A Nation of Takers, Not Makers

"The state is the great fiction by which everybody seeks to live at the expense of everybody else." — Frederic Bastiat

The Road to Serfdom is a book written by the Austrian-born economist and philosopher Friedrich von Hayek (1899–1992) between 1940–1943, in which he "warned of the danger of tyranny that inevitably results from government control of economic decision-making through central planning," and in which he argues that the abandonment of individualism, liberalism, and freedom inevitably leads to socialist or fascist oppression and tyranny and the serfdom of the individual. Significantly, Hayek challenged the general view among British academics that fascism was a capitalist reaction against socialism, instead arguing that fascism and socialism had common roots in central economic planning and the power of the state over the individual.

Hayek argues that Western democracies, including England and America, have "progressively abandoned that freedom in economic affairs without which personal and political freedom has never existed in the past." Society has mistakenly tried to ensure continuing prosperity by centralized planning, which inevitably leads to totalitarianism. "We have in effect undertaken to dispense with the forces which produced unforeseen results and to replace the impersonal and anonymous mechanism of the market by collective and 'conscious' direction of all social forces to deliberately chosen goals." Socialism, while presented as a means of assuring equality, does so through "restraint and servitude", while "democracy seeks equality in liberty". Planning, because coercive, is an inferior method of regulation, while the cooperation of a free market is superior "because it is the only method by which our activities can be adjusted to each other without coercive or arbitrary intervention of authority".

Centralized planning is inherently undemocratic, because it requires "that the will of a small minority be imposed upon the people." The power of these minorities to act by taking money or property in pursuit of centralized goals, destroys the Rule of Law and individual freedoms. Where there is centralized planning, "the individual would more than ever become a mere means, to be used by the authority in the service of such abstractions as the 'social welfare' or the 'good of the community' Even the very poor have more personal freedom in an open society than a centrally planned one. Hayek states, “While the last resort of a competitive economy is the bailiff, the ultimate sanction of a planned economy is the hangman." Socialism is a hypocritical system, because its professed humanitarian goals can only be put into practice by brutal methods "of which most socialists disapprove". Such centralized systems also require effective propaganda, so that the people come to believe that the state's goals are theirs.

Hayek analyzes the roots of Nazism in Socialism, then draws parallels to the thought of British leaders: “The increasing veneration for the state, the admiration of power, and of bigness for bigness' sake, the enthusiasm for "organization" of everything (we now call it "planning") and that "inability to leave anything to the simple power of organic growth" are all scarcely less marked in England now than they were in Germany.”

One of the ways for the state to gain more and more power is to control the livelihoods of more and more people. The way this is done is by the state employing more and more people. At some point in time the state will employee more people than the private sector. When this happens those in the private sector, the entrepreneurs and small business people, will become serfs to the Bureaucrats. This day is quickly approaching, if not already upon us.

Stephan Moore writes in the WSJ; “If you want to understand better why so many states—from New York to Wisconsin to California—are teetering on the brink of bankruptcy, consider this depressing statistic: Today in America there are nearly twice as many people working for the government (22.5 million) than in all of manufacturing (11.5 million). This is an almost exact reversal of the situation in 1960, when there were 15 million workers in manufacturing and 8.7 million collecting a paycheck from the government.

“It gets worse. More Americans work for the government than work in construction, farming, fishing, forestry, manufacturing, mining and utilities combined. We have moved decisively from a nation of makers to a nation of takers. Nearly half of the $2.2 trillion cost of state and local governments is the $1 trillion-a-year tab for pay and benefits of state and local employees. Is it any wonder that so many states and cities cannot pay their bills?” Just recently the City of Costa Mesa, California announced it would be laying off 50% of its city work force.

“Every state in America today except for two—Indiana and Wisconsin—has more government workers on the payroll than people manufacturing industrial goods. Consider California, which has the highest budget deficit in the history of the states. The not-so Golden State now has an incredible 2.4 million government employees—twice as many as people at work in manufacturing. New Jersey has just under two-and-a-half as many government employees as manufacturers. Florida's ratio is more than 3 to 1. So is New York's.”

