Political Order and Political Decay (27 page)

A second lesson is that the political coalition favoring reform has to be based on groups that do not have a strong stake in the existing system. Such groups occur naturally as the by-product of economic growth and social change. New business interests that are excluded from the existing patronage system, middle-class professionals lacking access to politics, and civil society groups catering to the needs of underserved populations are all candidates. The problem in assembling a reform coalition is that the existing clientelistic politicians will also try to recruit these groups to their cause. In the United States, many of the railroads—exemplars of industrial modernity—learned to play the corrupt patronage game. This meant that the reform coalition had to include older, economically less modern groups like small farmers, and shippers whose interests were hurt by the railroads. Similarly, in older eastern cities, the masses of immigrants were often successfully mobilized by the existing urban machine, instead of being available for recruitment by the progressive coalition.

A third lesson is that while government reform reflects the material interests of the parties involved, whether entrenched patronage politicians or rising middle-class voters, ideas are critical in shaping how individuals see their interests. A middle-class voter could equally well take a proffered government job, or be persuaded that his or her family's long-term interests are better served by a system that recruits the best possible people on an impersonal basis. The choice actually made often depends on how these ideas are publically articulated. There is, moreover, a flipping point in such systems: if everyone around you is taking the patronage job, you will be more inclined to do so even if you think it is a bad idea. If few people do, it will seem like deviant behavior. Public discussion of the moral basis of public employment is critical in shaping these preferences.

A fourth lesson is that reform takes a great deal of time. The Pendleton Act was passed in 1883, but it was not until the 1920s that a large majority of public servants were put under the merit classification system. Even then this pattern was reversed briefly early in the New Deal. The American system of checks and balances, as noted, puts up more roadblocks in the path of decisive political change than do other democratic systems. Since reform needs to go up against powerful entrenched interests, it should not be surprising that it does not happen overnight. Oftentimes reform is spurred by accidental events, like the assassination of James Garfield, or the exigencies of wartime mobilization. And at all times it benefits from strong leadership, as in the role that Theodore Roosevelt played both before and after he became president.

Even as the United States was laying the foundations of a modern public sector, the seeds for later problems in the growth of bureaucratic government were being planted. No sooner had a merit system been created than the new classified employees of the U.S. government banded together to form their own unions and lobby Congress to protect their status and jobs. In 1901, the newly created union of postal employees began to press for reclassification of positions and salaries, in response to which Congress sought to limit the ability of public employees to lobby on their own behalf. President Roosevelt supported the right of public-sector employees to unionize but wanted to limit their political activities so as to retain ultimate control over executive branch agencies. Public-sector employees were increasingly organized under the American Federation of Labor, which pressed for the passage of the Lloyd–La Follette Act of 1912, explicitly recognizing the right of public workers to organize and petition Congress on their own behalf (though not the right to strike).
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The organization of public-sector unions and the emergence of merit employees as a powerful interest group underscores one of the great inherent dilemmas of bureaucratic autonomy. On the one hand, the merit system was created to protect public employees from patronage and the excessive politicization of the bureaucracy. On the other hand, those same protective rules could be used to shield bureaucrats from accountability, making them hard to fire when they failed to perform. Bureaucratic autonomy could lead to high-quality government with public officials looking to the public good. It could also protect bureaucratic self-interest in job security and pay.

Today, these same public-sector unions have themselves become part of an elite that uses the political system to protect its own self-interests. As we will see in Part IV, the quality of American public administration has declined markedly since the 1970s, in no small measure because of these unions' ability to limit merit as a basis for hiring and promotion. They are an integral part of the contemporary Democratic Party's political base, making most Democratic politicians loath to challenge them. The result is political decay.

The development of a modern, impersonal government is not just a matter of ending clientelism and overtly corrupt officeholding. One could have a clean and honest bureaucracy that nonetheless does not have the capacity or the authority to do its job properly. So a full account of the process of American state building should include not just the elimination of corruption but also the development of governments that are capable and autonomous enough to perform their functions at a high level, while remaining fundamentally accountable to a democratic citizenry. How this happened in certain key sectors in the United States is the subject of the following chapter.

 

11

RAILROADS, FORESTS, AND AMERICAN STATE BUILDING

Continuities in American political culture that have made state building a slow and laborious process; why it took so long to regulate the railroads; how Gifford Pinchot made the U.S. Forest Service into an autonomous bureaucracy; the ICC and Forest Service as contrasts in autonomy

Having a high-quality, modern government is not just a matter of eliminating patronage and corruption. Officials can be morally upright and well-intentioned but lack the necessary skills to do their jobs; their numbers could be insufficient to deliver adequate services; or they can lack necessary fiscal resources. A government, just like any private-sector firm, is an organization (or a collection of organizations), that can be well or badly managed. State building, therefore, requires more than just shifting from a patrimonial, patronage-based public sector to an impersonal bureaucracy; it also depends on the creation of organizational capacity.

In the United States, the creation of a modern state occurred considerably later than in Europe and a couple of millennia after its inception in ancient China. Moreover, the state-building project, once begun, was a slow and laborious process, subject to many setbacks and reversals. The reasons for this have to do with American political culture, which from the start has been highly resistant to government authority, and to the design of American political institutions, which throws up many roadblocks to decisive political reform. Americans are, in many ways, still living with this legacy: distrust of government remains high compared to other developed countries; strong institutional barriers to reform of government still exist; and the quality of the services that the U.S. government provides is oftentimes poorer than in other developed countries.

