Progress pill
Philosophy of liberalism

Reduced state powers

Freedom as a Social Project

Reduced state powers

  • The reduction of state powers
  • The structural inefficiency of state action
  • Decentralisation is not the answer
  • Education and health: the paradox of monopolisation

The reduction of state powers

The political programme of liberty is fundamentally based on a drastic reduction in the powers of the state, particularly those considered parasitic. This idea runs through the entire French liberal tradition, from the Marquis d'Argenson (1694–1757), who famously wrote in his Considérations sur le gouvernement ancien et présent de la France that "to govern better, one must govern less," and the Physiocrats in the eighteenth century, with their famous laissez faire principle, to the great thinkers of the nineteenth century such as Paul Leroy-Beaulieu (1843–1916), the editor of L'Économiste français and author of the monumental L'État moderne et ses fonctions (1890). While these authors recognise that the state has a number of necessary powers, notably in policing, justice, and certain aspects of the enforcement of contracts, they all agree on the need to strictly limit its scope of action.
What is the fundamental distinction around which this debate revolves? It is the distinction between the state as guardian of rights and the state as producer of services. The first role, all liberals concede as legitimate. The second, they subject to relentless scrutiny. On one side are the necessary attributions: principally the establishment of a rule of law, the protection of freedom of contract, the enforcement of contracts, and the defence of individual rights against violation. On the other side are ancillary functions, many of which are perfectly suited to private initiative, free association, and the market economy. History shows, as Leroy-Beaulieu demonstrated with extensive empirical evidence, that roads and bridges, canals and waterworks, have often been built and managed privately in many societies with excellent results.
Leroy-Beaulieu wrote in L'État moderne et ses fonctions with the confidence of a man who had studied the statistics of a dozen nations:
"The more one examines the history of public works, the more one finds that private enterprise has preceded and surpassed state action in virtually every domain. The state has typically intervened where private capital had already demonstrated the profitability of the enterprise, and has done so at greater cost and with lesser efficiency. This is not an accident; it is a structural feature of any organisation that is sheltered from the discipline of competition and the sanction of profit and loss."
In other words, the expansion of the state into economic life is not the sign of progress but of political convenience: governments take credit for activities that free enterprise would have accomplished more efficiently, and do so at the taxpayer's expense.

The structural inefficiency of state action

The state, in all its economic manifestations, is a deficient and costly mechanism. Why is this so? The answer lies in the structure of incentives. The state does not rely on individual initiative and enterprise, and does not allow personal interest to develop fully. The functionarism that characterises it generates an organisation that is not very progressive and poorly adapted to the rapid evolution of society. This maladaptation becomes particularly problematic in a context of constant technical innovation, where progress must be anticipated and the production of goods and services constantly improved.
Leroy-Beaulieu, in his Essai sur la répartition des richesses (1883), captured the mechanism with precision:
"The agent of the state does not lose his own money when he errs; he loses the money of others. He does not gain when he succeeds beyond expectation; he gains only his fixed salary. Between his efforts and his rewards there exists no direct and personal relation. This is why the state, however well-intentioned its servants, will always produce at greater cost and with less inventiveness than the free enterprise that places each man's fortune in direct dependence on his intelligence, his energy, and his judgment."
Indeed, it is important to emphasise that it is not the individual alone who replaces the state, but free association and the coordination of individual forces on the basis of exchange and contract. Individualism does not replace socialism in isolation: it is free enterprise and voluntary cooperation that take over far more effectively. The error of certain critics of liberalism is to imagine that reducing the state means abandoning individuals to their fate. In other words, the choice is not between the state and the isolated individual, but between the state and the vast, creative, self-organising capacity of free civil society.

Decentralisation is not the answer

The programme to reduce state powers must not be confused with simple decentralisation. Here is a distinction that is too rarely made: decentralisation transfers the location of power; it does not reduce its nature. While the latter has some merit in recognising the variety of human existence and in bringing decision-making closer to the people it affects, the local state has no more legitimacy than the central state to intervene in ways that are abusive and contrary to individual freedoms. Simply transferring powers from the central state to local authorities is not a satisfactory solution.
Bastiat, with his characteristic lucidity, observed:
"A municipal council that forbids me to open a bakery in my own street is not less tyrannical than a royal ordinance that forbids it throughout the kingdom. The tyrant who speaks with a local accent is no less a tyrant. Decentralisation is a change of master, not a recovery of liberty."
In other words, what liberals seek is not a redistribution of state power but its radical reduction: not a transfer of these powers to the commune or the canton, but their transfer to the realm of private activity, to the individual, to free association, and to enterprise.

Education and health: the paradox of monopolisation

Education and healthcare are perfect examples of the perverse effects of state monopolisation. Consider the paradox: the state declares that these services are so essential, so precious, that it cannot leave them to mere market forces. And yet the very consequence of this monopolisation is to devalue precisely those who provide these essential services. Paul Leroy-Beaulieu, in his Essai sur la répartition des richesses (1885), anticipated that the great doctors and elite professors would become the privileged people of the future in a society founded on contract. As life became increasingly precious to individuals in an advanced civilisation, those who protected and enriched it would see their value recognised in due measure.
Leroy-Beaulieu wrote, with an insight that two centuries of experience have done nothing but confirm:
"In a free society, the physician who cures, the teacher who forms minds, the engineer who builds, the architect who creates beauty: these are the true aristocracy of talent, the natural elite to whom the market spontaneously assigns a reward proportionate to the services they render. It is the state that, by monopolising their professions and fixing their salaries by administrative decree, condemns them to a mediocrity incompatible with the dignity of their mission."
The current reality reveals a paradoxical situation. Education and healthcare professionals, who produce extremely valuable services, are in fact the first to be sacrificed by the public service system, which devalues their work and prevents them from acquiring the place in society that should be theirs. The state considers these branches so essential that it must monopolise them, but it is precisely because they are so useful that they would be highly valued in a regime of freedom. In other words, the state's most fervent justification for its monopolies is simultaneously the most powerful argument against them.
Quiz
Quiz1/5
Why does liberal thought reject decentralization as an adequate solution to excessive state intervention?