Politics & Policy

Behind America’s Crisis of Confidence: Government of, by, and for Special Interests

Democracy in America has reached a dangerous turning point.

It’s dangerous to live in interesting times, and we are living in fascinating times. Take the current U.S. election cycle. Just a year ago, nobody in the Republican political establishment could have imagined the rise of Donald Trump as a serious contender for the party’s nomination. Party elites somehow missed the lurch of working-class Republicans toward nationalism, protectionism, and a much more vulgar style of politics. Now they are facing electoral doomsday at the hands of a reality-TV star who is not really a Republican at all, and whose most pronounced trait is that he couldn’t care less what you or anybody else thinks about him.

The fracturing of the GOP along class lines was recently exposed with gripping clarity by David Frum in The Atlantic. The working-class Republican voter feels he’s getting screwed from every direction: corporations, lazy people on welfare, criminals who have learned to play the victim, illegal immigrants, foreign governments, and of course the politicians who sell out to all of them. He looks at the political firmament and sees nobody who addresses his grievances, nobody who speaks like him, nobody who speaks for him. Victimized and voiceless, the Republican working-class voter had already lost faith in the party. Now he may be losing faith in democracy itself.

Working-class Republicans feel they’re getting screwed from every direction: corporations, lazy people on welfare, criminals who have learned to play the victim, illegal immigrants, foreign governments, and of course politicians.

Understanding what happened, and what the GOP can do about it, is the urgent challenge facing the party now. As Mathew Continetti argued in the Free Beacon in December, the nomination of Trump could be the end of the GOP as we know it. In fact, the destruction of the GOP might be further along than anyone realizes. And much more than the party’s fate is at stake. If America had a fluid multi-party structure like that of Canada, Great Britain, or France, we would probably be witnessing the electoral annihilation of the GOP and the sudden rise to dominance of an entirely new party from the fringes — a party even less committed to liberty and democracy than the one it’s supplanting.

Something similar has happened in France with the rise of the National Front’s Marine Le Pen, who bears more than a passing resemblance to Trump. Her appeal to working-class voters mixes anti-immigrant vitriol with protectionist nonsense seldom heard since the Great Depression. Unfortunately, the 1930s bear more than a passing resemblance to our own decade.


The Road to Serfdom

The world did not immediately recognize the German election of September 14, 1930, as a turning point in human history. A disruptive fringe party, headed by a shrill and ridiculous former corporal from Austria, skyrocketed from twelve seats to 107 in the Reichstag and suddenly became Germany’s second-largest party. Its name, the “National Socialist German Worker’s Party” was either a disruptive innovation or an absurdity, depending on your point of view. If socialism stood for anything, it stood for the international working-class struggle to wrest the means of production from national elites, and from the bourgeoisie that had so selfishly allied itself with those elites, as Marx argues in the 18th Brumaire of Louis Napoleon.

Nationalism was the province of bourgeois parties. But starting with the election of 1930, the bourgeois parties of Germany’s political center — the “establishment” on which the Weimar Republic depended — were wiped out. The ridiculous Austrian had discovered that a charismatic personality could capitalize on the intrinsic limitations of democratic institutions; by embracing vulgarity and vitriol, he could successfully appeal to an untapped voting block composed of workers on the left and the right. Like today’s National Front in France, Adolf Hitler sucked voters from every part of the political spectrum.

My purpose here is not to compare Donald Trump to Adolf Hitler, which would be preposterous and stupid, but rather to show how dangerous it can be for working-class folks to lose trust in the leaders of mainstream democratic parties. The Nazi Party styled itself a workers’ party. Its opposition message was essentially the same as that of Michael Moore in movies such as Fahrenheit 9/11: The country’s mainstream democratic politicians are a corrupt cabal, secretly controlled by wicked capitalist forces, all bent on exploiting the worker. The Nazis even had their own version of the Koch brothers to persecute as a symbol of everything evil: the banker-philanthropist Jacob Goldschmidt. The message was, essentially, “Democracy is weak. It doesn’t work. Follow us.” 

The Nazis succeeded in selling themselves as the solution to the workers’ plight. Of course, they were nothing of the sort. Hitler promptly led German workers from a bad situation into an infinitely worse one, a world war that ended in the destruction of whole cities, the deaths of 3.4 million German soldiers, and a record of crimes against humanity that will forever shame that people more than any other had organized Western civilization.

