Can More Government Lead to Less Government?

One of the greatest strengths of libertarianism is its ideological consistency. It is also libertarianism’s greatest weakness. When I went back to college in my 30s to complete my BA and MA in history, I found that a lot of aspects of libertarian thought, as intellectually satisfying as they were, simply didn’t fit the facts of history all that well.

The early American republic, for example, wasn’t the paragon of laissez-faire capitalism that many libertarians imagine. State and local governments were extremely active in regulating commerce of many sorts, from alcohol sales restrictions, to granting of monopolies, to generous subsidies to business enterprises. The federal government played an aggressive role in promoting westward expansion (much to the detriment of the Indians) — and through a series of musket contracts, consciously and intentionally dragged U.S. firearms manufacturing from a collection of cottage craftsmen to a modern industrial base.

One of the examples of satisfying but dangerous abstractions is that it is an article of faith that minimum wage laws are always bad. There’s no question that minimum wage laws can have destructive effects — especially for unskilled workers. There is a strong argument that minimum wage laws have played a part in causing high black teenage unemployment. Without the early experience of work, and with the inadequate public school education that many poor blacks receive, it is surprisingly easy to drift into young adulthood with no job skills — and no prospect of acquiring any.

The last several months, I have been working one week each month in Bend, Oregon. Oregon is a rather unusual state in one respect: there is no self-serve gasoline. I am just old enough to remember when gasoline was 29 cents a gallon, and a young man wearing a uniform fueled you up, washed the windshield, and offered to check the oil and tires. Gassing up in Oregon is a bit like going back in time.

I’ve had Oregonians insist to me, over the years, that the reason Oregon doesn’t allow self-serve — and all other states do — is that Oregonians aren’t smart enough to pump gasoline without training. The older guy who pumped my gasoline one day in Bend told me that, yes, this is the reason. Someone pumping his own gasoline in Tigard, Oregon, in the 1930s caused an explosion with considerable loss of life — and that this is the reason that Oregon doesn’t allow self-serve.

Whatever the merits of the argument back then, it doesn’t make sense now. Oregon’s law is clearly a method of creating jobs for people who otherwise might have trouble finding employment. This is, by libertarian standards, a very bad thing. But think about this: is it better for someone with limited job skills to have a crummy job or no job at all? I’m not talking about self-esteem. A regular, private sector paycheck is preferable to dependency on unemployment, welfare, or some other form of government assistance.

This started me thinking about minimum wage laws. There is no question that raising minimum wage above the market level causes unemployment. There is also no question in my mind that one of the reasons that labor unions push for higher and higher minimum wage laws is to create an incentive for employers to hire union labor. If you can hire four people at $8 per hour each to move boxes in a warehouse — or one union laborer who, with the cost of a forklift, will end up costing $40 per hour — well, you might be better off with an unskilled labor force. If minimum wage goes up to $12 per hour, the union guy running a forklift makes a bit more sense.

Still, consider this: someone making $8 per hour is scraping by every week. They are likely dependent on the government for assistance of some sort: food stamps; WIC; S-CHIP, maybe taking their sick baby to the emergency room because they don’t have health insurance. Under some conditions, the temptation to fall into even greater dependency, such as Temporary Aid to Needy Families, must be strong. But what happens if either market pressure or a minimum wage law increases wages to $9 or $10 per hour? You might think that grossing $40 or $80 more per week isn’t going to matter much — but when you are only grossing $320 a week anyway, that’s a huge difference. For some families, it may be the difference between needing government assistance and not needing it, or perhaps only needing help from one program instead of from two. (For those thinking politically: perhaps the difference between someone identifying with the dependency class and with the middle class.)

Obviously, if our goal is to use government to reduce dependency, then we have to make pragmatic, even experimental policy decisions. It isn’t enough to just arbitrarily increase minimum wage by some amount that makes us feel good. But we should not let beautiful abstractions blind us to the possibility that more government, carefully used, can lead to less government in the long run.