A Lesson in Political Management

By Leef, George C. | Freeman, December 1999 | Go to article overview

A Lesson in Political Management


Leef, George C., Freeman


Suppose you have just learned that the house you live in has leaky water pipes. If not attended to, the damage done by the leaks will compound and the value of the house will decline. Would you spend whatever it took to fix the problem? Or would you go out and buy an expensive new high-definition TV?

That might sound like a silly question, but that's because you are assuming that you own the house. Of course, you would protect its value. The prospect of continuing damage from leaking water would be a strong incentive to repair or replace the pipes. On the other hand, what if the house wasn't your property? The loss in value would not be your loss, and unless the leak threatens your belongings, why bother with it? You might just go out and buy that new TV

Property rights obviously make a difference. What if there is no real owner with an interest in maintaining the property? That's the case with "public property," which really does not belong to any individual or group. Management of public property depends on the choices of politicians and bureaucrats who stand to gain nothing from making "right" decisions (those that make the best use of it) and to lose nothing from making "wrong" decisions (those that make less than optimal use of it). Political-bureaucratic management predictably leads to neglect of property entrusted to public officials in favor of spending that benefits them more in the currency of politics: influence, power, and prestige.

A recent controversy in North Carolina shows the truth of that theory.

The Campus Crisis

In April 1999 a consultant hired (at great expense) by the board of governors of the University of North Carolina released a report that shocked people. It stated that hundreds of buildings on the 16-campus UNC system were in "deplorable condition." Hundreds of millions of dollars of repair and renovation work was needed "urgently" for dorms, classrooms, laboratories, and libraries. Over a tenyear period, the university system's capital "needs" amounted to $6.9 billion.

Supporters of the university played up the repair and renovation angle, but inspection of the list of proposed spending projects showed that only about half the university's priority "Phase I" spending was to go for repair and renovation of academic buildings. The rest was for land acquisition, various campus enhancements (such as landscaping), nonacademic buildings (such as performing-arts centers and athletic facilities), and a largescale construction program to handle an expected surge in enrollments in the future. The "crisis" in the condition of existing buildings was running interference for a wish list of spending to expand and glorify the university system.

To pay for the great program to make the UNC system "ready for the next millennium," the consultant proposed multibillion-dollar bond issues by both the state government and by the university system itself If all that borrowing took place, it would double the state's bonded indebtedness (a point never mentioned by the proponents). To keep the public from rejecting this appropriation of resources by the university system, supporters sought to exempt the bonds from the state's referendum requirement by not having them backed by the full faith and credit of the state. Backers in essence said, "Trust us-you've elected us to make decisions on what is best for the state."

Trying to allay fears that this would be too much debt, politicians and university officials came up with economic arguments that would have any well-taught Economics 101 student laughing derisively. The spending, they said, would "stimulate the economy" and thereby keep the state's economy prosperous. Some people were impolite enough to point out that this is an example of Bastiat's lesson of the "seen and unseen"; left in private hands, the money would "stimulate the economy" in other ways.

Backers also argued that higher education "drove the economy," suggesting that if billions weren't spent as they wanted, somehow North Carolina businesses would be unable to find competent workers. …

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