Topic: Government and Politics

Governing in Ignorance

Last night Jimmy Wales, the founder of Wikipedia, delivered the first Joseph K. McLaughlin Lecture at the Cato Institute. He talked about the vision, history, organization, and impact of Wikipedia, and the influence of F. A. Hayek and his essay “The Use of Knowledge in Society” on his own initial conception of a crowdsourced encyclopedia. He also discussed Wikipedia’s occasional influence on public policy decisions, such as the defeat of the Stop Online Piracy Act (SOPA) in 2012. But I was particularly struck by this line (about 43:00 in the video):

Far too often lawmakers propose laws, and it’s fairly clear that they do not even have the most rudimentary understanding of how the internet works.

It reminded me of something Bill Clinton said at the Clinton Global Initiative in 2010:

Do you know how many political and economic decisions are made in this world by people who don’t know what in the living daylights they are talking about?

That’s a lesson policymakers ought to keep in mind whenever they contemplate legislating about health care, marriage, minimum wage laws, net neutrality, banking regulations, overtime pay, or anything else. Do they really understand how the particular market or industry works? Do they really understand how the impact of a new law or regulation will ripple through affected industries? In most cases they don’t, as Aaron Powell wrote about the lessons of SOPA:

SOPA was not the exception to the rule. Instead, it was just how things are done in Washington.

Should You Take the Government’s Dietary Advice?

Recently, I’ve worked with the excellent Cato Multimedia team on the first edition of a project you’ll be seeing more of: Ask a Cato Expert.

In this first episode, I’ve answered the question of “Should you take the government’s dietary advice?” I highlight the history behind our current dietary guidelines, and come to the conclusion one should not. Please take a look at the video below, and tweet us new questions at #AskACatoExpert!


You Gotta Love the Kaiser Family Foundation

The folks at the Kaiser Family Foundation will publish studies that explain how ObamaCare creates “an incentive to avoid enrolling people who are in worse health” such as “by making [insurance] products unattractive to people with expensive health conditions.”

Then, when their own polling shows three of the public’s top four health care concerns are the very sort of health-insurance features ObamaCare pushes insurers to adopt, they spin it as evidence the public does not want Congress to reopen ObamaCare.

Foreign Wars and Domestic Politics

When things aren’t going so well for a president, it can be useful to find a scapegoat. Foreign threats are also useful distractions. The movie “Wag the Dog” told us that, as if we hadn’t seen the pattern repeated many times in our political history.

We can see the same phenomenon in a recent Washington Post dispatch from Moscow about the Russian parliamentary elections, which resulted in a big win for political parties aligned with President Vladimir Putin. Andrew Roth interviewed a Moscow pensioner:

“The president’s party, who else would I vote for?” said Nadezhda Osetinskaya, a 67-year-old pensioner and former nurse who lined up before polls opened at 8 a.m. at a school in northwest Moscow.

Osetinskaya had her share of complaints. Prices for food and medicine are increasing, she said, and she required support from her children to live on her $250 monthly pension. She was unhappy with the quality of care at a hospital where she receives treatment for a kidney ailment. The city had carried out years of road work, she said, but the potholes on her neighborhood streets are legion, probably the result of corruption. 

But on broader questions, she enthusiastically supported Putin, lauding the recent annexation of Crimea and blaming Russia’s economic difficulties on a Western conspiracy. Voting for United Russia was a way to support Putin, she reiterated.

So this voter is unhappy with rising prices, poor health care, and government corruption. But she supports the longtime incumbent because he’s fighting a war and blaming Russia’s problems on someone else. (Maybe Snowball!) Blaming America has worked for the dictators of Cuba and Venezuela, not that they’ve ever allowed a real election.

Writers have often seen the true nature of rulers and politics. Henry Adams wrote a century ago, “Politics, as a practice, whatever its professions, had always been the systematic organization of hatreds.”

And Shakespeare understood the value of foreign military adventures to rulers long before that, when he wrote in Henry IV, Part 2,

I cut them off and had a purpose now
To lead out many to the Holy Land,
Lest rest and lying still might make them look
Too near unto my state. Therefore, my Harry,
Be it thy course to busy giddy minds
With foreign quarrels…
It still works. 

When Civic Participation Means Shaming A Non-Voter’s Kid

This video, “Playground” [YouTube, Facebook] makes quite an impression. It shows a scene of schoolyard bullying but takes the side of the jeering, taunting mob – in the name of voting. It is one of a series of 30 second videos put out by a group calling itself Civic Innovation Works, encouraging a vote in the general election on November 8 and seemingly intended as public service announcements.  The others in the series appear to be similar in message, but lacking in this one’s outrageousness (although one does present a fantasy about publicly shaming a non-voter).  

