The history of governments is that they start out small and wind up large. Along the way, they grow in fits and starts.
Crises, however, often cause large and irreversible spurts in the growth of governments.
The American ideal for government was that it was to be limited, with power disbursed. So wedded to those ideas were we that, after fighting a revolution over an abuse of power, we created a federation of governments instead of a united set of states. So deliberately weak were the Articles of Confederation that the federal government couldn’t require states to contribute money to it, i.e., there was no “federal” power of taxation over the states or its citizens.
Power, however, is inefficient when disbursed. When a crisis arises, that inefficiency is often decried if not demagogued and soon action becomes synonymous with the assumption and centralization of power.
So, not that many years after winning our freedom, the American nation-states were bickering, they printed money almost at will and overrode private contract rights. Debtors fought creditors and the individual nations could effectively veto federation foreign policy, thereby limiting us internationally.
It became so bad that Alexander Hamilton thought the nation-states would resort to war if nothing was done. What was done was the centralization of power to a more “perfect union” under the Constitution. The autonomous nation-states were no more, federal taxation was established along with courts and more, and power was centralized in the federal government.
Later in our history, according to the Federal Reserve Bank of St. Louis:
“Before the Federal Reserve was founded, the nation was plagued with financial crises ... Banks needed a source of emergency reserves to prevent the panics and resulting runs from driving them out of business. A particularly severe panic in 1907 resulted in bank runs that wreaked havoc on the fragile banking system and ultimately led Congress in 1913 to write the Federal Reserve Act. The Federal Reserve System, initially created to address these banking panics, is now charged with several broader responsibilities, including fostering a sound banking system and a healthy economy.”
Need more proof?
Beyond the adoption of the Constitution in response to a crisis, perhaps the largest single expansion of government power was in response to the Great Depression. Prior Constitutional law was upended and our federal government was granted vast powers as President Franklin Delano Roosevelt said that Americans “cannot seriously be alarmed when they cry ‘unconstitutional’ at every effort to better the condition of our people.”
In our time, in response to 9/11, enormous power was consolidated in the Department of Homeland Security. According to its website, “The Department of Homeland Security was established in 2002, combining 22 different federal departments and agencies into a unified, integrated Cabinet agency.”
Not every crisis in American history has been met with a consolidation of power. President James Monroe, who resisted government action, famously bragged in an inaugural speech, “Who has been deprived of any right of person or property?”
From my book, “The Divided Era,” I note that even during “the throes of the Panic of 1819, Monroe remained steady. The Panic is historically recognized as America’s first peacetime financial crisis with eerie similarities to the financial crisis of 2008. At the time, the regulation of banking was left to the states, and those banks fueled Western land speculation. When the economic ‘bubble’ suddenly popped, with hundreds of banks shutting down, and thousands of depositors and investors wiped out ... Monroe and his Congress, however, stayed within the constructs of the Constitution and refused to undertake a federal takeover of the banking system—a decision which stands as a stark, 180-degree contrast to our federal government of today.”
To be sure, the centralization of power in response to crisis is not new to our time or place. The historian Will Durant teaches us that full socialism was instituted in Rome A.D. 301, under the Emperor Diocletian. “The government ... brought nearly all major industries and guilds under detailed control ... When businessmen predicted ruin, Diocletian explained that the barbarians were at the gate, and that individual liberty had to be shelved until collective liberty could be made secure.”
Today, with the push of the media, federal government spending is rising at record rates as we respond to, among other things, hurricanes, border problems, ISIS, and now the pandemics. With the Coronavirus, the federal government is spending in unprecedented fashion, the Federal Reserve is intervening in the economy is record ways, and governors are proliferating orders of questionable legal standing.
All of which underlines the basic point that, amid a crisis, politicians act, and the worse the crisis, the more they act. Most often, they grab power and increase the size and scope of government. As this most recent crisis unfolds, our governments will have spent more money, as a percentage of the economy than ever before.
The only question is whether any of them will relinquish the power they grabbed during this crisis. If history is our guide, the answer will likely be no.
