January 16, 2003

Chapter 13

Democracy and Bureaucracy:

Some History

1. INTRODUCTION

     Bureaucracy, or bureau for short, refers to a hierarchical organization. We mean by this that it has a number of departments and sub-departments. Except at the lowest and highest levels, each worker is in a specific department which is higher than a lower level department but which is itself lower than a higher-level department. The classic case is the military bureaucracy. We call the people who work in a bureaucracy bureaucrats. Except for the bureau chief and bureaucrats at the lowest rank, each bureaucrat has a superior and he himself is also a superior.

The bureau chief is the manager of the bureaucracy. She ordinarily decides which resources the bureau will hire and which methods will be used to provide the bureau’s service. She is also typically in charge of preparing the bureau's budget. The bureau chief is not completely free to do as she pleases. The precise details of her job, and therefore the constraints on her behavior, are dictated by the person who hires or appoints her.

     Bureaucracies exist in business and in government. We are concerned here with the bureaucracies of a democratic government. In these, the bureau chief is hired and overseen by politicians, who follow a procedure that is specified by law or in the constitution. In addition, the bureau chief is constrained by law.

     In Public Choice, we use the term sponsor to refer to the politicians who hire and oversee the bureau chief. Thus, we say that the actions of the bureau chief are constrained by the actions she expects her sponsor to take in response to her behavior. A second source of constraints on the actions of bureau chiefs are laws regulating the bureau’s and/or bureau chief’s actions. Although these vary among bureaus, one law that is common to all bureaus is the civil service law. This law limits the ability of the bureau chief and other higher-ranking bureaucrats to hire, fire and promote lower-ranking bureaucrats.

     Modern national governments have many large bureaus, or departments. These include the defense department, the department of education, and the transportation department. State or provincial governments and even local governments also have bureaus. In a parliamentary system, the bureaus are called ministries.

The Assumption That Democratic Bureaus are Efficient

     Some people take it for granted that if successful governments today supply certain services, then people must want the services. Moreover, if the government uses bureaus to supply the services, bureaucratic supply must be efficient. For example, people often point to the economic success of democratic countries like the U.S., where the legislature has created large bureaucracies to implement the laws they have passed. If the U.S. people are so wealthy and if the U.S. bureaus supply a number of "public services," the reasoning goes, then the bureaucratic supply of those services must be efficient. A major reason for these presumptions is the lack of historical perspective. People do not realize just how new big government and bureaucratic supply is in the U.S. Except for the military, bureaucracy did not exist in the U.S. until about 75 years ago. Around that time, some state and local governments adopted this form. The formal bureaucratic structure that exists today at the national level became institutionalized only in the last twenty to forty years.

     This bureaucratic structure did not emerge because voters demanded it. Instead it appears to have emerged as the result of a political struggle over which branch of the national government should have the right to control government employees. The actual sequence of events is described later in the chapter. The point that we want to make here is that it would be a mistake to think that bureaucratic supply was the outcome of decisions made by competent, knowledgeable, efficiency-conscious politicians. A contrary indication is suggested by the lower rate of economic growth in the U.S. economy that has occurred during the same period. Although it is not easy to judge the relevance of economists' statistics on rates of growth in a complex world, there is at least a hint here that the growth of bureaucratic supply of "public services" may have inhibited the growth of private enterprise.

     The fact that bureaucracy is used in the mature democracies of the world today to supply various government services is not necessarily evidence that bureaucracy is efficient in satisfying citizen's wants. To determine its efficiency, we must analyze it by trying to understand bureaucratic supply and its broader environment. We must analyze the bureau in the same way that we have analyzed democracy in general -- by assuming that bureau chiefs, bureaucrats, and sponsors act in their self interest under the constraints imposed by laws and constitutional rules.

Why Study Bureaucracy?

     Why study bureaucracy? We know that bureaucracy is the way that the people of all the democracies in the world today have chosen to cause various goods and services to be supplied. Some of these services, like the police and perhaps the military, are necessary for the continuing survival of a nation's democracy and the market economy. Even if these services are provided inefficiently in terms of some ideal, they are necessary. Others services, however, are not necessary. If we judge that the bureaus that supply them cause more harm than good, we should either improve them or get rid of them. If a service is not yet being supplied through government, our study will help us judge whether it should be. In short, the study of bureaucracy will help us determine the significance of bureaucracy as a source of government failure.

Plan of the Chapter

     The purpose of this chapter is to introduce bureaucracy. We do this in two steps. First, in part two, we review the classic sociological model of bureaucracy presented by Max Weber. Second, in part three, we present a brief history of government administration in the U.S. We choose the U.S. mainly because of its size and because bureaucracy developed there long after democracy was well established. By comparing the early times without bureaucracy to the modern times in which bureaucracy is a common feature, we can better understand how it developed. We may also learn something about whether it was a good or bad development from the standpoint of efficiency.

     The subject of bureaucracy is continued in chapters Fourteen and Fifteen. Chapter Fourteen presents and assesses the popular model of American bureaucracy described by William Niskanen. Chapter Fifteen makes some recommendations on how to improve the bureaucratic supply of public goods when bureaus are necessary.

