I just finished reading The Rise and Decline of Nations by Mancur Olson. He makes the argument that national growth rates are harmed by the increase in special-interest organizations. These organizations include labor unions, professional organizations (e.g., the American Medical Association), price-fixing industrial cartels, monopolies (e.g., Microsoft), congressional lobbyists, and so forth. Olson summarized his thesis as follows:
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Few organizations for collective action in stable societies will dissolve, so these societies accumulate special-interest organizations and collusions over time. These organizations, at least if they are small in relation to the society, have little incentive to make their societies more productive, but they have powerful incentives to seek a larger share of the national income even when this greatly reduces social output. The barriers to entry established by these distributional coalitions and their slowness in making decisions and mutually efficient bargains reduces an economy's dynamism and rate of growth. Distributional coalitions also increase regulation, bureaucracy, and political intervention in markets.
If the argument is correct, it follows that countries whose distributional coalitions have been emasculated or abolished by totalitarian government or foreign occupation should grow relatively quickly after a free and stable legal order is established. This can explain the postwar "economic miracles" in the nations that were defeated in World War II, particularly those in Japan and West Germany.
The logic of the argument implies that countries that have had democratic freedom of organization without upheaval or invasion the longest will suffer the most from growth-repressing organizations and combinations. This helps to explain why Great Britain, the major nation with the longest immunity from dictatorship, invasion, and revolution, has had in this century a lower rate of growth than other large, developed democracies.
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Olson thesis is that a country's success and stability make it susceptible to decline as self-interest organizations get entrenched over time and gum up the works, hindering the country's innovation and economic growth.
Government becomes increasingly entangled with special interests. Historically, the Republican party has been associated with corporate special interests and the Democrat party has been associated with union special interests, although neither party is fastidious about where its funding comes from. Moreover, individual congress members routinely put pork-barrel legislation for their home districts ahead of the national interest. Consequently, no help in clearing away the choking vines of special interests can be expected from either the Republicans or the Democrats.
A group that organizes to grab a preferential piece of the national pie is analogous to a "good old boys" network within a company, The "good old boys" band together to grab power and squeeze out competition. Waste and corruption often result. President Eisenhower warned of the collusion dangers inherent in the "military-industrial complex". Today, he would probably enlarge this and say the "military-industrial-congressional complex", because defense contractors have gotten very adept at lobbying congress.
Straining for a happy ending to his book, Olson offered a half-hearted utopian solution: "A society might choose the most obvious and far-reaching remedy: it might simply repeal all special-interest legislation or regulation and at the same time apply rigorous anti-trust laws to every cartel or collusion that used its power to obtain prices or wages above competitive levels. A society could in this way keep distributional coalitions from doing any substantial damage. This remedy does not require any major expenditure of resources: intelligent and resolute public policies would by themselves bring great increases in prosperity and social performance. So sweeping a change in ideas and policies is extraordinarily unlikely."
I am not hopeful. It is human nature to promote one's tribe -- the AFL/CIO, the Mafia, the AMA, the banking industry, or whatever -- at the expense of the multitude. Until human nature is purified, nations will continue to rise, gradually be choked by special interests, and then decline.
So, until the U.S. decline becomes outright collapse, I will continue taking my cut of the defense industry's astonishing share of the GNP. And my AARP representatives will continue to lobby for my generation to receive an unsustainable portion of the nation's future wealth to pay for our Social Security and Medicare. It's the American way.
