There Needs to Be a Revolution Every 240 Years

Thomas Jefferson wrote to William Stephens Smith:  "The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants.  It is its natural manure."   He was fond of adding that there needs to be a revolution every 20 years. 

The human mind is rarely able to forecast the future with precision.  In the case of the Federalist government instituted at the state constitutional conventions in the 1780s and the national Constitutional Convention, Jefferson overstated the  case by 220 years.

From its beginning the federal government fulfilled the anti-Federalists' fears. It always has subsidized the wealthy and well placed, and it frequently has instituted elements of tyranny that have waxed and waned with popular opinion. In the 1790s the Federalists passed the Alien and Sedition Act, a direct attack on the Bill of Rights upon which the anti-Federalists had insisted.  During the Civil War Lincoln closed Democratic newspapers and attempted to arrest Chief Justice Roger Taney.  After World War I anarchists and socialists were exiled.  During World War II, Japanese-Americans were confined to concentration camps.  In the post-war period the FBI harassed communists.

Those incursions on civil liberties are small compared to the federal incursions on economic liberties that have escalated since the Civil War.  Until the 1920s, America's had been a limited state, a concept little understood before the 18th century.  Popular ideological commitment to liberty and the limited state allowed democracy to coexist with economic stability.

The American laissez faire, free market approach was able to accomplish several objectives previously unknown to humankind:

(1) an explosion of innovation,
(2) a rising standard of living for all Americans, especially workers, despite erroneous public belief that living standards were falling,
(3) an opportunity for all Americans to start businesses,
(4) a greater degree of freedom than ever previously known to mankind because economic liberty begets civil liberty.

As well, (5), the American economic and constitutional system overcame the natural flaw of democratic systems, class warfare and self-aggrandizement through special interests' capture of regulatory mechanisms, because of public commitment to the limited state and liberty.  In the 19th century government was less than five percent of the economy; today it is more than 40 percent.

In Rise and Decline of Nations Mancur Olson makes clear why democracy leads to special interest lobbying that imposes high public costs.  It may be that there are periods when the public can say no to special interests' influence on the state, but mass movements are fragile and do not last.  Ultimately, the economy's innovative capacity and living standards decline as special interests extract ever greater shares of wealth through regulation, taxation, and monetary expansion.

Olson shows that the reason special interests are successful in a democracy is that the incentive to lobby favors small groups. A given benefit divided among a small number of group members is larger per capita than a given benefit divided among a large number.  With a million group members benefits need to be divided among the million members.  With a single corporation or a single union, benefits need to be divided among a small set of interest groups. This makes organization of the interests easier and cheaper.

The transactions costs of organization and the larger benefit per capita make interests that can be easily organized more effective. This can change over time. For example, the environmental movement has been able to establish special interest groups that have worked in tandem with the United Nations and federal regulatory authorities. Nevertheless, they have done so by forging corporatist alliances.  Without those alliances the current push toward state-enforced, corporatist environmentalism could not have proceeded so far.  

The wealthy have always been small in number, have had greater resources, and have been able to communicate among themselves because they have been concentrated in specific geographic areas like New York and Los Angeles.  From the beginning of American history institutions like the central bank and slavery reflected the ability of the wealthy  to divide a large benefit among a relatively small group.

In his Anti-Federalists, Jackson Turner Main shows that the anti-Federalists were poorer and less organized than the Federalists.   Although the Federalists claimed to be in favor of decentralization and federalism (thus their name), once in power they attempted to centralize the state through the First Bank of the United States, a standing army, and the Alien and Sedition Act. As well, the Constitution broadened slavery (compared to the level that would have existed without the Constitution) by making the Fugitive Slave Law possible.

What prevented special interest capture of the economy was public commitment to limited government.  The American government always reflected the interests of the wealthy, but because its scope was limited, the American economy has been the most successful in history. Progressivism, though, discarded the 19th century commitment to the limited state. Progressives like Richard T. Ely viewed expansion of the state as a good in itself; John Dewey saw democracy itself as an ultimate good.  The administrations of Theodore Roosevelt and Woodrow Wilson discarded the limitations on special interest extraction.  In the Progressives' minds they were saving America from trusts, but the ultimate effect has been to allow full sway to the dynamic Mancur Olson describes, so the trusts have expanded.

The result has been that for the past 40 years the American economy has been dismal, and it is getting worse.  As well, the Obama administration has demonstrated that it is capable of worse tyranny that that of Senator Joseph McCarthy, which the American public has so far accepted with indifference.  These include use of state power to financially harass dissenting political organizations, illegal investigation of more than 100 million telephone records, and a cover-up about President Obama's self-destructive decisions with respect to Benghazi.  Hardly a day goes by without evidence of an additional tyrannical initiative at the federal level.

Americans tend to believe that they have a great political and economic system, but that is no longer true.  My ancestors wisely chose emigration from their eastern European homes, and if you are smart, you are thinking of foreign real estate investment.  Enough Americans favor freedom that a revolutionary movement is possible here. After 240 years, the liberty tree needs refreshment.  