2. THE "IDEAL" BUREAUCRACY

     In social science, it is typical to begin a discussion of bureaucracy by referring to the German sociologist Max Weber. Writing in 1922, Weber believed that a modern government, unlike its predecessors, should be impartial. It should administer laws fairly to all without discrimination. To achieve this goal, a government needs a system of administration in which officials turn a blind eye to the particular status or economic position of the people who benefit or are harmed by its actions. He believed that this could be achieved by using a bureaucratic system of administration.

The Function of Government Administration

     Weber's notion of administration was a functional one. We have defined the function of democratic legislators as that of making laws. We might add Weber's idea to this by saying that the function of government administrators, as he saw it, is to administer and enforce the laws impartially. Just as members of a collective try to build a political system in which the law making function is performed, they may want a system in which laws are enforced impartially.

How to Assure That Administrators Perform Their Function

     In the case of the legislature, our first and most important question was how members of a collective could build a set of constitutional rules to help assure that the legislative function would be performed. Weber asked a similar question about administrators. How could members of a collective assure that the administrators would (1) act impartially and (2) be efficient. Weber gave three answers. First, he said that in order to insulate administrators from partisan influences, they should be long-term employees, or career bureaucrats. This could be accomplished by making it difficult for sponsors to replace already-hired administrators and by setting up a lucrative retirement and pension program. Second, in order to achieve efficient supervision, accountability, and fair play; the administrators should be organized in a hierarchical structure of governance, headed by a chief, like that of the modern army. They should be employed in bureaus. All bureaus should have rules of behavior that are clear and generally applicable to all. The pay of bureaucrats and their opportunities for promotion and prospects for demotion should be determined according to whether they follow the behavioral rules.

     The third answer accounts for those services that require specialists at lower levels. If specialists are hired, they are likely to be better able than their superiors to determine whether they are operating most efficiently in any particular situation. To achieve efficiency, the chief and the other various superiors must allow the experts to use discretion in doing their jobs. The need for specialists raises a problem of supervision that a hierarchical structure is not suited to deal with. Strict rules cannot be applied to specialists because of the cost or inability of their superiors to judge whether they are exercising their discretion properly. How then can the bureaucratic structure give the experts incentives to do the job for which they were hired? Weber's solution to this problem was a moral code. Each specialized supplier of government services must possess or be instilled with an ethical predisposition to act in the interest of the people she serves.

Weber's Ideal Bureaucracy Is Unrealizable in a Democracy

     When we try to use Weber's image of bureaucracy to help us understand the bureaus that exist in modern democracies, we encounter some major difficulties. Here we discuss two of these. First, it seems that Weber did not appreciate the political nature of bureaucracy. Second, he seems to have made an unrealistic assumption that it is possible to either change a bureaucrat's self interest or to train her to act contrary to it.

Politics and Limitations on Power

     Weber did not distinguish between bureaucracy under a dictatorship and bureaucracy under democracy. This is important for two reasons. First a dictator, by definition, does not have to be concerned about reelection. Second, he faces no legal or constitutional constraints on the directives he gives a bureau chief or on the means he uses to control the chief and the bureaucrats. As a result, he is very likely to have both (1) greater incentive and (2) greater power to make a bureau efficient than the politicians of a democracy. Consider each in turn.

     The greater incentive to control bureaucrats is due to the fact that the dictator is typically the main beneficiary of the services. Of course, a dictator may not be clever enough to make his bureaucracy efficient. Some dictators have been wise; others stupid. Moreover efficiency, as the dictator defines it, is likely to be quite different from citizens’ ideas of efficiency. For example, a dictator may define efficiency in terms of whether his bureaus have been able to extract the greatest amount of taxes from the citizens in order to finance his lavishly decorated palaces.

     In a democracy, politicians have much less incentive to make bureaus efficient. As we have seen, the main goals of politicians are reelection and aiding the party. The bureau chief can help in this by serving pressure groups or other campaign contributors and by serving the politicians' constituents. In the case of representatives from voting districts, this often means pleasing particular groups in particular districts. The bureau chief also can serve politicians by trying to persuade the lower-level bureaucrats and the clients they serve to vote or campaign for the president and his party. If it is permissible, the bureau chief may even order the bureaucrats to campaign on behalf of candidates or to make campaign contributions. In the U.S., this latter practice has gradually been eliminated. Because of the service a bureau chief can provide to politicians, political parties, and pressure groups; when a new party comes into power, it almost always replaces the existing bureau chiefs.

     Bureau chiefs who followed Weber's ideal would have to ignore the demands of politicians, political parties and pressure groups, except as those demands are expressed through ordinary law-making. Yet if politicians expect them to do this, the politicians would ordinarily not appoint them in the first place.

     The greater power to make a bureau efficient is due to the dictator's control over the monopoly of force. By definition, he possesses the right to punish bureaucrats in the most severe ways. If he believes that a bureau chief or lower level bureaucrat is corrupt or has been shirking, he can torture and kill her.