Why all this is so can be illustrated by the story of the nation's first national regulator, the Interstate Commerce Commission (ICC), whose job it was to oversee the railroads. It took almost two generations to create a modern regulator with adequate power to set rates and enforce rules. Yet the ICC remained hostage to political forces that ultimately made it an obstacle to the modernization of the American transportation system.

By contrast, the possibilities that exist for high-quality government and genuinely autonomous bureaucracy (as well as the reasons why such organizations are rare in the American experience) are embodied in the case of Gifford Pinchot and the U.S. Forest Service. I will tell each of these stories in turn.

RAILROADS AND THE LONG ROAD TO STATE POWER

The most transformative technology of the middle third of the nineteenth century, in both the United States and Europe, was the railroads. Particularly for regions of the United States west of the Mississippi River, railroads were critical in linking farmers to distant markets. With the creation of a single national market over a continental landmass, expansion of the division of labor, as Adam Smith had anticipated, could proceed apace. The impact of the railroads, in the words of historian Richard Stone, “was often the power of life and death over a particular location. In undeveloped areas railroads were the determining factor in exactly where settlement would occur … Stories are rife concerning towns which no longer exist because they could not attract a railroad, without which products could not get to market.”
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As a result, railroads were built at a furious pace; the ton-miles carried by the thirteen largest lines rose 600 percent between 1865 and 1880, and mileage doubled just between the years 1870 and 1876.
2

Unlike in Europe, where the railroads were either developed by governments or were placed early on under strict government supervision, the railroads in the United States were almost entirely products of the free market. Competition in this particular service, however, led to huge conflicts among different economic interests, including among the railroads themselves. Competition was fiercest among the large trunk lines; these companies often overbuilt rail mileage and engaged in ruinous rate wars. There were, for example, twenty competitive routes between St. Louis and Atlanta in the 1880s.
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Companies that went bankrupt could often undermine healthy ones (as in today's airline industry) by continuing to operate in receivership while lowering their costs. In response to steadily falling revenues, the railroads tried to create “pools” or cartels that would limit price competition, but these were often broken by opportunistic players operating in cooperation with shippers. On smaller feeder lines, by contrast, a single railroad often held a monopoly and could raise rates on hapless farmers and shippers at will. The lines were tempted to give volume discounts to large shippers sending goods over long distances, due to economies of scale; this angered smaller local producers and shippers, who were at a competitive disadvantage. There were moreover serious and often violent conflicts between railway owners and their workers.
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In all of these cases, the different economic players turned to their elected representatives to defend their interests politically. They employed a mishmash of state and federal measures, like the prohibitions of rate discounting or of the pooling of rail service.

Railroads resemble other public utilities such as telephones, electricity, and broadband Internet in the need to reconcile conflicting interests: while the private parties investing in them want to maximize their returns on capital, which dictates selective provision of services to certain buyers—large shippers and producers in large cities—there is a countervailing political interest in subsidizing universal service to smaller players and rural communities. Although the economic conflicts of the late nineteenth century were often portrayed as pitting small farmers against oligarchic rail interests, owners of the railroads found themselves faced with volatile and often unprofitable markets. Certain individuals made enormous fortunes out of this system, while others went bankrupt or found their economic fate in the hands of others. The inconsistent profitability of this sector was reflected in generally falling prices of railroad stocks toward the end of the nineteenth century.
5

In many ways, the railroads in the late nineteenth century resembled the American health-care system in the early twenty-first century. Both constituted large and critical parts of the total economy. In the 1880s, the railroads were the largest sector of the economy in terms of invested capital, just as the health-care sector in 2010 consumed almost 18 percent of American GDP. Both the railroads and the health-care system had evolved out of the private sector with increasingly heavy political inputs in response to perceived abuses. Politicians in the nineteenth century limited the ability of railroads to recover costs through differential pricing, just as politicians today try to limit price discrimination by insurance companies. Both railroads and health care pitted diverse interests against one another: shippers and farmers against the railroads, doctors and drug companies against insurers. Both sectors generated economic inefficiencies due to the inconsistencies with which policies were applied across the country. And finally, both were economic activities whose implications transcended the jurisdiction of individual states and called out for uniform federal regulation, something that was not forthcoming given America's traditions of federalism and antistatist political culture.
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In response to the conflicting interests driving expansion of the railroads, there was considerable political pressure to make the system fairer and more reliable for both providers and users of rail services. However, at this point in American history, there was no precedent for economic regulation on a national level; the Constitution's Commerce Clause reserved regulatory powers to the federal government only in cases of foreign and interstate commerce. In the period following the Civil War, a variety of states had passed Granger laws that sought to prohibit price discrimination, and some, including Massachusetts, established relatively effective commissions to stabilize the market. The right of individual states to set prices and regulate economic activity was upheld by the Supreme Court in 1877 in
Munn v. Illinois
.
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But railroads could not be adequately regulated at a state level. They were the prime examples of interstate commerce that crossed numerous jurisdictional boundaries, a fact recognized in 1886 in
Wabash v. Illinois
, where the Supreme Court held that only the federal government could regulate railroads.