Bureaucratism: 1st Cousin of Socialism

July 22, 2022 Updated: July 26, 2022


Economists across the ideological spectrum largely, if not entirely, agree that the United States has a “mixed economy.”

In other words, our economy operates somewhere between the polar extremes of the classical liberal free-market capitalism that prevailed during the early decades of our republic and socialism, under which the government directs economic production. One possible label for our system is bureaucratism—a system in which the state has absorbed some segments of the private economy while influencing many remaining private enterprises via extensive regulation.

To understand bureaucratism more fully, we need to perceive clearly its economic effects and political tendencies.

The Economics of Bureaucracies

Economically, few would dispute the statement that bureaucracies are wasteful and inefficient. We’ve all heard stories about government bureaucracies spending large sums of money on absurd, if not outrageous, programs. We know that heads of bureaucracies go on spending sprees buying nonessential items in the last month of the fiscal year so that Congress won’t conclude that the bureaucracy is overfunded and can get by on a smaller budget appropriation.

The blame for bureaucratic inefficiency lies not primarily with the particular bureaucrats staffing the bureaucracies, but with the bureaucratic structure itself. As Ludwig von Mises explained so clearly in his 1944 book, “Bureaucracy” (available for free from the Mises Institute (pdf)), bureaucracies aren’t guided by a profit-and-loss calculus. The government decides that a certain function needs to be provided by the state, then the government appropriates whatever funds it’s willing to commit to create a bureaucracy to perform that function.

Unlike in the private sector, where profit-seeking enterprises seek to contain costs to improve their profit margins, bureaucracies disregard costs. They don’t want to be perceived as holding back on performing their assigned task. In the private sector, a firm that does a poor job loses customers and profits and possibly goes out of business. By contrast, when a bureaucracy does a poor job, its managers tell congressional overseers that they need more money for additional personnel, equipment, and so forth, and they usually get it.

Consider one of our oldest and largest bureaucracies: the Pentagon. The reports you might have heard about $600 toilet seats and weapons systems being canceled after billions of dollars have been spent on them are true. The anti-American left relishes publicizing such incidents. I agree with the left that the Pentagon is hugely wasteful. I disagree with the left that we should dismantle national defense. Sorry, but in our dangerous world, we need a robust national defense, despite the inevitable bureaucratic waste.

And I disagree with my libertarian friends when they say defense could be privately funded and controlled. Sorry, but do you really want a Bill Gates or George Soros controlling private armies? No, the proper lesson to derive from Pentagon waste isn’t that we should abolish or privatize national defense, but that no country can afford too many bureaucracies. Every bureaucracy is a drain on a nation’s economy, funded by taxes laid on the wealth-generating private sector.

If you want to put a dollar figure on the cost of bureaucratism in the United States, economists John Dawson and John Seater calculated that the 2011 gross domestic product of $15.1 trillion could have been $53.9 trillion—3 1/2 times greater—if federal regulations had remained at their 1949 level.

Despite mounting economic costs, for the better part of two centuries, the federal government has been adding departments and agencies that deal with matters clearly beyond the scope of its enumerated powers in the Constitution. The 10th Amendment—which was supposed to prevent Uncle Sam from getting involved in agriculture, education, energy, health care, retirement planning, housing, labor markets, and so forth—has been systemically ignored. Consequently, the federal government today plays a colossal (and colossally expensive) role in many spheres of economic activity that the private sector could handle with much greater efficiency.

The bad news is that our national government is more than $30 trillion in debt (multiples of that, when you factor in unfunded liabilities). The good news is that we still have a private sector, albeit one that, like Gulliver in the Jonathan Swift novel, finds itself increasingly fettered by an army of Lilliputian bureaucrats. If Uncle Sam eventually absorbs all production, then there won’t be profit-generating businesses to increase the wealth of our society. We’ll simply get progressively poorer, as happens to all socialist societies. Socialism is a system in which government controls all legal production (inevitably, there are black markets to supply otherwise unavailable goods). Another way of looking at socialism is to recognize that socialism is an entire system of bureaucracies. We, so far, are only partially bureaucratized, partially socialized, and hence still capable of generating economic growth.

