Edited and written by David Gordon
The State Eviscerated
Independent Institute, 2004
xx + 408 pgs.
Reading Robert Higgs’s magnificent collection of essays leaves one puzzled. Higgs is the foremost American economic historian who writes from a free-market perspective. His analysis of government failure and malfeasance rests on a combination of theoretical acuity and mastery of empirical data unmatched since the passing of Murray Rothbard. Why, then, are there so few Higgsians? Why do so many intellectuals embrace the statist disasters that Higgs ruthlessly and mordantly demolishes?
Are the supporters of the state gripped by Hegel’s illusion that the State is the march of God on earth? Most are not that delusional: they recognize at least some of government’s crippling deficiencies. Joseph Stiglitz, a Nobel laureate in economics who is sympathetically inclined toward socialism, remarked after his service with the Council of Economic Advisers: "I had expected lower standards of evidence than would be accepted in a professional article, but I had not expected that the evidence offered, would be, in so many instances irrelevant, and that so many vacuous sentences . . . would be uttered" (p. 50). Stiglitz, like so many of his colleagues, has not given up on government. Why not? They think that however imperfect an instrument, government is needed; and exactly this Higgs denies.
Is not government necessary to remedy the inequalities that the free market allows? Higgs responds by asking, is equality always a good thing? He gives numerous examples when it clearly is not. If, e.g., rich older people began dying in great numbers, or people developed an aversion to education, equality would increase, yet everyone not a follower of Pol Pot would acknowledge these trends to be undesirable. Higgs contends that "economists and other intellectuals routinely compare the income or wealth distribution between times or places and judge the differences good or bad, depending on whether the measured degree of inequality is less or more, without giving any consideration to why the differences exist" (p. 7, emphasis in original).
But is not inequality sometimes bad? Higgs responds with a list of nineteen dire consequences of attempts to redistribute income. Such programs, e.g., make society more contentious: groups struggle with one another to get benefits, and taxpayers view as enemies those who receive the money that has been taken away from them. "Less and less does the society constitute a genuine community. Rather, it becomes balkanized into bellicose subgroups regarding one another as oppressor and oppressed" (p. 24).
Do we not need government for some purposes, though? Must not dangerous medicines be kept off the market by government regulation? Without the FDA, would not consumers be victimized by makers of patent medicines, preying on the desperate hopes of those who suffer from incurable illnesses? Higgs responds with the obvious point that the FDA has delayed, or kept off the market altogether, drugs that might have saved many lives.
Higgs’s careful research is evident in his response to the next stage of the argument. Suppose a proponent of regulation says, "True enough, the FDA has delayed some valuable drugs. But it has kept dangerous drugs from harming people. When you condemn the FDA, you show only that you and that agency weigh costs and benefits differently."
Higgs questions the alleged benefits. According to one study, "fatal reactions to FDA-approved drugs amount to the fourth-leading cause of death in the United States, after heart disease, cancer, and stroke" (p. 65). And to those still reluctant to abandon the comforting myth that the FDA protects us from harm, Higgs has at the ready another surprising fact: "Once a drug has been approved, doctors are not restricted to using it solely for the FDA-approved indication; they may prescribe it for other uses as well. Such uses, known as ‘off-label,’ account for some 40–50 percent of all prescriptions" (p. 67). The costs of drug regulation are real, the benefits illusory.
Suppose that the defender of government retreats to his last battle station. Do we not need government at least to preserve law and order? Higgs asks in response an imaginative question. If we lived without government at all, could the situation conceivably be as bad as the present? Governments have killed millions: is it not the height of folly to entrust our safety to this institution? "Even though my own opinion of mankind is, I confess, substantially lower than the average opinion, I still have trouble imagining that, without government, people would have done even worse than they did with government" (p. 103, emphasis in original). As always, Higgs backs up what sounds like an extreme statement with a revealing fact: Somalia for most of the 1990s had no national government, yet "no one can dispute that Somalia compares favorably with many other African countries in which governments continue to exercise their power" (p. 374).
If Higgs’s view of government is right, a further question arises: why is government so bad? Our author’s answer is two-fold. First, those in government are too often evil power seekers, with no concern for the public welfare they hypocritically claim to advance. Higgs in his remarks shows himself an able disciple of one of his favorite writers, H.L. Mencken: "People do not expect to find chastity in a whorehouse. Why, then, do they expect to find honesty and humanity in government, a congeries of institutions whose modus operandi consists of lying, cheating, stealing, and if need be, murdering those who resist?" (p. xvi).
