Lee Friday – March 13, 2017
A London Free Press Article (February 24, 2017) reports “Ontario’s Progressive Conservatives are calling for an investigation after Environment Minister Glen Murray’s former chief of staff landed a job with electric carmaker Tesla the same month as the province announced a subsidy program for the electric-vehicle industry.”
Anyone who thinks this is unusual is not paying attention. All politicians and bureaucrats have a conflict of interest. It reflects the nature of the job. It is inherent in the democratic system, in fact any system of authoritarian government.
Politicians and bureaucrats are supposed to serve the public interest. But there is no such thing as the public interest. This is an abstract term. They are always serving someone’s interest, but this someone is never the majority. As Professors Martin Gilens and Benjamin Page wrote, “The chief predictions of pure theories of Majoritarian Electoral Democracy can be decisively rejected. Not only do ordinary citizens not have uniquely substantial power over policy decisions; they have little or no independent influence on policy at all . . .”[1]
HARMONY OF INTERESTS IN THE PRIVATE SECTOR
Within government, a conflict of interest is always present. Not so in the private sector. Private businesses do not have legal authority to seize my money, as the government does with taxation. Therefore, these businesses must find a way to persuade me to hand over some of my money. If I don’t like the product in one store, I can visit other retailers. When I find a product that satisfies me, I voluntarily hand over my money, and the store clerk voluntarily relinquishes the product. This exchange occurs because I value the product more than the money, and the store owner values the money more than the product. We are both better off. It is a win-win situation. Thus, the exchange is an outcome of a harmony of interests, not a conflict of interest.
In other words, exchanges on the free market occur only when each party is incentivized to satisfy the interest of the other party. The absence of coercion enables this harmony of interests.
In contrast, forced taxation means the taxpayer is forced to satisfy the interests of government, while the government has no incentive to satisfy the interests of the taxpayer. Clearly, a win-lose situation. Thus, we have a conflict of interest.
THE GOVERNMENT’S EXCUSE, AND THE REAL AGENDA
The government always says it cannot make all the people happy all the time; that there are always competing interests; that it must balance conflicting interests. This is correct, and that is exactly the point. Only the free market can transform conflicting interests into a harmony of interests. The coercive engine of government is designed to avoid the discipline of the market, so that special interests may be served at the expense of the interests of the majority.
It is not necessary to forcibly tax citizens if they really value a particular service offered by government – they would happily pay for the service, at a certain price. And that is the issue – at what price? The government operates parks, recreation centres and golf courses; it picks up the garbage; it delivers the mail; it builds and maintains roads; it runs libraries and schools; it provides policing and judicial services; etc. etc. But at what price? And what would the price be if these services were provided by the free market, and therefore open to competitive bidding, which means discriminating consumers are making the decisions.
Coercive taxation and government monopolies permit the government to spend whatever amount it pleases to provide a particular service. Citizens can take the time to discover the amount of the government expenditure, but they are rarely able to compare this to a market price.[2] Thus, for example, politicians and bureaucrats are in a position to determine the price to be paid to a particular contractor, with little fear of public scrutiny.
Because they are spending someone else’s money, the opportunity for political corruption is painfully obvious. These are the perverse incentives hard-wired into every system of authoritarian law. The conflict of interest is palpable. Inflated prices are often paid in return for, well, you name it – campaign contributions, physical cash, fancy dinners, hockey tickets, hire my brother, hire me after I leave office; all expense paid vacations; the list is endless. Such behaviour is common, though not commonly publicized. The system is not flawed – it is working as designed.
ALL LEVELS OF GOVERNMENT, ALL COUNTRIES
The conflict of interest exists at all levels of government. City Councils debate how money is spent, often rubberstamping the recommendations of bureaucrats. Who gets a higher budget this year? The library, the recreation centres, or any number of other parties scrambling to feed at the government trough? Not all interests can be satisfied. In many cases, the squeaky wheel gets the grease, and some palms get greased.
Maybe you don’t want a new library, but you want the hockey rink renovated. Sorry, maybe next year. Maybe you are upset about the lack of crime prevention and crime resolution (see here). The police say they are working hard and doing their best, yet they find time to increase revenues through the issuance of traffic tickets. What, you don’t think that is a good use of their time? Too bad, you have no say in the matter. There is no harmony of interests. Politicians and bureaucrats always face a conflict of interest, which they always resolve with arbitrary dictates.
