July 21, 2017

That Government Is Best Which Is Not Captured by Special Interests

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I am among informed friends, so I assume we can hold the following truths to be self-evident.

First, more individual freedom—including economic freedom—would be optimal. This case is both philosophical and practical in that free people are systematically happy, healthy, and wealthy people.

Second, while freedom is ideal, it is not robust. That is, a number of forces conspire to limit the scale and scope of human freedom. Thomas Jefferson was onto something when he wrote that “the natural progress of things is for liberty to yield, & government to gain ground.”

Third, liberty often “yields” because special interests want it to. In other words, people stand to benefit by limiting the freedom of others. Producers, for example, gain by limiting customers’ freedom to shop at the competition or to pay competitive prices. And in many cases, special interests have successfully fought for their own government-granted privileges that limit the freedom of others.

Fourth and finally, some cultural taboos (government isn’t supposed to pick winners and losers) and some institutional rules (the law protects persons and their property) can arrest this tendency. But the structure of some of these rules—such as the distribution of power between national and local authority—is hotly debated.

To speak in generalities, I think it is safe to say that those who accept my first three propositions tend to favor local power to national power. Whether it was the Democratic-Republicans in the early 19th century, the Democrats in the late 19th century, or the Republicans in the 20th century, the party that has generally favored limited government has also generally favored local government. To Thoreau’s famous dictum that “government is best which governs least,” many would add that “government is best which is closest to the people.”

There are some good arguments in favor of localism as a guarantor of freedom. But, in my view, too many of my fellow freedom-lovers overstate the case.

The Overstated Case for Localism 

Let me begin with the overstated case. It is often said that local government is more easily escaped than national government. If you don’t like the latest edict from your city council, you can pack up and move to another hamlet. And, indeed, while it may be easier to move to another state than to Canada, let’s not kid ourselves that it is easy. The costs of uprooting a family, selling and buying a new home, and—if necessary—finding a new job are enormous. No wonder the vast majority of us stay put, even if we live and work under governments that curtail our freedoms.

Sometimes it is said that your voice goes further in a local community than it does in your national community. It is true that in Austin, Texas, you are one of 947,000, whereas in the United States you are one of 325,000,000. So, your voice goes further in Austin than it does in Washington, DC. But that doesn’t mean it goes far. Most Americans live in communities of 10,000 or more people. And, as public choice scholars like to remind their students, basic math tells us that even in a community with as little as 10,000 people, the chances of casting a decisive vote in an election are vanishingly small. At least at the ballot box, most voices are a mere whisper.

The Better Case for Localism 

In light of these arguments, there are better arguments for localism.

First, though local leaders may not be that responsive to voters at the ballot box, they are likely to get feedback on their decisions from friends, neighbors, coworkers, lobbyists, the media, and the like. In some ways, these informal signals—which carry more information than a simple ‘yea’ or ‘nay’ vote—may be even more important than electoral signals. And a local leader, embedded in his community, is likely to get more accurate signals than a national leader in a far-distant capital.

Second, being smaller in size, local governments should be easier to change and adapt than are large, bureaucratic ships of state.

Third, local decision-makers are able to craft governance solutions that better suit the unique needs of their communities than the one-size-fits-all solutions that might be crafted at a national scale.

Fourth, when there are many local governments, public entrepreneurs can experiment with different governance mechanisms, giving rise to Justice Brandeis’s “laboratories of democracy.” Furthermore, if each laboratory is small, then the risks from these experiments may be contained.

Fifth and finally, local governments must compete with one another over capital, labor, and economic activity by developing institutional environments conducive to growth. And while most individual voters may not “vote with their feet,” some economic activity is quite mobile. For example, investors can shift investments to new locations without changing their own addresses. Moreover, firms that already have operations in more than one jurisdiction can easily shift resources on the margin. Local leaders who ignore these “election” results—and the press conferences they often inspire—do so at their own peril.

When Local Power Tramples Individual Liberty 

Those arguments certainly have merit. But so do the arguments on the other side.

James Madison was not the first thinker to worry about special interests and their threat to liberty. But he may have been the best. As a young statesman, he pushed for more federal power as a way to restrain the states’ abilities to limit individual freedoms.

In the 1780s, Madison lamented that under the Articles of Confederation, states had the power to erect barriers to trade in order to protect their parochial interests. As he would later describe it, with some hyperbole: “New Jersey, placed between Philadelphia and New York, was likened to a cask tapped at both ends; and North Carolina, between Virginia and South Carolina, to a patient bleeding at both arms.” With this concern in mind, he pushed for a constitutional convention to amend the Articles. And when a new constitution was written, he saw to it that it included a prohibition on such interstate barriers to trade.

The prohibition, however, only covered taxes. So, a few decades later, states began erecting regulatory barriers to trade that discriminated against out-of-state firms. Again, the federal government stepped in to expand individual liberty. In 1825, John Marshall’s Supreme Court struck down these barriers in Gibbons v. Ogden, a decision that historian Charles Warren would call the “emancipation proclamation of American commerce.”

