Glory Days for Government

An economic historian talks about national security crises and the growth of government

As Operation Infinite Justice gets underway, the war drums are beating across the land and a battle will surely come, although we know neither when nor what particular form it will take. Only this much is certain: Though our government didn't bring on last week's terrorist attacks and everyone in Washington would certainly give plenty for them not to have occurred, war is a great friend of the state. In such troubled times, people look to the federal government for action and assurance. To get predictions about what we might expect to happen this time around, I checked in with economic historian Robert Higgs, whose book Crisis And Leviathan (1987) insightfully chronicled how national crises in the 20th century consistently helped grow the size and scope of our federal government. Higgs is a senior fellow in political economy at the Independent Institute and editor of the institute's quarterly journal, The Independent Review.

REASON: What's the thesis of your book?

Robert Higgs: In a nutshell, it's that when a crisis of major significance occurs–something as large-scale and pervasive as the Great Depression or the World Wars–there's an overwhelming public demand for government to act. In the 20th century, every national emergency has seen federal government take unprecedented action to somehow allay the perceived threat to our security. These actions have taken a great many forms, but the common denominator is that they all entail the increased exercise of power by government over society and the economy. When the crisis ends, many of the emergency actions cease. But not all of them. Each emergency ratchets up the size and scope of the federal government. In some cases, agencies that had a very strict relation to the emergency transform to take on new missions.

REASON: What's an example of an agency that transformed itself?

Higgs: The War Finance Corporation in World War I was created to provide funds for various munitions enterprises. When the war ended, the War Finance Corporation turned to financing agricultural cooperatives and the export of agricultural products to Europe. It lived on until 1925. In 1932, it was revived to bail out railroads and other big companies that were going bankrupt during the Great Depression. During World War II, it was used for a multitude of new missions, including building new defense plants and stockpiling defense materials. When it was finally abolished in the 1950s because of scandals, it was immediately recreated in part as the Small Business Administration, which itself has taken on a variety of tasks over time.

REASON: Are the attacks on the World Trade Center and the Pentagon a large enough crisis to feed Leviathan?

Higgs: It's a big enough perceived emergency to cause the government to extend into areas it may not have moved into so quickly, particularly surveillance of ordinary citizens and ordinary locations where people might congregate for business or recreational purposes.

REASON: Is it appropriate for individuals to worry about government expanding at this time?

Higgs: It's extremely appropriate because historically, a large proportion of all government expansion has taken place as an emergency or crisis action. It's precisely under conditions such as those that exist at present that we ought to worry the most about the expansion of government.

REASON: What ought we to look for this time?

Higgs: We can expect thousands of reservists to be called to active duty and taken away from their ordinary jobs. We can expect the assignment of military forces to some unprecedented duties. It appears that some military units are going to be used for domestic police activities. It is clearly going to be the case that the FBI will become far more active in surveillance activities. The government will mount a variety of overseas actions requiring the armed forces, and perhaps a number of civilian employees, to attempt to kill, to disable, or to damage what are taken to be terrorist camps, facilities, or cadres. It is also fairly clear that the government is going to have to bail out the airline industry and maybe the insurance industry. When the government takes large-scale, unprecedented actions of this sort, unanticipated consequences always occur. Then the government has to expand even further to deal with those consequences.

REASON: Civil liberties always take a beating in war. Do the restrictions recede after wars are over?

Higgs: The civil liberties violations during the World Wars were, for the most part, abandoned after the wars, but not entirely. But they left institutional residues and changes in public attitudes and outlooks that could be exploited afterward. For example, it's pretty clear that World War I hysteria directed at the Germans was later directed at individuals caught up in the so-called Red Scare. People were already in a high state of excitement about "un-Americanism." That was instrumental in the ability of the government to persecute, deport, and otherwise harm a number of foreigners who were in the country at that time. The FBI expanded during World War II. After the war, FBI activities were often directed at dissident political factions, especially in the 1960s. Wars have increased state power both directly and indirectly. I've been talking about fairly direct ways in which the government changed opinions and institutions to enable it to do new things after a crisis ended. But a very important way in which both World Wars enlarged the power of government was through the effect on government budgets. We can see that same effect operating now. Governments at war spend much more money than they otherwise would. In doing so, normal constraints on government spending are broken–particularly people's attitudes about the importance of balancing the budget or belief that no more than x dollars ought to be spent for a certain purpose. Both World Wars caused the size of government relative to Gross Domestic Product to take a jump up and there was never retrenchment to the relative levels before the wars. We see something similar in the current episode. Until recently, there was a great deal of political struggle over not spending the supposed Social Security surplus. As soon as the crisis burst forth, that concern evaporated. Congress gave the president twice as much money as he asked for when he went in for an emergency appropriation. That is pretty much in character with past crises. Fiscal constraints break down very quickly in the face of perceived emergency conditions.

REASON: What's the nature of the coming crisis?

Higgs: The whole concept of wiping out terrorism is completely misguided. It simply can't be done. Terrorism is a simple act for any determined adult to perpetrate no matter what kind of security measures are taken. I suspect that after the government finishes making its show [of force] in the next few weeks, it will only inspire new acts of terrorism–if not immediately, then eventually. If the government was really serious about diminishing the amount of effective terrorist acts, it would set about creating a global corps of truly unsavory informants on the ground. But it's never shown in the past that it's had the wit to do that. I don't expect it to have the wit to do it this time. I expect to see a lot of huffing and puffing, calling up troops, dropping bombs and missiles, and maybe this time even sending in special forces for attacks on one group or another. But this is all politics. It's not going to make a dent in the genuine threat of terrorism.

REASON: What do you expect in terms of Leviathan at the end of the day?

Higgs: The ultimate result will be an enlargement of the Big Brother state. We were moving that way already. This will accelerate it.