     This kind of direct and severe intervention is not possible in a democracy. Consider first the control exercised by politicians over bureau chiefs. Bureau chiefs are chosen by politicians. The method used in a presidential system differs from that used in a parliamentary system. In a presidential system, they are typically selected by the president, subject to the approval of the legislature. In a parliamentary system, the selection occurs at the same time that the legislature chooses the prime minister. Thus, we say that the ruling party, or coalition, "formed the government," meaning that they chose the prime minister and his cabinet of bureau chiefs. In a presidential system, the president can demand the resignation of an errant bureau chief; in a parliamentary system, the parliament can do so. But that is the most they can do. Unless a chief has committed a crime, they cannot command the monopoly over force to punish her. She has at her disposal the same constitutional protections against being punished unjustly or severely as everyone else in a democracy.

     The power of politicians is further limited by the fact that bureau chiefs themselves have only limited power over the lower-level bureaucrats. Members of the collective recognize that bureau chiefs will probably be partly used to help the incumbent party and politicians achieve reelection. They tolerate this in order to give politicians the power to run the government as they see fit. However, they do not want to return to the spoils system (see Chapter Twelve and below in this chapter). Thus they favor a system in which the lower level bureaucrats are protected from arbitrary actions by the bureau chief.

     It might be thought that members of a collective could achieve Weber's ideal and avoid political influence on bureau chiefs by making them independent, like the Supreme Court Justices in the U.S. These judges are appointed by the president, subject to approval by the legislature, for life terms. Because they are appointed, political factors influence the selection of judges. History shows that presidents in the U.S. tend to nominate judges whose views correspond to those of their party. However, because the judges are appointed for life, the politicians cannot legally control them after they are chosen. Perhaps bureau chiefs could be chosen in the same way.

     This seems to be a very bad idea. Members of the collective elect legislators and the chief executive as their agents to make taxing and spending decisions. They want these elected officials to perform the function of deciding whether a particular service will be supplied and how. If they turned this decision-making power over to independent bureau chiefs, they would give up the voting power that enables them to control the external costs of collective decision-making and the costs of power abuse (see Chapters Four and Five).

      Suppose that the constitution made the chief of the transportation department as independent as a Supreme Court Judge. Members of a collective could make this happen by allowing politicians to appoint him for life and granting him fixed annual increases in his budget (and salary) to keep up with inflation. Or, if we did not trust only one person to direct transportation, we might want politicians to appoint a board of nine directors, as in the case of the U.S. Supreme Court. If we did this, not only would politicians lose control over transportation, so also would members of the collective. Politicians could not direct the chief or board of directors to, say, shift expenditures from two-lane roads to super-highways or to help start a mass transit system. The bureau chief (or board) would be the final decision-maker. Peoples' wants would only matter if the chief (or board) wanted them to matter.

     The service supplied by Supreme Court Justices is special. It is in large part to check the power of politicians and bureaucrats by judging whether their actions violate the provisions of the constitution and then making their judgments public. The service is strictly defined, limited, and permanent. When members of the collective make a constitution, they foresee no reason to expect the service to change. We could hardly expect judges to supply this service if they were controlled by politicians.

Neglect of Bureaucrats' Self Interest

     Weber believed that two mechanisms could be used to assure that a bureaucracy would act in the interests of the people. In the case of non-specialists, he put his faith in a hierarchical bureaucracy in which the bureaucrats were insulated from political forces by something like a civil service system. In the case of specialists, he recommended the adoption of a moral code. Let us first consider non-specialists. He recommended that these be selected by a civil service-type examination. In addition, he said that to avoid favoritism, there should be a system of fixed rules for hiring, promotion, demotion, and pensions

     Put yourself in the shoes of a non-specialist who has passed a civil service examination and is on her way to becoming a long-term bureaucrat. Given the general nature of the civil service exams, you are likely to be at the same educational level as your peers in the bureau for which you have been hired. You are also likely to have some of the same job skills, although you are unlikely to have skills that are too specific. You realize soon after you are hired that you have unusually high job security. Your boss can reduce your job satisfaction and recommend against promotion; but, once you have passed the trial period, he cannot fire you without a costly internal review. And even then, you can sue in court to be reinstated and paid compensation if it is judged that you were treated differently from other employees in a similar situation.

     Because of the pension and benefit system, you also realize that, as time passes, you are developing an increasing interest in sticking to the job until the milestone of retirement arrives. Because of this, you increasingly link your well-being to the well-being of the agency. More concretely, you link your well-being to the size of the agency budget. Higher budgets typically mean a greater ability to achieve your goals, no matter what your goals are. Suppose that your goal is to provide more of what you regard as service to consumers. Then a higher budget is likely to raise your ability to do this. So you will favor it. This is true whether your idea of greater service is the same as or different from that of citizens.

     A higher budget will also give you greater ability to order equipment. Some of this equipment may be useful in providing additional service but some may be useful only in making your job environment more pleasant. A higher budget will help to hire new entry-level employees, thereby helping you rise to a relatively higher position in the hierarchy. This may or may not increase efficiency but it is likely to open up opportunities for your promotion or transfer to a better position.