Those trusting souls who would reject what Higgs says as cynical must confront his next point. Even with the best will in the world, government could not carry out the formidable tasks it undertakes. Government action rests on accurate statistical data; but such data are generally not available. As an example, alleged trade deficits often serve as an excuse for government meddling, though we are never told why such deficits should be called "unfavorable." Yet figures on trade contain "a fudge factor called statistical discrepancy. . . [in 1996 this discrepancy was] equivalent to 32 percent of that year’s deficit on current account" (p. 117, emphasis in original). For the whole problem of government statistics, Higgs calls attention to "one of the most important and neglected economics books of the past fifty years [i.e., in the period 1948–1998]" (p. 116), Oskar Morgenstern’s On the Accuracy of Economic Observations (Princeton University Press, 1963) Morgenstern, by the way, was a member of Mises’s famous private seminar in Vienna.
If government is as bad as Higgs portrays it, how did it secure the dominating position it now holds? Here Higgs invokes his most famous thesis, elaborated in his great work Crisis and Leviathan. The state grows during wartime and other "emergencies"; and when peace or normality returns, government does not shrink to its former size. Business groups that might have been expected to defend free enterprise in fact cooperate with the government in order to advance their own interests: "Within three decades, from the outbreak of World War I in Europe to the end of World War II, the American people endured three great national emergencies, during each of which the federal government imposed unprecedented taxation and economic controls on the population. . . . Rather than resisting the government’s impositions or working to overthrow them, they [business interests] looked for ways to adapt to them, positioning themselves so that the government policies would provide a tax advantage, channel a subsidy their way, or hobble their competitors" (p. 171).
But did not the framers of the Constitution endeavor to protect us from these malign developments? Though they of course could not predict the exact contours of the present American variety of "quasi-corporatism," Madison and his colleagues feared a powerful central government and enacted safeguards designed to keep the government limited. What went wrong?
The problem, for Higgs, does not lie in the text of the Constitution. Rather, during periods of crisis, the Supreme Court all too often defers to the central government. Faced with an emergency, the Court refuses to impose legal barriers that an inflamed public is likely to condemn. Higgs places great emphasis on the Court’s upholding the Adamson Act in 1917, under which the Wilson administration imposed a labor settlement on interstate railroads. Nothing in the Constitution allowed Wilson to do this, but the Court found "a reservoir of reserved power on which it [the government] may legitimately rely during emergencies. The outcome: railroad owners were deprived of a great deal of property, without compensation, for a use not public" (p. 202).
Even worse, the Court during World War I "readily affirmed the constitutionality of sending men against their will to fight and die in a remote power struggle" (p. 202). Once conscription was allowed, how could government be restrained at all? Elsewhere Higgs has noted that this was precisely the argument of Justice Holmes: If government may involuntarily compel people to put their life at risk, may it not restrict their liberties in any lesser way it chooses, should an emergency in its judgment demand this?
Higgs has no sympathy for those who look to democracy as a means to limit Leviathan. In a brilliant review, he annihilates the principal thesis of Bruce Ackerman’s influential We the People. Ackerman argues that popular mandates can amend the Constitution by means other than the formal process specified in the document. If the people support seeming violations of the Constitution by several times reelecting the revolutionaries, the deed is done. Thus, the Fourteenth Amendment was "ratified" at the point of a bayonet; but when the Radical Republican Congress was returned to power, its revolutionary measures were confirmed. Again, the multiple reelections of Franklin Roosevelt made his usurpations of power legitimate.
As befits a disciple of Mencken, Higgs will have none of this: "Perhaps the most important unacknowledged weakness of Ackerman’s argument is its failure to deal with a critically important reality: those in positions of power . . . possess major advantages over their opponents in elections, Supreme Court proceedings, and other political encounters. Frequently, the incumbents have gained their positions by misrepresenting themselves. When Abraham Lincoln campaigned in 1860, he did not promise to mount a military invasion of the slave states" (p. 359). Higgs discusses in detail Roosevelt’s use of New Deal patronage to buy votes.
If Higgs is cynical about what Hans Hoppe has called "the god that failed," democracy, no one can doubt his commitment to liberty. He rejects with contempt the arguments of the "cliometricians" that pre-Civil War slavery was efficient. He agrees with Jeffrey Hummel that "efficiency is a welfare concept that presupposes the existing property-rights regime. In this light, finding that slavery was efficient amounts to little more than finding it benefits thieves when legal conditions allow them to get away with it" (p. 303).
Higgs is baffled by the contention of the institutionalist economist Warren Samuels that "there is something like a constant level of coercive command and control in society" (p. 108, quoting Samuels). How, Higgs asks in astonishment, can Samuels deny that coercion decreased when slavery was abolished and increased when the draft was imposed? Such questions show that Higgs, unlike Samuels, has a firm grasp on the common sense meanings of freedom and coercion.1 MR
1One can make sense of Samuels’s contention by invoking an odd theory of freedom held by the American Legal Realist Robert Hale, but I think it best to pass this by.