Even Michigan, at one time the auto capital of the world, and Pennsylvania, once the steel capital, have more government bureaucrats than people making things. The leaders in government hiring are Wyoming and New Mexico, which have hired more than six government workers for every manufacturing worker.

“Now it is certainly true that many states have not typically been home to traditional manufacturing operations. Iowa and Nebraska are farm states, for example. But in those states, there are at least five times more government workers than farmers. West Virginia is the mining capital of the world, yet it has at least three times more government workers than miners. New York is the financial capital of the world—at least for now. That sector employs roughly 670,000 New Yorkers. That's less than half of the state's 1.48 million government employees.”

“Don't expect a reversal of this trend anytime soon. Surveys of college graduates are finding that more and more of our top minds want to work for the government. Why? Because in recent years only government agencies have been hiring, and because the offer of near lifetime security is highly valued in these times of economic turbulence. When 23-year-olds aren't willing to take career risks, we have a real problem on our hands. Sadly, we could end up with a generation of Americans who want to work at the Department of Motor Vehicles.”

It’s not hard for anyone with an ounce of grey matter between their ears to see what is happening across the nation. The more people who work for he government the more there will be those who vote for the people who employ them, the government and that usually is the Democratic Party. Just look at the last election in California. Without the support of the public sector unions neither Barbara Boxer nor Jerry Brown would have been elected.

The employment trends described here are explained in part by hugely beneficial productivity improvements in such traditional industries as farming, manufacturing, financial services and telecommunications. These produce far more output per worker than in the past. The typical farmer, for example, is today at least three times more productive than in 1950.

These increases in productivity have been driven by technology. In my profession of surveying and civil engineering this is especially true. GPS, computerized drafting and design, and laser scanning has reduced the need for workers by at least 50% over the past twenty years. It has also driven up the pay scale for these workers due to the higher demand for skill and training.

Moore goes on; “Where are the productivity gains in government? Consider a core function of state and local governments: schools. Over the period 1970-2005, school spending per pupil, adjusted for inflation, doubled, while standardized achievement test scores were flat. Over roughly that same time period, public-school employment doubled per student, according to a study by researchers at the University of Washington. That is what economists call negative productivity.”

But education is an industry where we measure performance backwards: We gauge school performance not by outputs, but by inputs. If quality falls, we say we didn't pay teachers enough or we need smaller class sizes or newer schools. If education had undergone the same productivity revolution that manufacturing has, we would have half as many educators, smaller school budgets, and higher graduation rates and test scores. As proponent and lecturer on the Deming School of Quality Assurance I find the quality of our public education terrible.

Two years ago I was invited to lecture Caltrans employees in Sacramento on the Quality Assurance. This was a challenge because I had to tell the audience that I believed there could be no real quality assurance in the public service because government is driven by policy not performance. I thought the audience would throw something at me, but they seemed to understand my point, however, I have not been invited back.

The same is true of almost all other government services. Mass transit spends more and more every year and yet a much smaller share of Americans use trains and buses today than in past decades. One way that private companies spur productivity is by firing underperforming employees and rewarding excellence. In government employment, tenure for teachers and near lifetime employment for other civil servants shields workers from this basic system of reward and punishment. It is a system that breeds mediocrity, which is what we've gotten.

Most reasonable steps to restrain public-sector employment costs are smothered by the unions. Study after study has shown that states and cities could shave 20% to 40% off the cost of many services — firefighting, public transportation, architectural and engineering services, garbage collection, administrative functions, even prison operations — through competitive contracting to private providers. But unions have blocked many of those efforts. Public employees maintain that they are underpaid relative to equally qualified private-sector workers, yet they are deathly afraid of competitive bidding for government services.

Unless we break the stranglehold of the public employees’ unions and the reverse the trend of the growing public sector the works and writings of Hayek, Bastiat, Hazlitt, Misses, and Friedman will have gone for nothing and we will all be serfs to the government bureaucracy.