The Free Market
Myth of "Failed" Policies
The Free Market 13, no. 6 (June 1995)
Anyone who listens to the news hears a lot about failed policies. Conservative Republicans in Congress say they are seeking to overturn the failed policies enacted by liberal Democrats. Although the Democrats defend their deeds, they admit that certain policies may have failed and should be reviewed.
But politicians who talk about failed policies are just blowing smoke. Government policies succeed in doing exactly what they are supposed to do: channeling resources bilked from the general public to politically organized and influential interest groups.
For many years, public education has been a national embarrassment marked by declining test scores and students who perform well below those in many other countries. Surely the dismal results of government schooling allow us to conclude that it has failed.
But that conclusion won't float. Why would the people who appropriate educational funds and operate the schools tolerate a failing system for decades? In fact, the system has been a great success. Not for the students and parents, of course, but for the real beneficiaries: the teachers, support staff, administrators, and politicians.
These people are middle-class, organized, politically savvy, connected to the media, bloc voters. They form a formidable, highly focused political interest group. For them, the tax-funded school system works nearly to perfection, as attested by the rise of public school spending per pupil (adjusted for inflation) from $2,035 in 1960 to $5,247 in 1990. In turn, public-school employees reward friendly politicians with campaign contributions, votes, and get-out-the-vote work.
The welfare system is another national disgrace. For decades, commentators of various political persuasions have recognized that our tax-funded welfare system promotes dependency, family dissolution, juvenile delinquency, and other pathologies. Since 1965, an increase of more than five fold (adjusted for inflation) in anti-poverty spending only subsidized the growth of a wretched underclass.
It would take little more than $50 billion to raise every poor person above the official poverty line, yet the percentage of the population classified as poor hardly budges, while annual welfare spending amounts to four times that much. Where's the money going?
You guessed it. The money goes to the planners, researchers, social workers, public health doctors, nurses, and technicians, public housing managers, community organizers, administrators, and assorted apparatchiki. Like the public school teachers, these people have strong political connections, vote in every election for candidates who support more welfare spending, and never fail to accuse would-be budget cutters of harming children.
Liberals are not the only promoters of such scams. A notable favorite of conservatives is the Veterans Health Administration, with some 240,000 employees and a $16 billion budget. The VHA operates 171 hospitals, 362 outpatient clinics, 128 nursing homes, and 35 residential facilities. It provides some of the worst health care in America, but whenever anyone suggests privatizing it, anguished patriots protest the betrayal of the brave men who fought to defend our freedom.
In reality, this vast bureaucracy serves only about 10% of all veterans annually, and most of them qualify by virtue of low incomes, not service-related disabilities. The true beneficiaries include the more than 7,000 employees with salaries above $100,000.
Democrats and Republicans alike support the "War on Drugs." Federal, state, and local police make more than a million drug arrests yearly. Drug cases clog the courts. More than 60% of federal prison cells and about 30% of state prison cells hold drug offenders. No-knock drug raiders nullify the Fourth Amendment every day. Yet illicit drugs continue to pour onto the market, and they are readily available throughout the land. Looks like another failed policy.
But politicians say more money will win the war. For fiscal 1996, President Clinton has requested a record $14.6 billion for this exercise in futility. State and local governments will also spend huge sums. Who benefits? Posturing politicians and puritanical zealots, of course, but also the Drug Enforcement Administration, Customs Service, Coast Guard, FBI, and the rest of the drug warriors. Police love the drug war, because the forfeiture laws it inspired allow them to seize and keep private property with impunity. Corrupt cops get fabulous bribes, and corruption therefore runs rampant.
Public housing surely counts as failed policy. The very term "projects"—short for public housing projects—has become synonymous with squalor, crime, and desperation. People fight to keep the projects out of their neighborhoods and avoid them in their commutes.
For 25 years nearly everyone has lamented the failure of the public housing program, yet it persists. Like a virus that mutates faster than it can be killed, it lurches from one form of subsidy to another, each but a step ahead of the ensuing disillusionment.
Governmentally owned and operated buildings, mortgage subsidies, rental income guarantees for the owners of housing reserved for eligible tenants, rent supplements to tenants, subsidized loan rates and tax abatements to builders—one fiasco follows another on this road to nowhere. Despite this abominable record, HUD is now dispensing $26 billion a year.
