Under interventionist ideas, it is the duty of the government to support, to subsidize, to give privileges to special groups. The idea of the eighteenth century statesmen was that the legislators had special ideas about the common good. But what we have today, what we see today in the reality of political life, practically without any exceptions, in all the countries of the world where there is not simply communist dictatorship, is a situation where there are no longer real political parties in the old classical sense, but merely pressure groups.
A pressure group is a group of people who want to attain for themselves a special privilege at the expense of the rest of the nation. This privilege may consist in a tariff on competing imports, it may consist in a subsidy, it may consist in laws that prevent other people from competing with the members of the pressure group. At any rate, it gives to the members of the pressure group a special position. It gives them something which is denied or ought to be denied–according to the ideas of the pressure group–to other groups.
In the United States, the two-party system of the old days is seemingly still preserved. But this is only a camouflage of the real situation. In fact, the political life of the United States-as well as the political life of all other countries-is determined by the struggle and aspirations of pressure groups. In the United States there is still a Republican party and a Democratic party, but in each of these parties there are pressure group representatives. These pressure group representatives are more interested in cooperation with representatives of the same pressure group in the opposing party than with the efforts of fellow members in their own party.
To give you an example, if you talk to people in the United States who really know the business of Congress, they will tell you: “This man, this member of Congress represents the interests of the silver groups.” Or they will tell you another man represents the wheat growers.
Of course each of these pressure groups is necessarily a minority. In a system based on the division of labor, every special group that aims at privileges has to be a minority. And minorities never have the chance to attain success if they do not cooperate with other similar minorities, similar pressure groups. In the legislative assemblies, they try to bring about a coalition between various pressure groups, so that they might become the majority. But, after a time, this coalition may disintegrate, because there are problems on which it is impossible to reach agreement with other pressure groups, and new pressure group coalitions are formed.
That is what happened in France in 1871, a situation which historians deemed “the decay of the Third Republic.” It was not a decay of the Third Republic; it was simply an exemplification of the fact that the pressure group system is not a system that can be successfully applied to the government of a big nation.
You have, in the legislatures, representatives of wheat, of meat, of silver, and of oil, but first of all, of the various unions. Only one thing is not represented in the legislature: the nation as a whole. There are only a few who take the side of the nation as a whole. And all problems, even those of foreign policy, are seen from the point of view of the special pressure group interests.
In the United States, some of the less-populated states are interested in the price of silver. But not everybody in these states is interested in it. Nevertheless, the United States, for many decades, has spent a considerable sum of money, at the expense of the taxpayers, in order to buy silver above its market price. For another example, in the United States only a small proportion of the population is employed in agriculture; the remainder of the population is made up of consumers-but not producers-of agricultural products. The United States, nevertheless, has a policy of spending billions and billions in order to keep the prices of agricultural products above the potential market price.
One cannot say that this is a policy in favor of a small minority, because these agricultural interests are not uniform. The dairy farmer is not interested in a high price for cereals; on the contrary, he would prefer a lower price for this product. A chicken farmer wants a lower price for chicken feed. There are many incompatible special interests within this group. And yet, clever diplomacy in congressional politics makes it possible for small minority groups to get privileges at the expense of the majority.
One situation, especially interesting in the United States, concerns sugar. Perhaps only one out of 500 Americans is interested in a higher price for sugar. Probably 499 out of 500 want a lower price for sugar. Nevertheless, the policy of the United States is committed, by tariffs and other special measures, to a higher price for sugar. This policy is not only detrimental to the interests of those 499 who are consumers of sugar, it also creates a very severe problem of foreign policy for the United States. The aim of foreign policy is cooperation with all other American republics, some of which are interested in selling sugar to the United States. They would like to sell a greater quantity of it. This illustrates how pressure group interests may determine even the foreign policy of a nation.
For years, people throughout the world have been writing about democracy–about popular, representative government. They have been complaining about its inadequacies, but the democracy they criticize is only that democracy under which interventionism is the governing policy of the country.
Today one might hear people say: “In the early nineteenth century, in the legislatures of France, England, the United States, and other nations, there were speeches about the great problems of mankind. They fought against tyranny, for freedom, for cooperation with all other free nations. But now we are more practical in the legislature!”
If course we are more practical; people today do not talk about freedom: they talk about a higher price for peanuts. If this is practical, then of course the legislatures have changed considerably, but not improved.
These political changes, brought about by interventionism, have considerably weakened the power of nations and of representatives to resist the aspirations of dictators and the operations of tyrants. The legislative representatives whose only concern is to satisfy the voters who want, for instance, a high price for sugar, milk, and butter, and a low price for wheat (subsidized by the government) can represent the people only in a very weak way; they can never represent all their constituents.
The voters who are in favor of such privileges do not realize that there are also opponents who want the opposite thing and who prevent their representatives from achieving full success.
This system leads also to a constant increase of public expenditures, on the one hand, and makes it more difficult, on the other, to levy taxes. These pressure group representatives want many special privileges for their pressure groups, but they do not want to burden their supporters with a too-heavy tax load.
It was not the idea of the eighteenth century founders of modern constitutional government that a legislator should represent, not the whole nation, but only the special interests of the district in which he was elected; that was one of the consequences of interventionism. The original idea was that every member of the legislature should represent the whole nation. He was elected in a special district only because there he was known and elected by people who had confidence in him.
But it was not intended that he go into government in order to procure something special for his constituency, that he ask for a new school or a new hospital or a new lunatic asylum–thereby causing a considerable rise in government expenditures within his district. Pressure group politics explains why it is almost impossible for all governments to stop inflation. As soon as the elected officials try to restrict expenditures, to limit spending, those who support special interests, who derive advantages from special items in the budget, come and declare that this particular project cannot be undertaken, or that that one must be done.
Dictatorship, of course, is no solution to the problems of economics, just as it is not the answer to the problems of freedom. A dictator may start out by making promises of every sort but, being a dictator, he will not keep his promises. He will, instead, suppress free speech immediately, so that the newspapers and the legislative speechmakers will not be able to point out-days, months or years afterwards–that he said something different on the first day of his dictatorship than he did later on.
The terrible dictatorship which such a big country as Germany had to live through in the recent past comes to mind, as we look upon the decline of freedom in so many countries today. As a result, people speak now about the decay of freedom and about the decline of our civilization.
This article is serialized from Economic Policy: Thoughts for Today and Tomorrow, a book based on six lectures delivered in Buenos Aires in 1959 on Capitalism, Socialism, Interventionism, Inflation, Foreign Investment, and Politics and Ideas by the great 20th century economist who was too good to receive a Noble Prize: Ludwig von Mises (1881-1973). Copyright 1995 by Bettina Bien Greaves. All rights reserved.
