Federalism: the secret of American success
America is an extraordinary success. U.S. citizens today enjoy a higher standard of living than most other people on the planet, with America’s per person GDP exceeded only by a handful of small states. Fewer than 5% of the world’s population today are American, yet the U.S. accounts for about a quarter of global economic output.
For the past 30 years, Japan’s economy has flatlined. Much of Europe seems to have gone on a permanent vacation, her contribution to global economic output in free fall. America, however, despite the meteoric rise of China and India, continues to account for about the same share of global economic output as she did a generation ago.
It is hard to think of many innovations to have come out of Japan since the Sony Walkman. Europe’s most notable contributions to human progress are largely found in museums these days. But the United States is as innovative as ever. From the advent of powered flight to the age of the iPhone, Americans have accounted for the lion’s share of patents, and today approximately half of all patents are taken out by U.S. citizens.
Why? What is it about America that explains her remarkable success?
The laws of physics are the same in America as any place else. There are plenty of other parts of the planet just as richly endowed with natural resources.
Of all the former European colonies in the Western Hemisphere, what was it about these 13 former British ones that explains why they went on to form the most successful republic in human history?
The secret of America’s success is federalism.
When the Founders drafted a constitution for the fledgling United States in an old courthouse in Philadelphia in 1787, they designed a sublime system of government under which power was shared between a federal government and different state governments. In doing so, they bequeathed the new nation a system of government that not merely allows, but actively encourages, experiment and innovation.
Federalism gives America an advantage not because governments get things right, but precisely because governments so often get things wrong. Having a dozen different policy solutions being tried out in different parts of the country enables U.S. policy makers to ditch what fails and adopt what works.
Think of the great public policy innovations over the past 30 years. Almost all of them were possible because of the freedom that U.S. states have to do things differently.
A generation ago, Bill Clinton put his name to a program of welfare reform, helping lift millions of American’s out of welfare dependency. But the 42nd President was not the architect of the change. He was endorsing an approach pioneered in Wisconsin which proved so successful that even he, a Democrat, had to endorse it.
Federalism, as Milton Friedman might have put it, “establishes a political climate of opinion so that even the wrong people do the right thing.”
Charter Schools, one of the great success stories of American education, were embraced by Barack Obama. Like Clinton, Obama was not embracing an idea that had started in the nation’s capital, but rather as a quirky experiment in the mid-west and California. Today, that experiment provides better education outcomes to almost four million young Americans.
Today we are starting to see a school choice revolution unfolding across America. Moms and dads are being given control over their child’s share of school tax dollars, enabling them to send their child to a school of their choice, public, private or home-school.
The new school choice movement started despite, not because of Washington. Sparked by reforms in West Virginia, the movement has spread to Arizona, Iowa, Florida, Texas and even Arkansas.
Federalism not only throws up good ideas at a state level. From Thomas Jefferson to Calvin Coolidge to Ronald Reagan, federalism helps incubate great American leaders.
There are, suggested the great conservative philosopher, Frederick Hayek, fundamentally two different ways of ordering any society.
Most societies are run by those that believe that they should do so according to some form of deliberate design. The scope and blueprint of that design might vary widely, but in such a society those that hold power believe — often with the best of intentions — that they believe they know what works.
This Hayek called the “fatal conceit,” and it leads to governing by what Hayek called “constructive rationalism.” The outcome is almost always poverty, regression and decline.
Alarmingly, today most of the world is drifting rapidly towards government by constructive rationalism. This was demonstrated vividly during Covid, when governments from Beijing to London tried to control the trajectory of the pandemic by literally telling people how far apart they should stand.
After a brief flirtation with provincial and local autonomy under Deng Xiaoping, China under President Xi Jinping has reverted back to a system of top down control. Europe, the global hub of evolutionary rationalism for several centuries, has adopted a technocratic model of government, with uniform rules imposed in micro detail. Japan, superficially “western” in so many ways, is presided over by those that presume to know what works best.
It is a great good fortune that the United States, thanks to federalism, has a different way of doing things. Federalism means that America is run according to what Hayek called “evolutionary rationalism.” That is to say that it is the self-ordering actions of society itself that shapes things. Trial and error, not a government expert, figures out what works.
During Covid, the federal government might have adopted the conceit that it could control a virus by edict, the same as any government in France, Britain or Japan. Officials in California and New York might have done so too. But federalism meant that the Fauci’s in D.C. did not get to decide everything for everyone everywhere.
Unless you had to enter a federal building or fly on a federally regulated aircraft, most Americans could safely ignore what the experts in Washington wanted done, since it was state and local officials who decided. It is clear today that it was states like Florida, Mississippi and South Dakota, with light touch mandates, that got things right.
Armed with spreadsheets and a false idea of empiricism, Washington bureaucrats, in common with those in Brussels and Beijing, London or Tokyo, believe that they know enough to know what works.
The growth of the federal government, which began with the introduction of a federal income tax over a century ago, and accelerated during the New Deal, has concentrated power in Washington D.C. in a way that was never intended.
While the Founders defined an executive, legislative and judicial branch of government, each with their own powers and responsibilities, no where did they suggest that there should be that great alphabet soup of federal agencies that has grown up in D.C. Sitting inside each of those federal agencies are an army of bureaucrats who believe that they know best.
Armed with spreadsheets and a false idea of empiricism, Washington bureaucrats, in common with those in Brussels and Beijing, London or Tokyo, believe that they know enough to know what works. Such an outlook is ultimately incompatible with the tradition of American federalism that has served this republic so well.
America must deconstruct the administrate state that has emerged over the past couple of generations. Power must be passed back from federal agencies to the states. American exceptionalism—and the future success of the Republic—depend upon it.
Douglas Carswell is the President & CEO of the Mississippi Center for Public Policy. He was previously a member of the British Parliament and co-founded the official Brexit campaign.
