The Special Interest State

Discussing the 'Special Interest State', James V DeLong says:

The Special Interest State could get along quite well when it simply nibbled at the edges of the society and economy, snipping off a benefit here and there, and when the number of victorious interests was limited. But the combination of moral entitlement, multiplication of claimants, and lack of limits on each and every claim is throwing them into conflict, and rendering unsustainable the ethic of the logrolling alliances that control it.

Earlier:

Some minority-rights groups claim the right to control all speech. Victim groups of all kinds see a never-ending need for lawsuits. A provision inserted at the behest of the Teamsters into the recent stimulus bill, which was read by no member of Congress in its entirety, started a trade war with Mexico for the sake of banning 97 Mexican trucks from U.S. highways. Providers of higher education demand continuing escalation of subsidies for four-year B.A. programs rooted in the 19th century. Public employees have become perhaps the largest and most powerful interest group — 20 million strong, politically active, and dedicated to the ideals of no cuts in employment, absolute pension safety no matter what happens to everyone else’s retirement accounts, and little accountability.

Precisely so. And how sustainable is this?

As the government has grown in size and reach, it has justified its claims to power by accepting ever more responsibility for the economy and society. Failure will result in rapid loss of legitimacy and great anger. It is amusing to read pundits’ pronouncements that the Chinese government must deliver economic stability and growth or suffer social unrest; what do these pundits think will be the fate of an American government that fails in these tasks? And as the government’s reach extends, any chance that it will meet its self-proclaimed responsibilities declines.

Government has lost sight of what should be its over-arching goal: to look after the wellbeing of its people. 'People' - not institutions or special interest groups. And people are more than members of special interests. Bailing out car manufacturers, airlines, farmers or any other well-represented lobby group is not equivalent to looking after the wellbeing of the stakeholders in these groups. Of course, it's much easier for governments to listen to the lobbyists, and to equate the health of powerful interest groups with that of the people they are supposed to represent. But it is a temptation that must be resisted: it's based on, and tends to fossilise, a static view of society. Progress comes through diversity and adaptation. Looking after special interests stymies that sort of evolution. Worse, it diverts resources from the people who really need it.

And that is where Social Policy Bonds can offer a better solution. If governments were accustomed to expressing society's goals in terms of outcomes that are meaningful to ordinary people, then the bailing out of special interests would be clearly seen as the corrupt folly that it is. Social Policy Bonds would by subordinate all policy goals to such outcomes and channel our scarce resources into their achievement. Under a bond regime, government could not deceive itself and the rest of us with the pretence that, by protecting powerful interest groups, it's doing any favours to the people it should be representing.