     Now consider your attitude toward the bureau chief. If you think that the chief is aggressively trying to persuade politicians to raise the budget, you will tend to cooperate with her. If you think differently, you will not cooperate; at least to the extent that you can get away with it without reducing your prospect for advancement.

     By putting ourselves in the shoes of the typical lower level bureaucrat, we see that whatever else he may aim to achieve on the job, he will ordinarily support any activity that he believes will help the bureau obtain a high budget. He will favor the continued existence and well being of the bureau simply because he works there. Will a bureau comprised of such individuals be efficient? It is easy to find a reason why it would not be. Lower level bureaucrats would tend to reject any policy that would improve efficiency if, at the same time, it reduces their security or the budget of the bureau. A bureau chief who tried to implement a policy that reduced lower level bureaucrats’ security and the budget could not expect to achieve much cooperation from the lower level bureaucrats.

     We now turn to specialists. Because strict bureaucratic rules would hamper the activities of such people, Weber recommended that they follow a moral code. Let us see whether this is realistic, in light of self interest. The supreme specialist is the bureau chief herself. She is the bureau's top goal-setter, rule-maker, and rule enforcer. It follows from Weber's view that she should subscribe to a moral code. Yet, the primary goal of the politicians who appoint the bureau chief is reelection. As a result, they typically screen prospective bureau chiefs on the basis of two characteristics: (1) their expected contributions to future election success and (2) their contributions to past election success. Of course, a bureau chief or minister who exhibits a high moral character can be an asset in future elections if voters are aware of her character and express their views at the polls. However, vote-getting qualities other than moral character are also important and may outweigh it in the vote-getting game. Given this fact, there is no reason to expect either that the appointed bureau chief would be a specialist or, if she is, that she would conform to a Weberian moral code.

     Now consider specialists within the bureaucracy. As pointed out above, lower level bureaucrats are hired through the civil service system. As a result, it is very difficult for a bureau chief not only to hire specialists but also to assure that the hired individuals are morally inclined to serve citizens' interests. Civil service examinations cannot adequately test for specialized skills. Often a specialized skill must be learned on the job and it is sometimes not truly tested until an unusual or extraordinary event occurs. Nor can civil service examinations test for moral character -- i.e., for whether a prospective bureaucrat will act in the "interest of the collective." The fact is that a civil service system is not suited to selecting specialists and individuals who would find it in their interest to serve citizens at their expense. Yet the civil service appears necessary in order to minimize external costs and the costs of power abuse.

Summary Assessment

     Our discussion of the political nature of democracy suggests that Weber's ideal of an impartial bureaucracy cannot be achieved. Indeed, if we broaden our perspective, it is not evident that members of a collective who frame a constitution would even want a bureaucracy to achieve this goal. As we pointed out in chapter , the framers of the constitution of the U.S. were not even willing to allow all citizens to vote. They envisioned a democracy in which, at least during their lifetimes, the elite would elect politicians and in which the powers of the national government were limited. If they had expected a large bureaucracy, it seems unlikely that they would have wanted the bureaucrats to use their powers impartially. Impartial administration might give more services and political power to uninformed and illiterate individuals who might subvert the system that the framers were trying to create.

     Even if we could count on a bureaucracy to administer laws effectively, there is good reason to believe that the lower-level bureaucrats, in general, would pressure a bureau chief to advocate higher and higher budgets. Also, a bureaucracy that is organized according to the principle of impartiality in hiring is not suited to hire specialists. As we have seen, to use their discretion efficiently and impartially, specialists would have to exhibit high moral character. But civil service laws are ill-suited to select either specialists or people with high moral character.

3. THE HISTORY OF THE GOVERNMENT

ADMINISTRATION IN THE U.S.

     Roughly speaking, we can divide the history of government administration in the U.S. into four periods: the system of class and privilege (1788-1828), the spoils system (1828-1912), the transition period (1912-1978), and the modern system. We discuss each in turn.

The System of Class and Privilege

     Following the establishment of the United States and the ratification of the constitution by the original thirteen states, government programs were run almost exclusively by a relatively small elite of landowners and wealthy businesspeople, or by their associates. At that time the federal government was very small. It consisted almost entirely of the customs service and the postal service.

     It may seem strange today to learn that a tiny minority of landowners and wealthy businesspeople decided on the hiring of all employees of the major U.S. government departments. But it is important to realize the following facts about those early days. At the time the union was formed, each state had its own separate government, with its own elected legislature. Most states also had state constitutions. The elected state legislators were very reluctant to give up power to the newly-formed national government. Accordingly, they demanded the right to elect representatives to the U.S. Senate. So the first fact to realize is that the two representatives from each state to the U.S. Senate were chosen not by the voters of each state but by the state legislators. The second fact is that the state legislators themselves were elected by only a small minority of all the citizens in the state. For the most part, state constitutions permitted only landowners and the commercial elite to vote for the state legislators. Candidates for the house of representatives were elected directly by the voters of the states. But again only landowners and the commercial elite could vote. A third fact is that the president was elected by a set of electors appointed by each state. Since state legislators and the state governors held the power in the respective states, they decided how the appointments would be made. Since only landowners and the commercial elite could vote, they ultimately held the power.

