Daily are new trades and new companies established, if they serve some existing public want, they take root and grow. If they do not, they die of inanition. It needs no agitation, no act of Parliament, to put them down. As with all natural organizations, if there is no function for them no nutrient comes to them, and they dwindle away. Moreover, not only do the new agencies disappear if they are superfluous, but the old ones cease to be when they have done their work. Unlike public instrumentalities; unlike heralds’ offices, which are maintained for ages after heraldry has lost all value; unlike ecclesiastical courts, which continue to flourish for generations after they have become an abomination; these private instrumentalities dissolve when they become needless. A widely ramified coaching-system ceases to exist as soon as a more efficient railway-system comes into being. And not simply does it cease to exist, and to abstract funds, but the materials of which it was made are absorbed and turned to use. Coachmen, guards, and the rest, are employed to profit elsewhere; do not continue for twenty years a burden, like the compensated officials of some abolished department of the State.
—Herbert Spencer. Over-legislation, 1853.
Not only do government agencies endure when there is no need for them, for the most part they are created when there is no need for them. Politicians are constantly dreaming up initiatives that will help get them re-elected. Businessmen are also constantly dreaming up new products or marketing campaigns that will help them earn money, but there is a key difference; if a private businessman has an idea that sounds good, he will try it and if there is no market for it he will quickly withdraw it. But if a politician comes up with a new idea that sounds good, he will never retract it. His initiative has fulfilled its purpose for him simply by sounding good. As long as the electorate does not realize his scheme is half-baked, the politician is content for it to continue even after it has proved useless. Indeed, he rarely considers the outcome of his schemes; he sets the experiment in motion and thereafter loses interest.
An example of such a scheme is when a politician promises to ‘crack down’ on lenders who are allegedly discriminating against minorities. This sounds like a good idea, but as with most such initiatives, its unintended consequences are ruinous:
BUREAUCRAT: You must not discriminate in your lending against minorities.
LENDER: No fear of that, we never actually meet the borrowers or collect data on their race. Our computer decides who to lend to solely on the basis of creditworthiness and income.
BUREAUCRAT: That’s not good enough. Some minorities have statistically lower creditworthiness than the rest of the population. By lending blindly you are indirectly discriminating against them and therefore breaching their civil rights.
LENDER: So you want us to find out what race they belong to, and then make sure that minorities who do not qualify for credit are given loans anyway?
BUREAUCRAT: Yes, we need you to gather statistics on race and make sure that every race has an equal likelihood of getting a loan.
LENDER: But that will mean we lose money on bad loans.
BUREAUCRAT: Your point?
LENDER: We will have to raise everyone else’s interest rates to make up the losses. Moreover, our annual reports will disclose the bad debts and so we will be downgraded by the credit agencies. That will mean we have to pay more for funds and have to pass the higher interest rates on to our customers.
BUREAUCRAT: Your point?
LENDER: We have no alternative?
LENDER: I guess we will just have to do it and make less profit, and stop growing our business.
(one year later)
BUREAUCRAT: We have audited your loans and it seems that you are evicting a disproportionate number of minorities for not making their mortgage payments. This is in breach of their civil rights.
LENDER: But that is because you told us to lend to minorities who could not afford the loans.
BUREAUCRAT: I am sure we can come to an agreed settlement without the need for us to suspend your license.
LENDER: This is outrageous. We will fight you in court.
BUREAUCRAT: We have an unlimited litigation budget, what is yours?
LENDER: Our cash flow is sufficient to pay our lawyers and we will win in the end.
BUREAUCRAT: What kind of a cash flow do you think you will have when we suspend your license? How do you think the money markets are going to rate you once your license is suspended? And what about the stock market, do you think it will reward you for taking on the Federal Government of the United States of America? After all, we beat the Japanese, we faced down the Soviet Union, we should be able to wear you down.
LENDER: What do you want?
BUREAUCRAT: There will be a large fine. The District Attorney likes to announce these things at press conferences.
LENDER: Anything else?
BUREAUCRAT: You will have to enter into an enforceable undertaking to mediate with minorities who do not pay their mortgage. The process must have eighteen steps, which we have designed for you, and will take three years. You must also pay the borrowers’ legal fees should they decide to challenge your mortgage on the grounds it is unjust, and not evict them in the meantime. Finally, in order to bring your evictions of minorities into line with the rest of your loan book, you are simply going to have to forgive large portions of debt.
LENDER: You realize that will bankrupt us. Our shareholders are just ordinary people, their shares represent their retirement savings.
BUREAUCRAT: Your point?
Countless millions of these Melian dialogues take place every day all over the world as government regulators strive to justify their existence. The injustice of such whim-based government and the relative decline of the Western world is a direct result of governments passing unnecessary laws, delegating law-making power to bureaucrats, and giving them a roving brief to implement harebrained schemes according to their own discretion.