The State

They rank below the some-gain-and-none-loses type of arrangements,
not because we always prefer an arrangement where Paul gains without Peter losing, to one where Paul gains a lot and Peter loses a little. Some would regard it as positively good to take Peter down a peg or two. There may also be some other ground for favouring one over the other even if we do not believe that deducting one’s loss from the other’s gain to find the true balance of good makes sense. The some-gain-and-some-lose type of arrangements are inferior to the some-gain-and-none-loses sort only because the latter are
ipso facto good (at least if envy is ruled out of the calculus), while the former require a ground on which to base the claim of their goodness. Gainers-only arrangements
requiring coercion are interesting intellectual constructs. It is a moot point whether they really exist in reality, or that, if they do, they play an important part in the relations between state and society.
*26 Some-gain-and-others-lose arrangements, on the other hand, are what consent and the adversary relations between state and subjects mainly revolve around.

Before having one last look at the dead end the state seems fated to manoeuvre itself into in the course of dealing out gains and losses, it seems to me necessary, and more than just pedantry, to protest against a spreading misconception of the very mechanics of robbing one to pay the other. For some time now it has been the custom to consider the fiscal functions of the state under the headings of
allocation and distribution.*27 Under allocation are subsumed the
who does what decisions about providing public goods, “steering the economy” and making sure that markets perform their work. Distribution as a fiscal function deals with
who gets what, with undoing the markets’ work. The conceptual separation has led to treating these functions as a sequence, inducing social engineers to roll up their sleeves and set to work: “First we allocate, then we distribute what the allocation has produced.” The supposition that, in a system of strong inter-dependences, distribution depends on allocation but allocation does not depend on distribution, is remarkable.
*28 Those who so blithely make it, would in fact get quite cross if it turned out to be valid. If robbing Peter did
not result in his consuming less champagne and fewer dancing girls, and paying Paul did not lead to his getting more health care and to his deserving children staying longer at school, why did the social engineers bother at all? What did the redistribution accomplish? The decision to let Paul get more and Peter less, is implicitly also a decision to allocate ex-dancing girls to teaching and nursing. This fails to be true only in the freak case of an impoverished Peter and an enriched Paul jointly requiring the services of the
same total “mix” of dancing girls, hospital nurses and schoolteachers as before.

Carrying on from the allocation-distribution dichotomy, liberals consider that politics is about two different sorts of domains. One is the basically non-conflictual one of allocation, giving rise to “positive-sum games.” The other is the grimmer, conflictual who-gets-what domain of “zero-sum games.” (Note again, as in chapter 3, pp. 176-7, 180, that as these are not games, the invocation of game theory language is a little trendy, but let that pass.) I have insisted, perhaps more than sufficiently, that these alleged games cannot be played separately, and that allocative decisions are at the same time distributive decisions and
vice versa. A who-gets-what decision conditions what shall be provided and hence who does what. Emancipating one decision from the other recalls the Marxist ambition to distinguish the “government of men” from the “administration of things.”

While it may be legitimate to view changes in allocation as capable, if all goes well, of yielding positive sums so that mathematically nobody
need lose as a result of the change, what do we say if somebody
did lose? It is no use saying that the loss is really attributable to an attendant zero-sum distributional decision, and that if only the distribution had been different, the loser need not have lost; since a different distribution would have entailed a different allocation. The statement about the two decisions would be incoherent even if it ran in terms of sums of money, or apples, for we could not just suppose that the allocative gain would have been preserved if we had tried to distribute it differently. It would be doubly incoherent if it ran in terms of mixed bundles of goods, let alone utilities, for this would strike many people as an attempt to seek the residual balance between more apples for Paul and fewer pears for Peter.

The burden of this argument, if there is one, is that redistribution is
a priori not a zero-sum game (for it has effects on allocation) and that it seems very difficult to tell
empirically what it is. Calling it “zero-sum” evokes a false image of the state’s redistributive function as something neutral, harmless, leaving intact the interests of parties other than Peter and Paul. The evocation is false for two reasons. First, even if (abstracting from the cost of administering and policing these arrangements) the resource cost of Paul’s gain in some accounting sense exactly offset the resource cost of Peter’s loss, the two could still be held to be unequal from a “welfare” or class war angle. Second and more important, resource allocation must correspond to the new distribution. Contracts, property relations, investment, jobs, etc. all have to be adjusted.