     Thus all of the people elected to federal offices depended on the state politicians and the state politicians were elected by a small minority of the residents. It should be no surprise, therefore, that the elected federal government officials made appointments based almost entirely on the recommendations of the landowners and commercial elite. Ordinarily, if a legislator or president wanted to get elected, he had to agree to appoint the electors or their agents to the small number of government posts that existed.

     Every state gradually liberalized its voting so that more and more non-elite and/or non-property owning residents could vote for state legislators and representatives. In addition, more and more people became landowners and businesspeople. Eventually the growing number of voters raised the profitability of forming interstate political parties.

     Andrew Jackson, in 1828, was the first president to be elected by affiliating himself with a mass party. It was during his administration that the practice of hiring elites in the customs and postal services was replaced by the practice of hiring party loyalists.

The Spoils System

     The spoils system, which we described in Chapter Twelve, was a direct result of the rise of the political party. By the time of the 1827 election, obtaining enough votes to be elected to a national government office was becoming an increasingly complex affair. An increasing number of people had become landowners and states were gradually extending the voting franchise from landowning and propertied classes to members of the middle class. It became increasingly difficult for a candidate for president or the Congress to win an election by only appealing to the elites. Unless a person was a very exceptional candidate, he had to make deals with a political party. He had two principal ways to bargain. First, he could pay the political party to help him. Second, he could promise that, after the election, he would give government jobs to loyal party members or others who the party leaders designated. In exchange, the political party would bring in new voters, round up existing voters, stuff ballot boxes, and intimidate opposition party members and voters.

     Under the spoils system, appointments to jobs in government service were made by Congress. (Although the president had formal appointment power, he ordinarily delegated that power to Congress.) Suppose that the conservative party won the election, defeating the incumbent liberal party. Then the conservatives would control practically all appointments to government posts.

     During this period, the government was still relatively small. The jobs were easy because of the lack of central government supervision. Moreover, some jobs could be especially worth having.

     To see how the spoils system worked, let us take the case of customs service. The collector of customs was responsible for collecting tariffs, the major source of federal revenue during the first century of the U.S. Since there were many ports of entry, each port state had its own collector, or customs head. Although the law specified the exact import duties to be collected on specific products, the customs head was responsible for administration. He could overlook some importers or impose duties on their goods that were lower than the law required, while demanding that other importers pay the full duties. In addition, he could delay or expedite import shipments. Such action could have very large effects on the profits of particular importers and businesses that depended on imports. As a result, some local importers had large incentives to secure the appointment of an accommodating person to the position of customs head. By doing this, they could reduce their costs and perhaps cause their competitor's costs to be higher. To achieve their goal, they would help the local party elect members to Congress who would make the appointments they wanted.

     Let us turn our attention away from the customs head and toward the ordinary customs workers. Perhaps the best way to understand how the spoils system impacted lower level workers is to think of government jobs as gifts that the legislators could use to reward people who helped them get elected. Put yourself in the shoes of someone who wants a government job. One way to achieve your aim is to buy the job by contributing money to the candidate, to his political party, or to someone who is designated by the candidate or party to assign jobs. A second way is to join a political party first and then perform enough work and/or make enough friends to be rewarded with a job if the party's candidate won the election.

     Naturally, government programs became highly discriminatory. The bureaucrats in most of the programs did not even pretend to be concerned with the "public interest." Their aims were to serve their own interests. To do this, they sometimes had to serve the interests of those who had helped with the election, who might help with future elections, or who paid them money. Usually, however, they simply did not work very hard. Or, if they were in a position to do so, they exchanged privilege for bribes. At this point in history there was no bureaucracy; and administrators were not expected to help supply public goods, although the customs collectors were expected to collect enough money to support the government.

     After 1828, the political party grew in importance. A major reason was the growth of the voting population. Three factors contributed to this growth. The first was the steady stream of new citizens due to the practically free immigration policies. The second was an amendment to the federal constitution in 1870 which extended the voting franchise to all male citizens. The third was the end of the civil war, which enfranchised many previously unenfranchised male African American citizens.

     The spoils system, as a broad based system of hiring government employees, did not fully end until 1978. A limited civil service system was adopted in 1883, and by 1900 the per cent of government positions for which workers were hired through the civil service system grew to forty-six per cent. The rest of the positions remained part of the spoils system, however.

Transition to the Modern Period

     If we focus only on the chief executive, we can say that the ideas behind modern bureaucracy in the U.S. were planted by Woodrow Wilson, who was elected president in 1912. Before his election, Wilson's writings presented an idea of efficient management that was very similar to that of the sociologist Weber. He believed that the spoils system should be replaced by a set of hierarchical organizations containing non-partisan professionals. This could be accomplished, he believed, by appointing non-partisan experts to head the bureaus and by using a civil service system to hire lower level bureaucrats.

