Planning and Democracy

by Mario Rizzo



The Senate could not agree on an auto bailout package. So what may happen now? The Treasury may lend the Big Three about $15 billion under the authority given to it in the TARP legislation to buy any financial instrument necessary to promote financial market stability. This authority was thus not to do any specific thing but to do what in the judgment of Henry Paulson would help fix the system. So Congress basically gave the Fixer an almost blank check.


This supports the general point made by F.A. Hayek in The Road to Serfdom that comprehensive economic planning and democracy are incompatible. This is because there is no natural consensus when the State moves beyond a fairly confined sphere of action. (See my previous post “The Unity of the People”.) If there is to be an effective “consensus” (in this case, a Senate majority or super-majority) it must come out of the usual log-rolling. But in this case there were too many doubts, too many disagreements, and too many people were fed up with the idea of throwing good money after bad.  But planning, in the name of the emergency, must be swift, targeted, agile; it cannot depend on the drawn-out processes of legislation culminating in inaction or action-too-late to counter the cycle.


Hayek’s words in Chapter V of The Road to Serfdom (“Planning and Democracy”) are quite relevant. As the scope of State action increases beyond the minimum sphere,


Parliaments come to be regarded as ineffective “talking shops,” unable or incompetent to carry out the tasks for which they have been chosen. The conviction grows that if efficient planning is to be done, the direction must be “taken out of politics” and placed in the hands of experts – permanent officials or independent autonomous bodies (p. 62).


What is the role of Congress or parliaments in all this?


Its Bills would take the form of general formulae conferring wide powers on the appropriate government departments… (p. 63).


Compare now the recent comments by Robert Reich on his blog:


What now for the automakers? The Troubled Assets Relief Program — TARP — was enacted to save Wall Street but it’s already been so twisted out of its original shape by Hank Paulson that a bit more twisting to save the Big Three from bankruptcy over the next few weeks won’t be difficult. The White House was behind the auto rescue, and Bush doesn’t want to leave yet another failure on the portico as he leaves. Democrats certainly won’t object, and Senate Republicans will growl but so what?


This statement “nicely” exemplifies both the slippery slope tendency I recently blogged about (here) and the frustration (disregard ?) about democracy in the name of the emergency. Planners know what is best; there is no time for disagreement by the ignorant (Senate Republicans?).


Obviously, this problem of the erosion of democracy inherent in the administrative state did not begin with the current financial crisis. But the current crisis is certainly accelerating the trend. (This, of course, is in addition to the erosion of democracy brought on by the “war on terror.” That is another story.)


What is the end-game? I am not predicting full-scale serfdom. I am saying that if we don’t count the costs of the desperate policy acts which we have witnessed and probably will continue to witness, we shall lose more and more freedom – both political and, of course, individual.


5 thoughts on “Planning and Democracy

  1. Another aspect of this dangerous trend is the lack of clarity that permeates the public discussion of TARP. It is described as one thing, turns out to be something else, then the money is used in part for a different sector. The confusion bolsters the notion that the executive branch has to be allowed to handle the matter however it wants. Who else can even understand what’s going on? The confusion plays the same role that secrecy does in other instances of growing executive power–We can’t be told much about national security matters so can’t form a judgement about phones being tapped, we can’t understand TARP so can’t judge what’s being done with our money.

  2. I agree with Chidem. It took me several days after the bill was passed to realize what had happened. And this is only because I made a specific effort to find the exact language in the legislation. Eric Posner over at the Volokh Conspiracy blog had a couple of good posts on this.

  3. It is indeed a disturbing trend… I read that 60% of the population is against auto bailouts, yet one way or another, its going to happen. Washington is using this as the best opportunity to concentrate political power since the 30s… we’re in for a rough ride.

  4. The President has two areas of responsibility: foreign policy and domestic policy. The Bush administration have responded to grave events in each arena with an inflated rhetoric of fear that exaggerated the problem and supported a successful grab for power. Moreover, the executive’s new powers create precisely the thing Hayek most feared: discretionary authority. They replace the rule of law with the rule of men.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s