What bears remembering here are the worries that led Friedrich Hayek to write his classic treatise, The Road to Serfdom. Hayek started his most famous work in Britain, and worked hard to finish it after the Anschluss joined his native Austria to Nazi Germany in 1938. He wrote it in English, for English-speaking audiences, to warn them that the road to the serfdom of totalitarian rule starts with the embrace of socialist policies. Hayek argued that replacing market competition and stable rules with heavy-handed regulations and arbitrary control of social outcomes leads inexorably toward tyranny.

He saw the great English-speaking peoples committing the same mistake the Germans had made in embracing the socialist policies of administrative government 30 years earlier. He saw them sleepwalking down the same road to serfdom, and he wanted to warn them of the consequences. Though one book could hardly make a difference, his timing was impeccable. In the United States, the Supreme Court had just caved in to Franklin D. Roosevelt’s New Deal, which had dismantled just enough of the U.S. Constitution to make way for socialist policies and the capture of government by special interests.

The New Deal was a great leap forward in the process of progressive transformation begun a generation earlier by Woodrow Wilson. Wilson had risen to fame as a leading exponent of German-style administrative government, which was then all the rage in academic circles in the U.S. He held our own Constitution in open contempt.

Thankfully, the European Fascist movements were successful only where democratic institutions were too young to have established deep roots and unquestioned legitimacy. But that didn’t necessarily mean that the U.S. had dodged the bullet, as writers far more famous than Hayek argued at the time. Walter Lippmann, co-founder of The New Republic and the most influential American journalist of his era, had been a speechwriter for Woodrow Wilson and a supporter of FDR. But by 1937 had soured on both. In The Good Society (1937), he warned of what he called “gradual collectivists”:

The gradual collectivist believes in the absolutism of the majority, having by a fiction identified the mandates of transient majorities with the enduring and diverse purposes of the members of a community. He thinks it absurd that a few oligarchs in the Kremlin or demagogic dictators in Berlin or Rome should pretend that their personal decisions are the comprehensive purposes of great nations. Yet the gradual collectivist, under the banner of popular sovereignty, believes in the dictatorship of random aggregations of voters. In this theory the individual has no rights as against the majority, for constitutional checks and bills of rights exist only by consent of the majority.


Why Americans No Longer Trust the Government

The Republican working-class voter’s loss of faith in the party leadership is part of a broader and even more worrisome trend: the American public’s loss of trust in government generally. One Pew poll has tracked trust in government since 1958. The more you consider this poll, the more terrifying it becomes:

Americans’ trust in government reached its modern apogee in the hopeful early years of the Johnson administration, with its focus on equal justice and civil rights. During the years of the Great Society and the Vietnam War, however, trust in government began a vertiginous slide that continued during the Nixon, Ford, and Carter administrations. Trust recovered significantly during the Reagan administration, then dropped again with the partisan bickering and economic malaise of the latter half of the George H. W. Bush administration. It then recovered with the economic boom of the latter Clinton years, reaching a new high after September 11, 2001. It slid again during a new period of prolonged war and economic malaise in the second Bush term. Remarkably, during the Obama administration, trust in government has stayed at rock bottom, lumbering along at around 20 percent during his whole presidency — the first time in the history of polling that a two-term president has presided over such perilously low trust in government for such a long time without a respite.

The rise of the Nazi Party was made possible because Germans lost what little faith they ever had in the Weimar Republic. The bourgeois parties of the center-right and center-left were annihilated because the workers lost all faith in mainstream politicians. The lesson of Europe between the world wars remains vitally relevant today: When the modest institutions of a constitutional democracy lose the people’s faith, the door swings open to charismatic demagogues. One canary in the coal mine is the vulgarization of politics. When being a member of the political elite is no longer respectable, being ostentatiously low-class becomes a winning political formula.

To understand why the GOP working-class voter has lost faith in the GOP elites, one must understand why Americans have lost trust in government generally. Prolonged wars are clearly partly to blame but can explain only a small part of it.

When government attempts to regulate everything, it fails at most things, and people can see it.

I would posit the following explanation: The progressive scheme of government insinuates the federal government into too many things that government can’t do well. As catalogued with excruciating detail in Peter H. Schuck’s Why Government Fails So Often, when government attempts to regulate everything, it fails at most things, and people can see it. Worse, in its zeal to serve certain special interests, the progressive scheme of government hands power over to special interests of all kinds. The public interest loses at every turn, and the people can see that, too.  

Americans began losing faith in their government precisely when the Great Society programs launched in the 1960s. Today, that loss of trust is virtually complete, a long-term consequence of the New Deal and the progressive movement that produced it. It’s no accident that for the typical American worker, real income has not risen since the 1960s. Correlation is not causation, of course, but the result was predictable.