This is not to suggest every bureaucrat and politician is corrupt in this manner. There may be a few honest individuals who are not so motivated, but they are rendered impotent because their power-hungry peers outnumber them by a significant margin. In 1966, Carroll Quigley wrote about the U.S. armed services and the military/industrial complex in the post WW II period (the dollar figures quoted had much higher purchasing power at the time):
Each service has alliances with the industrial complexes which supply their equipment. These complexes not only supply funds, such as advertising, for each service to carry its message to the Congress and the people, but also exert every influence to retain equipment and tactics in obsolescent modes and types (but newer models) by dangling, before the high officers who can influence contracts, offers of future well-paying consultant positions with the industrial firms concerned. Most high officers of the American armed forces in the war and postwar period retired before the fixed age of sixty-two, often on a disability basis (which exempted retirement pay from income taxes), and then took consultant jobs with industrial firms whose chief business was in war contracts.
Thus, four-star general Brehon B. Somervell, chief of Army Service Forces in World War II, retired on a disability salary of $16,000 a year at the age of fifty-four to join a number of industrial firms, including Koppers, which paid him $125,000 a year; three-star general L. H. Campbell, chief of ordnance in World War II, retired on disability at $9,000 a year at age fifty-nine and became an executive, at $50,000 a year, of firms from whom he had previously purchased $3 billion in armaments. Four-star General Clay retired at fifty-two on $16,000 a year, but signed up at once with General Motors and Continental Can at over $100,000 a year. Three-star air-force General Ira C. Eaker left the service at age fifty with $9,000 a year and joined Hughes Tool Company at $50,000. Another three-star air-force general, Harold C. George, went with Eaker to Hughes, at $40,000. General Joseph T. McNarney, in 1952, took his four stars, and $16,000 a year, to join Consolidated Vultee at $100,000.
These are but a few of more than a hundred general officers whose postretirement alliances with industrial firms encouraged their successors, still on active service, to remain on friendly terms with such appreciative business corporations.[3]
Quigley’s summary reveals a conflict of interest. The revolving door between the corporate and government worlds is evident in all sectors of the economy. These Venn Diagrams will give you a sense of how pervasive this is in the U.S. If you assume this occurs in Canada and all other countries, you are on the right track. The Tesla story is just one example.
CONCLUSION
Why does the government subsidize Tesla? Because it is good for the environment, they say. Thus, for every electric car sold, we all benefit from a cleaner environment. Therefore, taxpayers should be happy. But is it true that electric cars are more environmentally friendly than internal combustion engines? How is the energy generated to charge the electric cars, and how does this impact the environment? I could go on, but this article is not about assessing the validity of scientific environmental assessments, and no, the science is not “settled” – there is no consensus. One fact that is beyond debate is that Tesla clearly benefits from the subsidy. So, who gets to decide?
Taxpayers do not decide. They have been denied the right to express their interests by saying “No, I will not subsidize Tesla with my money.” After politicians yank the money out of taxpayers’ pockets, they have no incentive to be impartial. They do not need to concern themselves, nor do they concern themselves, with the interests of taxpayers. They can focus solely on the interests of Tesla, and themselves of course. What does Tesla provide in exchange? Political campaign contributions? A job for a former chief of staff, as the Progressive Conservatives seem to be suggesting? I have no idea, but there is always something given in exchange.
The Tesla conflict-of-interest-story is merely a symptom of a much larger problem, namely the overwhelming conflict of interest which defines the relationship between the government and the taxpayers.
The Progressive Conservatives are no different than the Liberals, who would make similar accusations given the opportunity. In this way, they direct our attention to these minor issues of contention, while remaining silent about the all-encompassing conflict of interest which is hardwired into the entire system of democratic governance. There can never be a harmony of interests between the rulers and the ruled. The only way to reduce the conflict of interest is to reduce the size of government.
[1] Martin Gilens and Benjamin I. Page, Testing Theories of American Politics: Elites, Interest Groups, and Average Citizens, published in Perspectives on Politics (Volume 12, Issue 03, September 2014, pp 564-581); You will find more excerpts from the Gilens/Page study in my essay here
[2] In this essay, you will find a couple examples of the cost of public policing versus the cost of private security.
[3] Carroll Quigley Tragedy and Hope, A History of The World in Our Time (GSG & Associates, San Pedro, Ca.) (First published in 1966 by The Macmillan Company, New York, and Collier-Macmillan Limited, London) pp 911-12
