, but from unwilling "consumers." It has no profit and loss test, and therefore can do no cost accounting. In the private sector, it is cost accounting that enables a firm to decide which projects are profitable and which are not, and to make decisions on that basis. With this simple test, new technologies are developed, resources properly allocated, and the world fed.

The more decentralized the government is, the more flexible it is. It is not surprising, then, that most of the examples Osborne gives of good government are at the local level, where citizens have some influence over bureaucrats. But Osborne wants to extend his local examples to a national scale, pretending he can glean a model for the largest and most complex economy in the world from city hall. But when the government is giant and distant, when it spends $I. 5 trillion a year, and when its victims are diffused throughout the en- tire population, it is impossible to make it imitate a locality.

Say the Clothespin Safety Administration gets $1 million this fiscal year, but only spends $750,000. The budget director then cuts the budget, which creates incentives for the agency to spend to the limit.

Osborne condemns this as old-style government. His suggestion is to increase the budget when the agency spends less than its appropriation, but he overlooks the fact that this causes people to be even less concerned about costs. And it does not solve the central problem: how do we know how much the Clothespin Safety Administration should get in the first place? It has no consumers and no means of determining profit and loss, so it must be ruled arbitrarily.

From a managerial standpoint, government is much like a closed-off maze. We can make the players run a different path. We can give them new maps. We can tell them to be creative and entrepreneurial. But in the end, they are only running around a maze.

Government cannot be "reinvented" because its essential nature cannot be changed. Though it may be necessary, it is always coercive, bureaucratic, and wasteful. These vices are limited when government is limited, but when it expands beyond enforcing contracts and keeping the peace, it becomes destructive of society on a wide scale.

For the defenders of the mixed-economy, Osborne's maze can be useful, however. He provides a list of words they should stop using, including rules, sanctions, regulation, licensing, grants, subsidies, and loan guarantees. These are part of the "old order."

He then offers phrases for the new Clintonian order, including: public-private partnerships, quasi-public corporations, public enterprise, rewards, technical assistance, volunteers, catalyzing non-governmental efforts, and convening nongovernmental leaders.

Anyone can play this game. String these words together almost at random and you're reinventing government. Say some welfare program is supposed to help poor people, but actually encourages single crack mothers to have kids who grow up to terrorize the neighborhood, all at taxpayers' expense. Should the program be abolished? No, that is the old way.

Under the new way, we convene nongovernment leaders and volunteers to give technical assistance to public-private partnerships for public enterprises. Nothing changes, of course, except the cost to taxpayers goes up, even as they are tricked into thinking that reforms are being made.

Basically, Osborne wants the public and private sectors to be more "cooperative" with each other. That is, the government should fund more special interests. But when public money pours into the private economy, it has a dis-coordinating effect, sustaining businesses that should shut down, and generating unfair competition against those who stand on their own feet.

Though Osborne pretends this is his idea, the history of big government is the history of corporate elites getting rich at taxpayer expense. That was true of 19th century railroad rackets, the Progressive Era, the New Deal, the Fair Deal, the New Frontier, the Great Society, and every war in our history. Making favored private interests wealthy is hardly a guide to proper public policy.

At one time, when private parties got rich off government, it was called graft. Now it is called partnership. But this partnership can be dangerous, as when Osborne advocates making taxpayers foot the bill for private school. This means government control, and, for example, he wants to forbid private schools 'from charging tuition beyond the voucher" and to mandate "racial balance."

Osborne calls his program an "American perestroika." It's an appropriate name, for the original perestroika was Mikhail Gorbachev's attempt to save Soviet socialism. Gorbachev thought he could make it unbureaucratic and efficient. He wanted to reinvent it, so to speak.

Like other Clintonians, Osborne is a social democrat, meaning he wants to achieve collectivist goals through market incentives. But there is an essential conflict between state and market. The mixed economy can never be stable. Every intervention has some negative consequence, which creates a demand for other interventions. That is why the mixed economy always tends toward all-out socialization. Therefore, compromising with the social democrats and their reinvented government is supping with the Devil.