The First Civil Service Law

     After he was elected, Wilson aimed to restructure government according to his beliefs. However he could not pass laws. The push for bureaucratization had to come from Congress. But the members of a majority party in Congress had no incentive to pass a civil service law. This is because control over hiring served to increase the initial advantage that incumbents usually have over challengers. Until the end of the spoils system, both incumbents and challengers could promise to reward loyal party members who helped them get elected with government jobs. However, incumbents typically had an initial advantage. So prospective helpers in the campaign normally attached a higher value to the incumbents' promises than to challengers' promises. As a result, the spoils system typically enabled incumbents to increase their initial advantage.

     But an interesting series of events occurred in 1883. Sensing popular sentiment against the spoils system, the minority party challengers promised that, if they were elected, they would reform the spoils system. The incumbents were slow to respond and, as a result, the challengers gained an advantage in the polls. The incumbents anticipated that they would lose the election. They also worried that the challengers would not keep their promise to voters and thus would have the same advantage in the following election that incumbents always had. Fearing that they would lose the current election and also have a large disadvantage in the next one, they decided to pass a civil service law just before leaving office. The incumbents knew that if they lost the election, the challengers could easily reverse the civil service law by majority vote. However, they cleverly anticipated that the challengers would not risk their future credibility with voters by doing so. The challengers would realize that if they took deliberate action to reverse the law, voters would regard them as unreliable promise-breakers and not support their reelection in the future.

     Thus, the first civil service law was passed. And continuing public concern about returning to the spoils system insured that no incumbent party in the future could gain by overturning the initial law. However, the law covered only a small number of lower level, more or less permanent, bureau jobs. The spoils system continued at the upper levels and particularly in the smaller and less permanent government agencies. And, at least for the time being, no party had an incentive to overhaul the system completely.

Decentralization of Congressional Power Over Agency Appointments

     During this period of strong political parties, members of the majority party in Congress had a common interest in using the party as a means of getting reelected. But some of their other interests were not so much in common. Each member had her own voting district constituents and others that she wanted to serve. Legislators of the same party often disagreed over who should be appointed to various national government posts. To avoid the transactions costs associated with bickering over appointments, the ruling party centralized the appointment power in the following way.

     By majority vote, the House of Representatives divided itself into special committees. It assigned to each committee the task of overseeing a particular government agency. Each committee had a chairman who, according to the rules of the House, had to be a member of the majority party. The chairman was assigned the right to make all the agency appointments that were not covered by the Civil Service Act. For example, the Chairman of the House Agriculture Committee made all appointments to the Agriculture Department that were not covered by civil service.

     How could the party assure that each committee chairman would appoint the candidates desired by the party leaders? This was accomplished by yet another rule that gave the elected leader of the House of Representatives the right to appoint the committee chairmen. At the beginning of each session of the House (in other words, immediately after the election), the majority party would hold an election for the House majority leader, or whip. This is a single legislator who would, in theory, represent the interests of the party. Because the majority leader had the right to appoint committee chairmen, he was very powerful. He would only appoint legislators to chairmanships if he had their promise to be loyal to the party -- i.e., to him. Being loyal meant that they agreed to appoint to the government agencies only those people who he recommended. By this means, the majority leader -- and therefore, the party -- controlled all appointments.

     This system changed in 1910. The House of Representatives decentralized (i.e., dispersed) the power to control appointments by taking away the majority leader's right to appoint the chairmen to the committees. Committee chairmen still had to be members of the majority party. However, instead of being appointed by the majority leader, they had to be elected by a majority vote by members of the committee.

Growth of Presidential Power Over Agency Appointments

     The decentralization of committee power marked the beginning of a period during which the president's power over appointments began to expand. The expansion reached its highest point during the administrations of Franklin Roosevelt beginning in 1933. Roosevelt, a democrat, enjoyed the benefit of a democratic Congress. As time passed, he became so popular in the polls that he was able to dominate the democratic party. Democratic candidates for reelection found it wise to support his policies. As a result, he was able to create many new agencies. Because of his popularity and power and because these new jobs were not covered by the civil service law, he was able to make all the appointments himself. This helped to enhance his power and increase the probability of his reelection; since he could promise rewards of appointments to those who helped him. Moreover, since he could use his appointment power to help legislators also, it helped shift the balance of power away from the political party and legislature toward the presidency.

Passage of the Civil Service Act

     At a later time in history, when the president and the Congressional majority were from different parties (1978), Congress sought to take away the new presidential power over appointments. They did so by changing the Civil Service Act to cover practically all employees except the bureau chief. Thus one might argue that the U.S. civil service, as we know it today, resulted from a conflict over power between the Presidency and the Congress. But this explanation is too simple.