Why have elected officials and government housing experts continued to place long-odds bets on this luckless horse? Perhaps because well-heeled building contractors and construction workers' unions make it worth their while. Government officials can posture about helping the poor while dishing out patronage and sweetheart contracts to their pals. For every HUD official who gets caught, how many get away?
If they were serious about the provision of housing for low-income tenants, the politicos would abolish rent controls, zoning laws, environmental regulations, and building codes, the real causes of the high cost of cheap housing.
Foreign aid ranks high on nearly everyone's list of failed policies. The countries that rake in the development money usually develop leaders with beach-front property on the Riviera and big bank accounts in Switzerland, while the peasants—well, let us not dwell on the unpleasantness. A recent newspaper headline tells the typical story: "In Zaire, Corrupt and Autocratic Rule, Backed by U.S., Has Led Straight to Ruin."
To be fair, we should recognize that much of the money was understood all along as nothing more than bribes to foreign leaders for their cooperation during the Cold War. Still, the tin-pot dictators could have been enlisted for a lot less. How can one account for the hundreds of billions of dollars poured down the foreign-aid rathole?
The key is to notice that the money usually had strings attached. Foreigners were not given money to spend as they wished, but money that had to be spent in the United States for specified goods. As Jonathan Kwitny put it, "It's all part of a giant international flimflam."
The money leaves the pockets of the American taxpayers, travels to the U.S. government, then (often via international lending organizations such as the World Bank and the IMF) to foreign governments, which pay out most of it to U.S. banks and exporters. Behold, what you and I lose, Citibank and Bechtel gain. Not for a moment do such privileged corporations and their kept politicians consider foreign aid a failed policy.
Judging by the riots in South Central Los Angeles, not to mention the media drumbeat of alleged racial inequities, civil rights policy has failed, too. Three decades have passed since passage of the Civil Rights Act of 1964, which held out the promise of a color-blind America. Yet blacks and whites eye each other with even more suspicion, and affirmative action is one of the most scathingly contested issues in our political discourse. Oblivious to the controversy, institutions as diverse as universities, business corporations, government agencies, and civic organizations plow ahead with this divisive policy.
As usual, the puzzle has an answer with two aspects, one ideological, the other more down to earth. Because our breastbeating New Class has devoted itself for so long to indicting all white Americans as racists, white people who have never wronged a single black have been intimated. They are afraid to assert their innocence or protest affirmative action in public. So much of the public's dissatisfaction never gets visibly expressed that official policies seem to have more support than they really do.
Taking advantage of this timidity and the apparently favorable climate of opinion, members of the black civil rights establishment have gained publicity, positions, power, and no small amount of government largess. No matter how much or how little blacks as a group progress, these self-appointed leaders continue to trace all black problems to racism, and to dismiss black critics as Uncle Toms.
Even if all genuine racism were to evaporate like the morning mist, people whose identities and careers depend on fighting white racism would continue to demand a "strong" civil rights policy, complete with the preferential treatment of blacks subsumed under the current concept of affirmative action. For these professional race-baiters, the government's "failed" racial policies must be counted a grand success.
Many other sacred cows graze in the pasture of failed policies, and a similar story may be told about each of them. All cases contain two common elements.
One, obviously, is that the so-called failed policies are government policies. Government being, in Ludwig von Mises's apt expression, the social apparatus of compulsion and coercion, it can force the citizenry to endure policies even if they are failures from the perspective of the general public. But Mises also taught that ultimately no system of government can last unless it receives support from public opinion.
Hence the second common element of all so-called failed policies: humbuggery. As Mises's great disciple, Murray N. Rothbard, pointed out on many occasions, government is not just force, it is also fraud.
Government policies as a rule simply are not what they pretend to be. Little surprise then if the foreign-aid program does not help many foreigners, government schools do not educate students very well, government welfare does not elevate the lumpenproletariat, and so on. The ostensible objectives are mere political costumes, thinly cloaking the actual operations of the programs.
When we take a realistic view of the political process, we see that so-called failed polices are nearly always spectacular successes. Otherwise, they wouldn't last. It is politically convenient, of course, to speak of them as one might speak of a run of flu—as something terrible that has fallen upon us for which we have yet to find a cure.
But show me a government policy that clashes with the interests of a substantial number of powerful government officials and their resourceful supporters in the private sector, and I'll show you a policy that can be abandoned overnight.
Cite This Article
Higgs, Robert. "The Myth of "Failed" Policies." The Free Market 13, no. 6 (June 1995).