The Politics of Bureaucracies

As Mises pointed out in his book, bureaucracy is the mechanism of tyranny, whether you look at the ancient Egyptians or today’s Chinese Communist Party. (China’s economy has grown explosively since the reforms of the 1980s permitted a considerable amount of profit-seeking activity, but the people are being suffocated by ever-tighter bureaucratic controls, such as social credit scores, facial recognition technology, and so forth). The monsters whose names are recorded in our history books—pharaohs, emperors, Stalin, Hitler, Pol Pot, Mao, and so forth—could never have held power over societies without the complicity of an army of faceless bureaucrats willing to destroy the lives of fellow citizens in exchange for a secure position in a government bureaucracy.

Bureaucratism is fundamentally anti-democratic and illiberal. Unelected bureaucrats, rather than elected legislators make decisions that greatly impact their fellow citizens. In fact, it has gotten to the point where, in a typical year, more than 90 percent of the rules that Americans must live by (or else be fined or otherwise punished) are promulgated by bureaucrats rather than enacted by legislators.

According to the Competitive Enterprise Institute’s Clyde Wayne Crews, in 2020, Congress passed 178 laws, while executive branch agencies (that is, unelected bureaucrats) issued 3,353 binding rules. That’s a ratio of approximately 19:1 in favor of the bureaucrats. This is anomalous in the United States, where the government is supposed to be accountable to the people. It’s also uncomfortably close to socialism, where all power is wielded by the government.

Once again, the very structure of bureaucracies leads inevitably to problematic outcomes. Since a bureaucrat’s job is to regulate, he or she regulates. The bureaucrat is paid to achieve a particular goal, so he or she pushes toward that goal, even if the costs it imposes on the private sector are crushing.

I knew a man whose family had produced mushrooms in a cave they owned for several generations. A bureaucrat from the Occupational Safety and Health Administration (OSHA) fined him $10,000 for improper electrical lighting in the cave.

The owner said, “How about $5,000?”

“OK,” replied the bureaucrat. Obviously, the fine was—like many of the regulations themselves—arbitrary and capricious. The owner finally wearied of bureaucratic molestation and closed down his business. The United States now imports those mushrooms from abroad.

And then there’s the infamous incident when OSHA delayed the opening of a new ballpark in Butler, Pennsylvania, because the mirrors in the restrooms had been mounted a quarter of an inch too low (or was it too high?). You can still watch Congressman Mike Kelly (R-Pa.) tell the story in disbelief on the floor of the U.S. Congress in this clip.

Looking back over the past decade, I’ve commented several times in my writing on oppressive bureaucratic overreach. Among others, I’ve criticized the Environmental Protection Agency (EPA), National Labor Relations Board, Bureau of Land Management, and the Federal Communications Commission. Several years ago, the gross ineptitude at some Veterans Affairs hospitals stirred up quite a scandal. Repeatedly this year, the head of the Securities and Exchange Commission has come under fire for administrative overreach, including the use of ESG to choke off the supply of capital to fossil fuels companies. The Wall Street Journal shamed the Centers for Disease Control and Prevention (CDC) under the headline, “These Days It’s News When the CDC Does Something Right.”

The march of bureaucratism received a welcome setback when the Supreme Court slapped down a flagrant usurpation of power by the EPA with its West Virginia v. EPA decision, but the whac-a-mole regulatory state continues to grow. The Supreme Court seems to be awakening from its long-time somnolence in the face of executive branch expansionism. Will a Republican Congress in 2023 begin to reclaim its constitutional prerogative of writing the laws of the land, or will it throw the country to the howling wolves of creeping bureaucratism? Will that creeping bureaucratism culminate in the total bureaucratic control of society, that is, socialism? We shall see.

Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.

Mark Hendrickson
Mark Hendrickson is an economist who retired from the faculty of Grove City College in Pennsylvania, where he remains fellow for economic and social policy at the Institute for Faith and Freedom. He is the author of several books on topics as varied as American economic history, anonymous characters in the Bible, the wealth inequality issue, and climate change, among others.