Greater or lesser repercussions must impinge on everybody’s interest, though some interests may be affected only imperceptibly. These repercussions are themselves redistributive—perhaps unintentionally and perversely so.
*29 The total effect is to extend and magnify, well beyond the interests of the parties ostensibly concerned, the secondary turbulence of allocation-
cum-distribution induced by a given act of primary redistribution.

At least conceptually, we must keep track of three separate elements of turbulence. The first is
direct redistribution, where the state imposes an arrangement making some interests better off at the expense of others (whether intentionally or not). The second is the unintended reallocation-
cum-redistribution induced by the first. Let us label this secondary turbulence, which absorbs some energy and involves some trouble of adjustment (and not only to dancing girls), ”
indirect churning.” ”
Direct churning” describes fairly fully the third element. It is, from the accounting point of view, gross redistribution leaving either no or only some incidental net balance. This occurs when the state grants some aid, immunity, differential treatment or other gain to a person or an interest, and (quite possibly willy-nilly, only because no other way is more practicable) meets the resource cost by inflicting a more or less equivalent loss, normally in a different form, upon the
same person or interest. Superficially, this may look absurd though I hope it does not. The state has a quite compelling
rationale to churn this way. The argument for sheer churning has a good many strands. Following but a few should suffice for seeing its force.

It is not absurd to suppose, for a start, that there is some lack of symmetry (somewhat akin to critical mass or to the justly despised “change of quantity into quality”) between people’s perception of their large and small interests. Many of them just do not notice, or shrug off, gains or losses beneath some threshold. Having arrived at this diagnosis, the state must rationally apply the calculus of political support-building in its light. In certain situations, its rational course will be to create a few large gainers (whose support it can thus buy) matched by many small losers (who just shrug it off). This is why it may be good politics to put a heavy duty on foreign wheat to oblige the growers, and let the price of a loaf rise just that little bit,
*30 and more generally to favour the producer interest over the more diffuse consumer interest, independently of the fact that the producer is organized to extract a price for his support while the consumer is not, or is so less effectively. It is needless to remind ourselves that if the state, in making the running or just by keeping one step ahead of the opposition, goes round every producer group to exploit this benign asymmetry, every one of its subjects playing a double role as producer and consumer will make one noticeable gain “financed” by a large number of quite small losses. The net balance of redistribution, if any and if it can be ascertained, will be submerged under large flows of gross gains and gross losses impinging on much the same people; “direct” churning will be going on. The quantities of resources churned through indirect taxes, subsidies and by price-fixing, may well dwarf any net transfer associated with the churning.

An equally commonplace argument leads from “industrial policies” to churning. Whether to promote its growth or to save it from decline and extinction, the political benefit from helping a business firm or an industry (especially as it “provides jobs”) is likely to exceed the political damage caused by a small and diffuse increase in the costs faced by other firms and industries. The upshot, then, is that it is good for the democratic state to make every industry support every other in various, more or less opaque ways.
*31 There results a broad overlap of self-cancelling gains and losses, leaving perhaps only narrow slivers of some net gain here, some net loss there. Quite
where any such slivers are located must itself be in some doubt. Given the intricate nature of the social and economic stuff that is being churned, it is altogether on the cards
both that the industry which was meant to be helped was actually harmed,
and that nobody can tell for sure which way any net effect went, if there was any at all.

Another strand of the argument about churning is the apparent asymmetry between the capacities of democratic states to say yes and to say no. Resisting pressure, rejecting the demands of an interest or simply refraining from doing some good for which there is much disinterested support, more often than not has an immediate, indisputable and perhaps menacing political
cost. The political
benefit of saying no, on the other hand, is usually long-term, speculative and slow to mature. It is devalued by the discount that insecurity of tenure places on distant pay-offs, as well as by the trivial “drop in the bucket” nature of most individual yes-or-no choices.

