The first column of this series offered a philosophical balm for election frustration sourced from the thinking of political economists Anthony Downs and Bryan Caplan. As an explanation for why election campaigns can seem so frivolous, it showed how individual voters are noble but irrational to take elections seriously. This second column uses the work of Mancur Olson, another great political economist, to explain another counterintuitive feature of election dynamics: Why, in a democracy, relatively small groups seem to persistently secure illustrious privileges from the political process at the expense of the wider voting and taxpaying public.
As an example of such privilege, a Frontier Centre access to information request last year found that from 1982 to 2009, Industry Canada paid out $18-billion in loans and subsidies that might be called corporate welfare to 21,766 recipients. These recipients included companies from the huge (Bombardier) to the tiny (an ice cream parlour in Nepean, Ontario). Of course, it is not necessary to single out Industry Canada grantees. Canada’s policy of supply management in the dairy industry or the monopolization of essential public services by public sector unions would serve just as well, but for simplicity, let us focus on corporate welfare.
In civics class, students learn that democracy is a way for the majority to ensure that governments serve its interests. However, when groups much smaller than the voting public at large are able, at election time, to win very acute privileges at the expense of the wider voting and taxpaying public, something is surely wrong.
In his Logic of Collective Action, Olson goes about explaining why such policies are the perfectly logical result of the electoral process. In pages of mathematical proof, Olson shows that when it comes to lobbying for benefits from the political process, smaller groups (for example, a single industry) have several advantages over larger groups (for example, the wider voting public).
For any group to secure a benefit from the electoral process, it has to lobby to define the terms of the debate and to create a cause that voters will back, or at least not vote against. This means establishing the cause, informing group members about it and persuading them to contribute to its promotion. To mobilize almost 24 million voters with varied interests to vote for the cause (for example, an end to corporate welfare) is nearly impossible, but for smaller groups with more-concentrated interests (such as Industry Canada grantees), it is much easier. For example, there exists a large body of dubious, industry-funded research into the benefits of government grants to business.
The direct beneficiaries of policies such as corporate welfare have a much easier challenge precisely because of their smaller numbers. In the first place, it is easier for a smaller group to navigate the practicalities of organizing itself. In the second place, if the group succeeds, each member’s share of the benefit is bigger than the cost to each member of the public who pays for it. This makes it easier to persuade each member of a smaller group to contribute to the promotion of the group’s cause. In the Industry Canada example, the $18-billion is funded by approximately 24 million voters (at $750s each), but shared by only 21,766 recipients (about $827,000 each). The total costs and benefits paid and received by the groups are equal, but individual recipients are more motivated to act than are the individual payers.
These dynamics led Olson to conclude, “Where small groups with common interests are concerned, then, there is a systematic tendency for ‘exploitation’ of the great by the small!” (Olson’s emphasis)
It becomes easier to see why politicians, when faced with such dynamics, would favour smaller groups over larger in their campaigning. The large, disorganized majority has fewer clear buttons to push than does the smaller but more organized minorities. Electoral candidates’ usual response is the seemingly undemocratic (but perfectly logical) practice of concentrating benefits on the latter group and dispersing the costs on to the former, as in the Industry Canada example.
As with the previous column in this series, the inherent difficulties identified in the electoral process might seem depressing and, to some, even offensive. As with the previous column, the only escape route is to stop giving politicians so much money and power in the first place, but for now, I offer another philosophical balm for election frustration.