Underlying Factors

     On the surface, the decline of the spoils system and the rise of the modern civil service seems to be the consequence of a power struggle first between political parties and later between different branches of the government. If this was the only explanation for the transition to a civil service system, we would have no reason to think that it served voters in any way. There are two reasons to believe that the transition to bureaucratic supply under a civil service system was at least not inconsistent with the desires of most voters. Two underlying characteristics of the voting population seem likely to have been important in leading politicians to eliminate the spoils system: (1) the increase in demand for local public goods that accompanied the growing population of voters and (2) voters' increased ability to understand the effects of government policies on them and to pressure politicians for change by means of pressure groups. The latter characteristic was mainly due to improvements in communication and transportation. We discuss each in turn.

     The voting population increased tremendously during the period. First, the combination of a high birth rate and relatively free immigration caused the U.S. population itself to double about every thirty years. Second, the right to vote was extended to an increasing proportion of the population. As mentioned earlier, throughout the 19th century, state governments gradually expanded the number and categories of people who could vote. The national government also acted to expand voting rights. It freed the slaves in the 1860s and passed two constitutional amendments. An amendment in 1868 gave all men the right to vote while a 1920 amendment gave the same right to all women.

     The increase in the voting population, combined with population congestion in cities, drastically raised the demand for local public goods. These goods were supplied through city, county, and state governments. Although the demand increased, the method of hiring people to supply the goods stayed more or less the same at first. City, county and state governments had more or less the same kind of spoils system as existed in the national government. But, as we know, the spoils system is inefficient. The people hired to supply local public goods under it are typically not skilled, they are partisan, they do not work very hard, and they are easily bribed. Local voters demanded change. As changes occurred, citizens began to observe improvements in local government supplies of services. Later, they began to demand similar reforms at the national level.

     Improvements in communications and transportation made it possible for the voters in districts where reforms had not yet occurred to find out about their success elsewhere. This bolstered the demand for local reforms. In addition, it helped voters discover inefficiencies under the spoils system in the national supply of public goods. Accordingly, many people began to demand change at the national level. Politicians like Woodrow Wilson, who advocated Weber-type bureaucratic reforms, could count on votes from such people. Voters tended to support such reforms, other things equal, because they believed that the reforms would bring increased efficiency in the supply of both national public goods and local public goods that were supplied by the national government.

     The improvements in communication and transportation helped the newly emerging national pressure groups, which we discussed in Chapter Twelve. Most of these pressure groups were not so much interested in reforming the national bureaucracy as they were in gaining special privilege for their members. To achieve their goals at the national level, however, they needed to influence politicians. In the influence game, they faced stiff competition from the traditionally powerful political parties. So they set their sights first on reducing party influence. They could achieve this by reducing the power of the party leaders to reward workers with government jobs – i.e., by getting rid of the spoils system. So, broadly speaking, they supported the initially small minority of politicians who promised to reduce the spoils.

     Thus, the civil service system and non-partisanship in appointments to government positions were increasingly demanded by two important sets of people: (1) voters who wanted efficiently-supplied local public goods and other services from the national government and (2) pressure groups that wanted to wrest away influence over politicians from the political parties. Candidates for political office naturally perceived these demands. So they began to include bureaucratic reform in their platforms.

Summary

     The spoils system enhanced the power of political parties. Its existence enabled political parties to reward campaign helpers and contributors with jobs. This gave parties the power to contribute substantially to the election of candidates. Candidates who did not affiliate with a political party or who were not loyal to the party found it more difficult to get elected. However, changes in the voting population, population congestion, and improving communication led to an increased demand for efficiently-supplied national and local public goods. Voters became increasingly concerned about inefficiency in the national government agencies. In addition, the new national pressure groups sought special privileges that were difficult to obtain because of the influence of political parties over politicians. The combined pressure from voters and pressure groups led to increased bureaucratization of government agencies and a corresponding reduction in the influence of political parties. One result of the reduced influence of political parties was the rising power of the president relative to legislators.

     These changes were aided by the continuing competition among politicians. First there was competition among parties. This helped remove the additional advantage of incumbents due to their power to appoint loyalists to government jobs. Second, there was competition between the Presidency and Congress, which led to an expansion of the Civil Service System into its present form.

The System Today

     There is no convenient name to refer to today's system. We can best understand it by trying to put ourselves in the shoes of the various actors to which it is most relevant, namely the hired bureaucrats, the bureau chief, members of the Congressional oversight committees, and the president.

Hired Bureaucrats

     Practically all federal government employees are hired through the civil service system. This practically always means that in order to qualify as an applicant, one must pass an examination and/or have attained a given level of education from an accredited school. The agency can exercise some discretion in choosing among the qualified applicants. The behavior rules that pertain to a given bureau are determined within the bureaus, although each bureau must follow a merit system of promotion.

     The first hurdle faced by a new employee is the training and probationary period. During this period, new employees are typically required to pledge support for the bureau's overall aim of supplying public service. We could say that the employees are expected to possess a code of ethics that is specific to the bureau. For example, a trainee with the Federal Bureau of Investigation (FBI) is expected to express a willingness and even a desire to enforce the laws impartially and in a non-partisan way.

