Thursday, July 28, 2011

TWO WAYS OF GOVERNING -- Top Down China versus American Subsidiarity

I've always liked the word subsidiarity. It's the best way to manage any enterprise, including business and government organizations.

Subsidiarity represents the simple idea behind our system of federalism and is guided by the principle that a central authority should have one or more subsidiary functions. As a result, the central authority should perform only those tasks which cannot be performed effectively at a more immediate or local level. Stated another way, subsidiarity is simply an organizing principle which argues that matters should be handled by the smallest, lowest or least centralized competent authority.

Our concept of federalism as contained in the Constitution embraces subsidiarity. Solutions to problems by individuals, families or private organizations outside of government should be encouraged. When government action is appropriate, the COMPETENT local government should first act instead of the state government, which in turn should come before the national government. That's subsidiarity in action.

This principle of governance stands in sharp contrast to what's done in countries like China. The tragic Chinese train wreck of a few days ago, and the reaction of the Chinese government thereto, will help us to contrast the local rule subsidiarity based American way to the centralized top down command and control Chinese way of governing. Quoting from China's Train Wreck in pertinent part, "The deeper issue is Chinese institutions' inability to develop and administer complex systems. Like a multinational corporation with a long supply chain, a high-speed rail network depends on individuals at multiple levels of command taking responsibility for effective local operations. China's predilection for top-down organization makes it difficult for information to flow horizontally and for subordinates to take the initiative to make improvements." See also China Escalates Train-Crash Response.

Before getting too carried away with our American subsidiarity, however, let's focus on what is meant by "matters should be handled by the smallest, lowest or least centralized competent authority". In plain words, we should not delegate to incompetent authority, and subsidiarity requires that we do not do so.

The Tenth Amendment to the Constitution states: "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people."

That brings us to Hercules, California. Stadium Plan Puts Hercules in Bind details what serves as a good example of an "incompetent authority". Simply put, many of our current community leaders can't be trusted by taxpayers to act in a fiscally competent fiduciary manner. In what appears to be the "incompetent" example of Hercules, this relatively small community of 24,000 planned to build a baseball complex costing $20 million. City officials engaged consultants and paid them ~$500,000 prior to even acquiring the land for the baseball complex. Then they couldn't get the land. I could go on, but you'll have to read about it to get the full flavor of what happened.

When citizens elect people to spend their money wisely and then trust them blindly, who is to blame? Pogo knows. I wonder how many other examples there are throughout our great country where the taxpayer gets ripped through the incompetence of the elected local officials. Too many, I'm sure. If subsidiarity is to work, citizens have to work, too.

We all like to criticize the politicians in Washington, and they deserve to be criticized, for sure. But how about the state and local politicians, including those leading school districts? Subsidiarity requires responsible, attentive and competent management. And this is true regardless of whether we're describing government or business organizations.

Thus, we the people need to take the time to oversee and when necessary harness the proposed actions of our elected officials. They have only OPM to spend, but for taxpayers it's MOM that they're spending. And even if the money doesn't come from us initially, it comes from a lender who will demand repayment down the road. And that makes it ours at the outset.

Then there are the fifty states. Prudence dictates that we spend only what we can afford, and we have to take into account all aspects of compensation when setting the "price" of labor. In Higher Taxes Yield to Budget Cuts in States, the pay differential between a state or local government worker and a worker in private industry is reported to be $12.44 per hour, thus representing a huge discrepancy. Most of that difference is attributed to the governments' higher costs for benefits such as pensions and health care. Money is money.

A big piece of demonstrated competency is in the area of financial responsibility. While a politician isn't elected for a thirty or forty year term, his decisions while in office will impact costs directly and meaningfully that far into the future. Taxpayers need to provide meaningful oversight to ensure local government competency.

Only then can we enjoy the benefits of subsidiarity as the Founders intended. And we'll like what happens when we do so. It's the American way, and it's very much unlike China's way.

Thanks. Bob.

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