In a richly differentiated society with a large variety of concerns and interests, the state is constantly making numbers of small decisions in favour or against some such interest, each merely involving “a million here and a million there.” Admittedly, their sum soon runs to billions and, with “a billion here and a billion there, soon you are talking real money.” Yet none of the individual decisions takes the state in one leap from the realm of millions to the realm of real money. The day of reckoning is in any case more than a week away (“a long time in politics”), and as compromises and the fudging of issues have a
sui generis advantage over “polar” solutions, the state usually ends up by at least partially satisfying any given demand. However, both Peter and Paul have frequent occasions for making various demands upon the state; the more times they have successfully demanded in the past, the more often are they likely to present demands now. As the bias of the system is such that the state tends to say at least a partial “yes” to the bulk of them, the major result is bound to be churning.
Both Peter
and Paul will be paid on several counts by robbing
both of them in a variety of more or less transparent ways, with a possibly quite minor net redistribution in favour of Paul emerging as the residual by-product.

A corollary of the above is that some people or groups will gain from some direct or unintended redistributive arrangements while losing much the same sums from others. Not all can, let alone will, see through this and recognize their
net position, if indeed a
net position has objective meaning. Since economic policy causes prices and factor incomes to be other than what they would be in a
policyless capitalist state, and since it may in any case be inherently impossible to “know” the ultimate incidence of the total set of directives, incentives, prohibitions, taxes, tariffs, etc. in force, a subject need not be stupid to be mistaken about where the churning around him really leaves him.
*32

It is in the state’s interest to foster systematic error.
*33 The more people think they are gainers and the fewer who resent this, the cheaper it is—crudely speaking—to split society into two moderately unequal halves and secure the support of the preponderant half. With free entry into the competition for state power and hence the extreme unlikelihood of collusion among the rivals, however, the opposition must seek to dissipate systematic error as fast as the state succeeds in inducing it, in fact to induce systematic error of the opposite sign by telling the gainers that they are losers. Whoever is in power in democratic states, it is the steady endeavour of the opposition to persuade the broad middle class that it is paying more in taxes than it is getting back, and to tell the working class (if such an old-fashioned category is still admitted to exist) that the burden of the welfare state really rests on
its back. (When in opposition, “right” and “left” both arrive at some such conclusion from opposite premises, roughly as follows: living standards of working people are too low because profits are too low/too high.) Whatever the real influence of these debates, there is no good reason to assume that they simply cancel each other out. It seems
a priori probable that the more highly developed and piecemeal is the redistributive system and the more difficult it is to trace its ramifications, the more scope there must be for false consciousness, for illusions and for downright mistakes by both the state and its subjects.

Contrary to the sharp-edged outcome of a pure rich-to-middle redistributive auction in a homogenous single-interest society (see pp. 218-23), complex, addictive, heterogenous interest-group churning seems to produce a much fuzzier pattern. Very probably it can produce several such patterns and we cannot really predict which one it will be. Since there is a large number of alternative ways in which a highly differentiated, disparate society’s multiplicity of interests can be lined up on two nearly equal sides, there is no longer a presumption (such as I have established for a homogenous society) of
one best, unbeatable pattern of redistribution which a political competitor can match but not outbid. Hence, there need be no strong tendency either for the convergence of programmes or the disappearance of genuine political alternatives. A somewhat rightist and a recognizably leftist policy can be serious rivals of each other.

Any rivalry, however, still entails competing offers of
some net transfer of money, services, favours or liberties from some people to others, for with other things equal, he who makes
some such offer can, under simple everyday assumptions about why people support a policy, generate more support than he who makes
none. This is the case even if there is much fuzziness about the shape of the winning offer (note that a deterministic reliance on “natural constituencies” and on the programmes which either constituency imposes on its champion, will not do; many interests no longer fit into any natural constituency, left, right, conservative or socialist, but swell the “swing middle” which must be bought). Our theory becomes blurred, as it probably should in its descent to a progressively less abstract level.

The central thrust of the theory, however, does not get altogether lost. With tenure heavily dependent on the consent of its own subjects, competition still drives the state into some redistributive auction. The comparability of rival offers is more limited than in the abstract rich-to-middle tax-and-transfer version. There is no longer one simultaneous tender offer of a coherent set of positive and negative payments for support, addressed to particular segments of society. Instead, there is a prolonged cascade (perhaps ebbing and flowing with the electoral calendar), of quite diverse aids and fines, bounties and bans, tariffs and refunds, privileges and hindrances, some of which may be difficult to quantify. The opposition cascade is promise, the state cascade is, at least in part, performance. Comparison of the two is evidently not a light undertaking for a person with manifold concerns ranging from civil rights to the mortgage on his house, fair trade in his business and poor teaching at his children’s school, to name but a few in random order.