On the off chance that Civic Innovation Works was someone’s idea of an elaborate parody I looked them up. I found that Fenton, the well-known progressive/”social change” public relations agency, takes credit for one of the other videos in the series.

So it would look as if they are on the level. It is almost as if they were trying with “Playground” to convince viewers that electoral politics makes people worse.

In One Chart, Everything You Need to Know about Big Government, the Welfare State, and Sweden’s Economy

Sweden punches way above its weight in debates about economic policy. Leftists all over the world (most recently, Bernie Sanders) say the Nordic nation is an example that proves a big welfare state can exist in a rich nation. And since various data sources (such as the IMF’s huge database) show that Sweden is relatively prosperous and also that there’s an onerous fiscal burden of government, this argument is somewhat plausible.

A few folks on the left sometimes even imply that Sweden is a relatively prosperous nation because it has a large public sector. Though the people who make this assertion never bother to provide any data or evidence.

I have five responses when confronted with the why-can’t-we-be-more-like-Sweden argument.

  1. Sweden became rich when government was small. Indeed, until about 1960, the burden of the public sector in Sweden was smaller than it was in the United States. And as late as 1970, Sweden still had less redistribution spending that America had in 1980.
  2. Sweden compensates for bad fiscal policy by having a very pro-market approach to other areas, such as trade policy, regulatory policy, monetary policy, and rule of law and property rights. Indeed, it has more economic freedom than the United States when looking an non-fiscal policies. The same is true for Denmark.
  3. Sweden has suffered from slower growth ever since the welfare state led to large increases in the burden of government spending. This has resulted in Sweden losing ground relative to other nations and dropping in the rankings of per-capita GDP.
  4. Sweden is trying to undo the damage of big government with pro-market reforms. Starting in the 1990s, there have been tax-rate reductions, periods of spending restraint, adoption of personal retirement accounts, and implementation of nationwide school choice.
  5. Sweden doesn’t look quite so good when you learn that Americans of Swedish descent produce 39 percent more economic output, on a per-capita basis, than the Swedes that stayed in Sweden. There’s even a lower poverty rate for Americans of Swedish ancestry compared to the rate for native Swedes.

I think the above information is very powerful. But I’ll also admit that these five points sometimes aren’t very effective in changing minds and educating people because there’s simply too much information to digest.

As such, I’ve always thought it would be helpful to have one compelling visual that clearly shows why Sweden’s experience is actually an argument against big government.

And, thanks to the Professor Deepak Lal of UCLA, who wrote a chapter for a superb book on fiscal policy published by a British think tank, my wish may have been granted. In his chapter, he noted that Sweden’s economic performance stuttered once big government was imposed on the economy.

Though the Swedish model is offered to prove that high levels of social security can be paid for from the cradle to the grave without damaging economic performance, the claim is false (see Figure 1). The Swedish economy, between 1870 and 1950, grew faster on average than any other industrialised economy, and the country became technologically one of the most advanced and richest in the world. From the 1950s Swedish economic growth slowed relative to other industrialised countries. This was due to the expansion of the welfare state and the growth of public – at the expense of private – employment.57 After the Second World War the working population increased by about 1 million: public employment accounted for c. 770,000, private accounted for only 155,000. The crowding out by an inefficient public sector of the efficient private sector has characterised Sweden for nearly half a century.58 From being the fourth richest county in the OECD in 1970 it has fallen to 14th place. Only in France and New Zealand has there been a larger fall in relative wealth.

And here is Figure 1, which should make clear that what’s good in Sweden (rising relative prosperity) was made possible by the era of free markets and small government, and that what’s bad in Sweden (falling relative prosperity) is associated with the adoption and expansion of the welfare state.

But just to make things obvious for any government officials who may be reading this column, I augment the graph by pointing out (in red) the “free-market era” and the “welfare-state era.”

As you can see, credit for the chart actually belongs to Professor Olle Krantz. The version I found in Professor Lal’s chapter is a reproduction, so unfortunately the two axes are not very clear. But all you need to know is that Sweden’s relative economic position fell significantly between the time the welfare state was adopted and the mid 1990s (which presumably reflects the comparative cross-country data that was available when Krantz did his calculations).

You can also see, for what it’s worth, that Sweden’s economy spiked during World War II. There’s no policy lesson in this observation, other than to perhaps note that it’s never a good idea to have your factories bombed.

But the main lesson, which hopefully is abundantly clear, is that big government is a recipe for comparative decline.

Which perhaps explains why Swedish policymakers have spent the past 25 years or so trying to undo some of those mistakes.