The dumbing down of power

Dr Richard J Grant is Professor of Finance & Economics at Cumberland University, Tennessee & Free Market Foundation Senior Consultant. 

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This article was first published by the Business Day on
3 January 2023

The dumbing down of power

Some activities are just not suitable for a majority vote. What you choose to have for dinner is not a matter that you would submit to a committee for a decision. You might get a family consensus on shared meals, and on a special occasion you might really take a family vote, but most would find it absurd to seek a decision from an outside group or the city council.
Similarly, when you purchase a personal item at a shop, the transaction is between you and the people running that shop. It is what we call a bilateral decision: there are only two parties involved. You have the best sense of what you wish to purchase and, with only two parties involved, the transaction can be simple and quick. Shifting that decision to a committee would slow down everything and you would be at risk of receiving an item that you would not have chosen for yourself.
The problem is compounded when you are required to pay for other people’s decisions. Those who decide are not bearing the full burden of their decisions. When the city council decides to authorise a municipal project, there is no guarantee that all taxpayers will benefit commensurately with their contribution. Nor is that a requirement or even a reasonable expectation of collective governance. But it must be understood that such divergences in the interests, benefits, and burdens of citizens determine the appropriateness of delegating some types of decisions to different levels of government or to third parties.
Services such as sanitation, road maintenance, local policing, water supply, and electricity distribution are traditionally either supplied or contracted at the municipal level. Most would see it as impractical, if not absurd, to shift such decisions to the provincial or national level of government. People in the local community are better informed as to the resources available in their own communities, and they are more likely to get the kind of service they need and desire if they decide locally. They will also be less likely to overspend when the projects are financed by local taxpayers.
Everything changes when the financing of local projects is spread across taxpayers at the provincial or national levels. The political cost of their decisions to the local politicians now appears to be much lower than is the real total burden on society. The local politicians are now likely to select projects that are more expensive and possibly of more-narrow benefit to their political supporters rather than to the broader public welfare. Further, as local politicians become less dependent on local tax financing, they also become less responsive to the needs of their own community – and when criticized, they can claim that the province or national government is not supplying enough money. Services deteriorate.
The acceptance of funding from higher levels of government most often has strings attached. As a condition of receiving those funds, local and provincial officials lose much of their control over the choice of projects and delivery methods for which those funds would be spent. Local knowledge and local desires are now less important in the selection and management of local services.
As the funding and control are shifted to higher levels of government, there is a loss of variety in the types of municipal services and in their methods of provision. With this, there is a loss in what we call “the demonstration effect.” That is, municipalities and provinces are less able to learn from each other’s successes and failures in policy and service provision. In a very real sense, the inappropriate centralisation of power and financing causes a dumbing down effect on the quality of governance and a net drag on economic progress and the welfare of society.
Just as the collectivisation of agriculture has produced famine wherever it has been imposed throughout history, the shift of ownership and responsibility away from the family to ever-higher levels of government has had a deadening effect on the spirit and productiveness of societies. Most matters in life are best left to individuals and families to decide freely amongst themselves how to trade and cooperate. The traditional concept of “subsidiarity” – whereby decisions and responsibility are decentralized to the smallest or lowest appropriate level – contains much wisdom. Societies that forget this tend to disappear from history.
The primary function of a national government is national defense: the protection of its citizens and their property from foreign invasion or interference. This allows the provinces and municipalities to focus on the functions and services most appropriate to their regions and cultures. A national government that is limited in its scope and remains focused on doing a few things well will be more effective and more transparent – provide better service and be more responsive to its citizens – than are centralised regimes. But the centralisation of power in the national government creates a one-stop shop for corruption and, ultimately, state capture.

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