What Madison, Marshall, and many others appreciated was that local governments are often compelled by special interests to limit individuals’ liberty to engage in interstate trade. That is why most notions of “market-preserving federalism,” from Barry Weingast’s to Adam Thierer’s, stress the need for the national government to prohibit such interstate barriers.

But Madison also knew that states could do mischief to individual liberty within their own borders. And he had a good theory for why. In Federalist 10, he noted that the population of a smaller government is more homogenous than the population of a nation (“The smaller the society, the fewer probably will be the distinct parties and interests composing it”). This means that an interest group is more likely to dominate state policy than federal policy. History furnishes no better example than the slavery interests that managed to obtain the full support of 15 state governments—including Madison’s Virginia—but never quite managed to get the full support of the federal government (and, of course, eventually felt the federal government’s full opposition).

The Balancing Act 

Adam Thierer rightly calls federalism a “delicate balance.” The trick is to invest the federal government with enough power to limit state government overreach but not with enough power that the federal government itself overreaches. This echoes Madison’s assertion about government itself: “In framing a government which is to be administered by men over men, you must first enable the government to control the governed; and in the next place oblige it to control itself.”

For a short time in the 19th century, this balance was properly struck. In the aftermath of the Civil War, a new generation of constitutional framers aimed to expunge the original constitutional sin of slavery with three constitutional amendments. The first and last of these are straightforward: the 13th Amendment outlawed slavery, while the 15th Amendment ensured that freed slaves had a right to vote. However, the 14th Amendment—principally authored by Ohio Congressman John Bingham—was more complex. Its first section, designed to secure the rights of freed slaves from the encroachment of state governments, is particularly important here. It reads, in part:

No state shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any state deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.

Each of these three clauses targets a branch of state government. State legislatures are not to make laws that abridge the “privileges or immunities” of US citizens; state courts are not to deprive citizens of “life, liberty, or property, without due process of law”; and state executives are not to deny anyone “the equal protection of the laws.” 

Though “privileges or immunities” hardly resonates with the 21st-century ear, its meaning would have been well understood in the 19th century. The 14th Amendment’s language echoed Article IV of the original Constitution, which stated, “The Citizens of each State shall be entitled to all Privileges and Immunities of Citizens in the several States.” As the legal scholar Michael Kent Curtis tells us, the “words rights, liberties, privileges, and immunities seem to have been used interchangeably.” Whereas the original Constitution’s privileges and immunities clause ensured that rights recognized by one state would be recognized in another, the 14th Amendment’s privileges or immunities clause went much further. It said that states had to respect the rights owed to each of us by virtue of our US citizenship.

This sweeping statement was intended to limit a state government’s ability to curtail an individual’s natural rights. And as Randy Barnett has demonstrated, the “evidence is overwhelming” that these natural rights included “economic liberties,” such as “the right to acquire, use, and possess private property and the right to enter into private contracts of one’s choosing.”

Unfortunately, this portion of the 14th Amendment did not last long. Just five years after it was ratified, the Supreme Court took up the so-called slaughterhouse cases. New Orleans had passed a statute granting a monopoly to a single slaughterhouse and making it illegal to slaughter animals anywhere else within the city. If US citizens possess natural economic liberties and if the 14th Amendment’s privileges or immunities clause protected these liberties from encroachment by state and local governments, then this statute was unconstitutional. As the Supreme Court’s 5-4 majority would put it, the question was this:

Was it the purpose of the fourteenth amendment, by the simple declaration that no State should make or enforce any law which shall abridge the privileges and immunities of citizens of the United States, to transfer the security and protection of all the civil rights which we have mentioned, from the States to the Federal government? And where it is declared that Congress Shall have the power to enforce that article, was it intended to bring within the power of Congress the entire domain of civil rights heretofore belonging exclusively to the States?

That majority’s answer to this question was essentially no. The 14th Amendment, they asserted, protected only a narrow band of federal rights of citizenship such as the right to travel between states and use navigable rivers. In dissent, Justice Stephen Field wrote that the majority’s decision rendered the 14th Amendment a “vain and idle enactment, which accomplished nothing and most unnecessarily excited Congress and the people on its passage.”

A New Federalism

The decision in the slaughterhouse cases has been roundly criticized. As Harvard’s Laurence Tribe put it, “the Slaughter-House Cases incorrectly gutted the Privileges or Immunities Clause.” And as Yale law professor Akhil Amar asserts, “Virtually no serious modern scholar—left, right, and center—thinks that [Slaughterhouse] is a plausible reading of the [Fourteenth] Amendment.”

These criticisms suggest a way forward: the federal government could once again be empowered to limit state governments’ abilities to curtail individual liberty. This could be done by a Supreme Court willing to revisit the long-discredited case when provided the opportunity. Failing that, it could be achieved with a new Constitutional amendment that revives the original intent of the 14th Amendment, perhaps with 21st-century language. That would be a good balancing act.