How Progressives Dismantled the Constitution

The New Deal remains important today because it changed the essential character of American democracy — very much for the worse. It did so by dismantling some of the most essential protections of the Constitution and replacing them with a version of majority rule that left well-organized special interests firmly in control of the government. In the process, some of the Constitution’s most vital protections from tyranny — protections upon which the well-being and freedom of American workers vitally depend — were lost.

The Constitution that the American people actually chose 250 years ago was very different from the one we know today. It was a Constitution that severely limited the ability of both state and federal government to cater to special interests. It did so, at the state level, through interstate regulatory competition, and at the federal level, through a severe limit on direct taxation and on the federal power to regulate commerce.

The original Constitution left most government spending and regulation at the level of the states and let people and businesses choose among different jurisdictions. The competition for businesses and labor tends to keep both taxation and regulation low. The framework of interstate competition makes it very hard to sustain the perks and benefits that special interests are always pining for, usually in the form of protection from competition. If, for example, Illinois establishes a minimum price at which Illinois farmers can sell wheat, then people will get their wheat from Indiana or Missouri and the Illinois farmers will simply lose business. Same goes for today’s minimum-wage laws: States such as Texas sit back and smile when other cities and states flirt with raising the minimum wage to $15 per hour, because they know that will only drive more people and more businesses to Texas.

The smile disappears, however, when those uncompetitive states propose to federalize their uncompetitive policies, so that we can all be uncompetitive together. That, essentially, was the New Deal. The farmers and union workers who wanted government protections from competition couldn’t get them from state governments because of the “race to the bottom.” The phrase “race to the bottom” is progressives’ pejorative term for the race to the top in which both businesses and labor seek the optimum level of taxation and regulation among the states. So farm workers and union labor found a candidate — Franklin D. Roosevelt — who promised them a way to enjoy the protections and subsidies of anti-competitive cartels imposed by a government whose jurisdiction Americans could not choose to escape by right, namely the federal government. 

Every major legislative initiative of the New Deal consisted of the federal creation of some kind of price-fixing cartel for either agriculture or union labor. The basic goal was to reduce output and elevate prices within a scheme that purchasers of goods and services could not escape. The result was a massive forced transfer of wealth from society as a whole to those two special interests, with a significant net loss to the economy overall.

The New Deal faced a major obstacle, however. The Constitution specifically limited the federal government’s power to regulate commerce to only those transactions that actually crossed state lines. Local labor contracts and contracts for the local sale of agricultural products were entirely beyond the reach of the federal government. The Supreme Court therefore struck down — initially — most of FDR’s initiatives.

But FDR was popular, and the American people, not realizing what was at stake, were behind him. Facing a united front of the president, Congress, and popular opinion, the Supreme Court was unwilling to defend the Constitution’s framework of limited federal powers by itself. In 1937, faced with FDR’s threat to the “pack the court” with five additional justices, it surrendered. The Supreme Court has since then convinced itself that if it wants to keep its popular legitimacy, it must let the dictatorship of transient majorities trump the Constitution’s limits on government power. That explains its habitual “deference” to the political branches in cases that test the limits of political power.

The Supreme Court has convinced itself that if it wants to keep its popular legitimacy, it must let the dictatorship of transient majorities trump the Constitution’s limits on government power.

So why would a majority of the people lose faith in a system of government that elevates the tyranny of the majority above all else? Because once the protections that the Constitution affords passive citizens are lost, the tyranny of the majority systematically elevates politically organized special interests above the public interest. Nowadays, federal law abounds with examples where special interests extract egregious benefits at the expense of common Americans, without Americans’ ever knowing it. It’s poverty by a thousand little frauds. As Milton Friedman once put it, “Each of us . . . has more concern with our role as a producer of one product than we have as a consumer of 1,001 products.”

Hence the powerful practical significance of the argument Michael Greve makes in The Upside-Down Constitution: The progressive transformation that began with the New Deal has left us with a constitutional order that no free people would or could chose in a moment of real constitutional choice. No people would very consciously choose a system of government that empowers political elites and special interests to systematically extract rents and other benefits from society as a whole.

No system of government that elevates special interests over the public interest can maintain the public trust. Whether or not it’s possible to demonstrate scientifically that Americans’ loss of faith in government is a result of the progressive scheme of government, that loss of trust is an inevitable result of the progressive scheme of government. Sooner or later, the trust was bound to fray.

