Knights or Knaves, Angels or Devils? 4

Good and bad examples from government.

This series has been discussing the nature of man.  The first article presented the two pretty much incompatible views of the nature of man:

  • Original sin holds that men and women are born inherently sinful and have to be reformed one at a time.  This requires intense personal involvement with individuals as practiced by Alcoholics Anonymous, Weight Watchers, and many other groups which seek to help individuals modify their behavior.
  • The Noble Savage view argues that men and women are born inherently good but are corrupted by corrupted institutions, most notably institutions which produce inequality.  This view leads to the idea that if we were able to straighten out society, people would be good.  Billions of taxpayer dollars have been spent on projects like urban renewal, slum clearance, public housing, and other forms of betterment.

One of our readers commented:

We are born with great capacity to do good, but have a natural tendency to do evil that must be individually conquered on a daily basis.

Human capacity to do good is evident everywhere.  The wonder of our market-based system is that in order to serve himself, a business leader must organize his employees to serve society.  The better he serves society, the more customers he gets and the better he serves himself.  If he gets too out of touch with society, customers leave and he goes broke.

Business leaders probably have a larger dose of ambition and greed than most people.  Most businessmen would rather get rich without the bother of having to serve society, so instead of beating competitors fair and square, many businessmen lobby government to pass laws that make it harder for their competitors.

Big firms actually favor regulations because they know that their smaller competitors, who are more nimble in the market than they are, will have a much harder time coping with bureaucracy and may be put out of business.  Small businesses do this too.  The Wall Street Journal reports:

... cat groomers, tattoo artists, tree trimmers and about a dozen other specialists across the country who are clamoring for more rules governing small businesses...

"Occupations prefer to be licensed because they can restrict competition and obtain higher wages," said Morris Kleiner, a labor professor at the University of Minnesota. "If you go to any statehouse, you'll see a line of occupations out the door wanting to be licensed."

Regulation has a place in public safety, of course.  When Upton Sinclair wrote The Jungle in 1906, he hoped to make Americans sympathize with the harsh working conditions and poor wages of the workers.  Instead, he horrified Americans by describing the unsanitary conditions in the plants where meat was prepared.

Sinclair bitterly regretted that his celebrity came about, "not because the public cared anything about the workers, but simply because the public did not want to eat tubercular beef."  His novel led to a federal investigation and many laws which regulated slaughterhouse operations.

In this case, the public had demanded regulation to protect their interests.  An unexpected consequence of regulation was that many of the smaller meat packers were put out of business.  This allowed the larger factories which had figured so prominently as bad guys in Sinclair's novel to prosper even more.

Who Watches the Watchers?

We at Scragged argue that, regardless of fundamental human nature which is debatable, some fraction of any population turn out to be more interested in serving themselves than in serving society.  This is bad enough in business leaders, but businesses go out of business when they get too far away from serving.

The problem, as we've pointed out a time or two, is that governments don't often go out of business, and when they do it's disastrous for millions of innocent bystanders.  Thus, a bureaucracy can afford to stay out of touch for generations until the entire city, state, or nation collapses.

This is not to say that government agencies are worthless, not at all.  Japan was bombed flat during World War II.  As the Japanese struggled to put their infrastructure back together, I watched men and women carry gravel in baskets slung on poles because trucks and bulldozers had been destroyed.  In late 1945, General MacArthur sent a telegram to President Truman, “Send me bread or send me bullets”: he had to feed the Japanese or shoot them as there was no food in Japan.

As the economy recovered, the Japanese found that by working extremely hard, they were able to export about 15% of their annual GNP.  Unfortunately, they imported 14% because there are essentially no natural resources in Japan.  They were running the entire country on a 1% margin.

Government bureaucracies such as the Ministry of International Trade and Industry (MITI) were given great power to influence businesses by allocating foreign exchange and granting or refusing import licenses.  The bureaucrats set a vivid example of working extremely hard to help their society deal with an ongoing crisis.  Most citizens followed their virtuous example.

Over time, the Japanese economy grew to the point that many writers believed that Japan would rule the world economy.

The economy didn’t improve because the bureaucrats chose economic “winners.”  Venture capitalists who invest their very own money get only one or two winners out of every 10 new investments; bureaucrats who “invest” taxpayers’ money do far worse.  To name but a few examples of bureaucratic frailty, MITI told both Sony and Honda that their companies would never make it internationally, and instead MITI funded a "Fifth Generation" computer development project to compete with IBM.

The bureaucracies helped a great deal, however, by setting an example of hard work and by managing logistics.  Consular offices arranged meetings between visiting Japanese executives and American mayors and governors who could help locate new factories and do other favors.

They also urged competing businesses to cooperate on shared research.  When the US Government required that tailpipe emissions be reduced starting with the 1975 model year, the Japanese government persuaded the automobile companies to cooperate on the research.  Once the research phase ended, the companies applied the new knowledge in different ways, but they did not waste money repeating research.  In the US, in contract, antitrust regulations forces Ford, GM, and Chrysler to each spend their own money researching essentially the same issues.

The export crisis was both real and measurable.  The bureaucrats were motivated by the certain knowledge that if they didn’t help promote exports, their own children might not get enough to eat.  The observed fact that the government employees were working very honestly and very hard helped keep everyone motivated to serve society instead of serving themselves.

Once the economy really began to prosper, however, the crisis ended, motivation weakened, and human nature reasserted itself.  Bureaucratic rot set in as predicted by the Chinese sage Confucius.

The agencies decided that since the nation was doing so well, they ought to start building the agency instead of worrying so much about the national economy.  After a time, the individuals in the agencies decided that the agencies were doing well enough and started looking out for themselves.

As the citizens saw government employees working less and serving themselves, they, too, became less virtuous as Confucius had predicted.  Japan has been stuck in economic stagnation for the past ten years.

No leader has emerged who can inspire the bureaucracies to encourage the citizens by setting an example of sacrifice and virtuous hard work.  No one wants to endanger bureaucratic privilege by streamlining regulations which impose costs on businesses or, perish the thought, cut government costs by reducing government employment.

As the citizens see government employees serving themselves, they have no motivation to serve society.  With everyone wanting to take out and no one wanting to put in, the economy stagnates.

We’re seeing the same bureaucratic drag on the economy here in America.  Nobody trusts much of anything our government says and most people believe that government employees are padding their nests with bloated salaries, pensions, and benefits which will bring about economic collapse.  Under those circumstances, is it any surprise that businessmen aren't motivated to invest in job creation?

The last article in this series explains why it's so vital for taxpayers, voters, and other citizens to have a realistic idea of the overall character of the people in our government.  Knowing the general character of all men is a good place to start.

Will Offensicht is a staff writer for and an internationally published author by a different name.  Read other articles by Will Offensicht or other articles on Society.
Reader Comments - just another example of the unintended consequences of regulation and subsidies - essentially what happens when government (and we, the people) forget that government is to protect liberty, not ensure security (except from those who would take our liberty).

February 15, 2011 11:10 AM
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