Rival offers need not be closely similar, nor need they completely exhaust the whole potential “pay-off” available for redistribution. The concept of the potential pay-off itself must be reinterpreted in a less precise manner. It can no longer be treated as co-extensive with taxable capacity, the less so as a good deal of redistribution is an indirect result of various state policies and totally bypasses taxes. When all this is duly said, however, political competition still means that neither rival can afford to content itself with offering much lower net redistributive gains than its tentative estimate of the net loss it can safely impose on the losers.

The interdependence, within any differentiated social system, between who gets what and who does what, and the few common-place assumptions about psychology and the working of consent-dependent political regimes, introduced in this section, steer the issue from competitive equilibrium to what I propose to call the last democratic dilemma.

Over and above any direct redistribution, a great deal of indirect churning will be generated. The state will also engage, off its own bat and responding to piecemeal political incentives, in additional direct churning. The addictive effect of (gross) gains under churning, notably the stimulus provided to interest group proliferation, is likely to cause churning to grow over time despite the absence and quasi-impossibility of further net gains. False consciousness, systematic error, a degree of producer-consumer schizophrenia and some free-riding bias in group action in favour of extorting gains (and never mind that after every
other group has extorted
its gain, the first group’s share in the resulting total of costs will have wiped out its gain)—all these deviations may suffice to offset, up to some point, the inconveniences and costs of churning and still produce political benefits on balance. The more churning there is, however, the more the balance is liable to tip over,
both because more churning takes more government, more overriding of mutually acceptable private contracts, more state influence over the disposal of incomes and the rights of property (which may
upset one half of society),
and because of some perhaps dim, inarticulated frustration, anger and disappointment that so much redistributive ado is at the end of the day mainly about nothing (which may
upset the other half).

Rather like the individual political hedonist who finds that as the state increases the pleasure it bestows, after some point (which he may or may not have actually reached yet) the accompanying pain increases faster and it would be best if one could just stop before quite getting there, society is also likely to reach some point of marginal pleasure-pain equivalence where “it would like to stop.” However, there is no operative meaning in this “would like to.” Society cannot call a stop, nor can it make any other decision (though majorities can make a limited range of decisions in its name and the representatives of the majority can decide additional matters in
its name, and the state may carry them out in
their name, none of which is in dispute here). Should it find too much of its arrangements churned more than it feels is congenial or indeed tolerable, society has no obvious recourse against the democratic political process which yielded this result. It may respond with uncomprehending rage, with what former French President Valery Giscard d’Estaing aptly called “morose turbulence” and sullen cynicism. Its frustration will obviously threaten the political survival of the state which, by inadvertence, line of least resistance and the pressures of the social structure called forth by its own consent-seeking, has pushed churning too far.

On the other hand, net goes with gross, genuine redistribution is accompanied by churning. If continued tenure of power dictates a certain genuine redistribution, a growing volume of churning on top of it is nearly certain to be induced for one good reason and another. Yet if the former is consistent with political survival, the latter may be excessive for it. There may consequently no longer be
any possible political equilibrium position, not even one of unrewarding state drudgery. A genuine existential impasse may be reached: the state both must and must not redistribute.

It is this contradiction which conditions the mixed-up, disoriented split personality of many present-day democratic states.
*34 Ideology must go hand in hand with interest. In recent years, the dominant ideology of Western democracy has been cautiously co-opting a sprinkling of previously rejected elements of theoretical anarchism, libertarianism and traditional individualism; before we know where we are, Herbert Spencer will be radical chic. On a less cerebral plane, deeply felt claims mount for “rolling back the state.” As the quarter-turn of ideological fashion unfailingly signals, it has in a sense become clever policy for the state to roll itself back.

Torn between a rational interest to go on producing the “democratic values” that the beneficiaries have taught themselves to depend on (and at least to continue upholding if not furthering the group interests whose support it cannot afford to forgo), and an equally rational interest to respond to the mounting
poujadisme, frustration and ungovernability of much the same people and much the same interests by doing virtually the opposite, the state twists and turns and explains away its own incoherent evolutions with incoherent rhetoric. In two minds, by fits and starts fighting its own nature, it resists its own attempts to make itself shrink.