Here we arrive finally at the simplest explanation for the GOP working-class voter’s loss of trust in political elites. Last year, I argued in The Atlantic that the reason many tea-party leaders wind up selling out to special interests is that the progressive scheme of government systematically ropes everyone in, sooner or later, to the service of special interests. That’s the key to understanding what David Frum called the Great Republican Revolt. I happen to believe that the GOP’s current “establishment” is the most conservative the party has ever had, but it doesn’t matter. It is part of a progressive scheme of government, and it serves special interests at the expense of common people, just as every other part of our government does.

If you’re part of the U.S. government at all, at any level, you do not serve the American people, try as you might. You serve special interests. You hold office according to elections created by the original Constitution, but the authority you wield is not the authority of that original Constitution as envisioned by the Framers. It is the far greater authority of the New Deal Constitution: government of special interests, by special interests, for special interests. As Richard Epstein has written, the purpose of the progressive’s rewriting of the Constitution was to “make the world safe for cartels.” Now it is those cartels we serve, whatever our oaths of office.

With notable exceptions, the dreary story of conservative reforms is this: Well-organized special interests easily defeat measures that would clearly benefit everyone. Democrats are foolish to rejoice at the crisis of the Republican party. The crisis of the GOP is just one symptom of the much deeper crisis of American democracy — a constitutional crisis that affects every part of the political spectrum. The American worker is losing faith in democracy itself.


Restoring Government of the People, by the People, for the People

The challenge facing GOP elites can be succinctly stated. It is vital, first, to diagnose why the working class has lost faith in the GOP and in democratic institutions generally. What are the American worker’s grievances and why does he feel that the government is failing to address those grievances? Second, what strategy can cure the malady, and how can the GOP convince the working-class voter to embrace that strategy? Finally, what does the cure look like? What is the GOP’s vision of a future of liberty, safety, and opportunity for all — including how to help those who really need it?

The common person looks to government for protection, opportunity, and help — when he actually needs it. American government at all levels is failing to provide those things, as the Pew poll on trust in government indicates. Obama has presided over a 16-point increase in the number of Americans who think that “big government” is the biggest threat to the U.S. in the future. The 69 percent of the public that now believes this is the highest percentage ever, and it includes more than half of all Democrats. That’s quite an indictment. For not only is the American government failing at the many things that it shouldn’t be trying to do in the first place, it’s also failing in the few things that we vitally need it for.

The American working class has become overwhelmed by a feeling of economic insecurity. They don’t like big government, but they panic at the thought of not being able to look forward to Social Security or Medicare. They think that government is not watching out for them, which makes them defensive, aggrieved, and afraid. Most of those fears are well founded; others are not. But all Americans’ fears for the future would be substantially assuaged if the government could go back to working the way it’s supposed to.

That means more than small government — it means better government, and it means a different kind of government. The classic conservative policies of low taxation, low regulation, and free trade are necessary but not sufficient. Like an addict in a twelve-step program, the first step is to recognize that the problem is too serious to fix without looking for outside help. Eight decades of progressive policies have left us with government that doesn’t work and cannot work sustainably, no matter who is elected.

As suggested above, I would argue that the most crucial reason for this failure is the progressive movement’s dismantling of certain vital elements of our Constitution over the last century. We have lost the most vital checks and balances on government power, both vertically (as between federal and state governments), and horizontally (among the branches of the federal government).

The task for the GOP elites is daunting. They must reconnect the dots between working-class grievances and the conservative philosophy of government. Harkening back to Ronald Reagan won’t cut it any more. Reagan stopped the progressive transformation for only a little while, and only in some ways. If Reagan were in politics today, he would probably be as overwhelmed by the challenge of saving the Republican party, and American democracy, as today’s candidates are.

If the crisis of the Republican party, and American democracy, has a silver lining, it is this: The American people did not knowingly choose the progressive “constitution” we have today. They were tempted to embrace its several elements by a bewitching and misleading appeal to their sense of justice and generosity. What American could fail to be moved by the Grapes of Wrath? But today the wrath of the tired and voiceless is directed at progressive government. Americans are no longer willing to ignore its blatant failures. And therein lies a great opportunity.

A moment of constitutional choice is at hand, a fork in the road. Either we can proceed further down the road to serfdom we embarked upon eight decades ago, or we can choose a path of constitutional restoration, toward a future in which Americans can live as they were meant to live — self-reliant, self-governing, and free.

— Mario Loyola is a contributing editor at National Review and a senior fellow at the Wisconsin Institute for Law and Liberty.

Mario Loyola — Mr. Loyola is a research associate professor and the director of the Environmental Finance and Risk Management Program at Florida International University and a senior fellow at the Competitive Enterprise Institute. From 2017 to 2019 he was the associate director for regulatory reform at the White House Council on Environmental Quality.


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