Whither Public Unions?

Wisconsin Governor Scott Walker's victory in his recall fight has renewed interest in public sector unions.  Rasmussen suggests that Walker's win will spur other states to cut back on benefits to state-level unions.  Nevertheless, Rasmussen finds that 49% of Americans favor public unions while 46% oppose them.  However, Rasmussen's numbers don't disaggregate respondents who belong to unions and so have a financial incentive opposed to other taxpayers'.

Some of the support for public sector unions comes from the 11.8% of Americans who belong to unions.  This includes both public and private sector unions. (According to the OECD, 11.4% were unionized as of 2010.  Whether you go with 11.4% or 11.8%, the numbers are lower than all of the other countries' union densities listed on the linked OECD chart, with the exceptions of Estonia and Turkey. Germany's union density is 18.6% and Japan's is 18.4%.) The Bureau of Labor Statistics  finds that while 11.8%  of US workers are unionized (14.8 million workers), 37.0%  of public sector workers (7.6 million workers) are unionized.  Public sector workers constitute a bit more than 51% of all unionized workers.  Without public sector union members, the labor movement would be more sickly than it is. Unionized workers likely know this and so tend to support public sector unions.

If the employed US labor force, including farm workers not counted in the BLS's official union density numbers, is about 139.8 million, as of  May the density (percentage) of union workers, including farm workers, is about 10.5% (assuming farm workers don't belong to unions).  Note that 139.8 million is only about 44% of the total US population of 320 million.  About a quarter of the population is under 18 and about 12.5% is over age 65 and receives Social Security.  Unionized government employees are about 5.4% of the employed labor force and about 4.9% of the total labor force.  I don't believe that this number includes union retirees.

Comparing the 11.4% (which excludes farm workers) to the 1920s, which was before the National Labor Relations Act, 9.9% of non-farm workers were union members in 1928 and 13.2% of private sector workers were in unions in 1925.  In other words, the current private sector unionization density of 6.9% is a little over half of the private sector density (13.2%) in 1925.  The labor movement is now largely a public sector movement.  Private sector union workers have an incentive to support public sector unionism because without it union institutions like the AFL-CIO might not exist, or at least would be diminished.

If one excludes union members from the Rasmussen poll, the three percent balance in favor of unions (49% to 46%) will shift to a significant opposition to public sector unions.  Let's say 80% of union members favor public sector unionism. Let's also say that of the 243 million Americans over 18, 11.8% either belong to  a union or have a spouse or parent who does. If so, the 49% is reduced to about 40% and the 46% is reduced to 44%.  Public opinion among non-union Americans would then be 47.6 % for public unions and 52.4% against. 

The statistics for taxpayers not in unions are likely even more opposed.  Taxpayers are a subset of the total population. They must subsidize union members' pay.  If unions boost pay, then taxpayers likely have a conflict of interest with the unions unless the government manages to efficiently enhance productivity in step with wage increases.  Since governments and their unions do not implement incentive pay and are famous for bureaucracy, it is difficult to imagine how that would be accomplished. Government employment levels in highly unionized states are no lower per capita than employment levels in states with right-to-work laws or without bargaining laws.

Prior to the adoption of bargaining laws for public sector workers, Wellington and Winter argued that public sector unions would have excessive bargaining power because services like police and sanitation are monopolies with price-inelastic demand.  In other words, governments tend to monopolize services that are price inelastic.  As is well known to labor scholars, industries with price-inelastic demand tend to have high wages.  Wellington and Winter could not have foreseen that unions would not only increase wages but lobby to increase demand for their wage bill--the employment level multiplied by the wage.

Mancur Olson and George Stigler wrote articles and books in the 1970s and 1980s that showed that special interests can extract rents from the public through lobbying.  Public sector unions are well-placed to extract rents because they are easily organized and can develop close relationships with elected officials.  New York, where I live, has seen a high public sector union density and a high number of taxpayers leaving the state.  I am a public sector union member.  Unless one is in an ultra-high-wage profession such as investment banking, law, advertising, or other financial services, or is otherwise subsidized by the state as a public sector employee or health-care worker, it is very difficult to flourish economically in New York State.  New York's population has hardly grown since 1960, when public sector unionization became prevalent. 


As the burden of increasing costs has become difficult for taxpayers to bear, there is increasing resistance to unions.  People who do not pay taxes and beneficiaries of public sector spending constitute a large percentage of those who oppose cutbacks.  Tax systems are typically set up so that those who are the wealthiest have the most loopholes.  Those who work hard and generate the wealth necessary for public sector services are burdened with high taxes.  Generally, public sector services range from mediocre (police, roads) to non-existent to destructive, as is the case with drug enforcement, New York's Department of Environment Conservation and Department of Environmental Protection, its bogus building code, its dismal school system, and its destructive welfare system.

Come to think of it, life would be much better if we cut public sector employment by 80%.