     After a trial period, the employee faces an evaluation by his superiors. If he passes, he is classified as a permanent employee. At this stage, he acquires the right to continue working at the bureau, unless he commits serious violations of rules or unless the bureau's budget is reduced or the bureau is disbanded. In addition, he begins to acquire other rights. As the length of his service increases, so do his rights to vacation time, pensions, and seniority in the event of a budget cutback.

     Because the value of the employee's rights increases with the length of service, he becomes increasingly dependent on the legislature and on his bureau chief's aggressiveness in seeking a high budget. Thus, he tends to favor legislators and bureau chiefs who support the bureau. This dependence increases with his longevity. The longer he works in the bureau, the lower are his opportunities for employment elsewhere; since his other job skills get rusty. In the meantime, his loyalty is transformed from support for the bureau's mission to support for the bureau's budget, as described above.

Pay and Fringe Benefits

     Pay and fringe benefits in the civil service differ significantly from those in a free market economy. In a market economy, there is a wide variety of work agreements, each one being suited to a particular specialization, the desires of the worker, and the demands for his services. For example, different auto mechanics, machine operators, word processors, foremen, clerks, and so on have different contracts, hours of work, working conditions, and other obligations and benefits. Some workers have contracts with detailed specifications about working conditions, the conditions under which they could be laid off, pensions, insurance, health benefits, retirement benefits and so on. Others have no such contracts but, other things equal, receive higher pay. Because employers and employees negotiate their own preferred deals, working conditions and compensation arrangements vary widely.

     Government employment is different. For the most part, in all of the mature democracies, government workers of a similar type have the same kind of contracts. Workers are paid according to same scale; they receive similar pensions, health benefits, vacation time, and retirement benefits; and they are subject to the same layoff policies. They may also have lifetime rights to housing, tax exemptions, and subsidies.

     The reason for the uniformity in the civil service seems to be citizens' desires to safeguard against the abuse of discretion. For example, if the head of a department in a bureau could decide a worker's salary by himself, he could make the salary contingent on the worker providing personal services to her or help in a favored politician’s election campaign.

The Bureau Chief

     Because the bureau chief is appointed by the president, her tenure typically lasts only so long as the president decides not to replace her. If the president's party wins the next election, she may continue in her post, although this is not assured. Thus, she has an incentive to cooperate with the president and his party. Her ability to achieve her goals depends on the size of her budget. Accordingly, she ordinarily has an incentive to convince the legislature that her budget should be large. The exception would be if the president (or his party) believed that he (they) could gain votes by reducing the size of bureau. This has been rare in the U.S.

     Today, bureau chiefs cannot legally intimidate employees to vote for a political candidate or to contribute to his campaign. However, they can use their control over resources in a politically biased way. For example, in public addresses, the heads of the administrative agencies tend to assert that the president's policies are good and that the opposition party's policies are misguided. However, the other bureaucrats typically support any policy that will bring them security, increases in pay, or other benefits. Thus, they are likely to vehemently oppose a chief who advocates cutting back or abolishing a bureau. Such a chief will not command much support from the lower-level bureaucrats. Thus a president is under pressure from both lower-level bureaucrats and most bureau chiefs to maintain high budgets.

Oversight by the President

     The president has the power to appoint the chiefs of all bureaus, subject to approval by both houses of Congress; he can dismiss a bureau chief as he wishes. In an effort to assure that the appointed chiefs follow his orders or act according to his desires, he typically appoints close advisors to keep account of the bureau chiefs and the activities of the bureaus. On the basis of their reports, he either directs others to supervise the chiefs or he supervises them himself. The president's power over a bureau is mainly due to his power to dismiss the bureau chief. If he judges a bureau chief to be deficient in some way, he simply dismisses her.

Congressional Oversight

     Congress also exercises oversight. On the one hand, it has the power to approve all presidential appointments to the job of bureau chief. On the other hand, the bureaus are accountable to Congress which can, by majority vote, summon bureaucrats to give testimony. Except for bureaus involved in national security or the surveillance of criminals, congressional investigators typically reveal such testimony to the public. Lying to Congress is a crime. This fact gives the two houses of Congress the power to command that bureau chiefs and other bureau employees reveal information about bureau activities.

     To help decide whether to command testimony, both houses of Congress have standing oversight committees. Their function is to oversee the activities of the major bureaus. In 1974, the House had eighteen and the Senate had seventeen such committees. The committees are actually charged with two tasks: (1) keeping an eye on the bureaus and (2) making budget recommendations to the full Senate or House of Representatives. The latter task gives them added power, particular during the annual budget review process. During this process, the president submits an annual budget proposal to Congress in which he includes the separate budget proposals of each bureau. Congress is free to make changes in the budget as part of a negotiation process that ultimately results in a compromise between the President and the two houses of Congress.

     The committees do not control the recommendations made by the legislative bodies. They merely make recommendations. But all members of the legislature take account of the committees’ recommendations. In addition, each committee member has voting power on bills which she may bring to bear on a recalcitrant bureau chief. Thus, if a committee member is not pleased with a bureau chief or with a bureau’s activities, she can threaten to try to recommend a reduction in the bureau’s budget or other changes in the bureau.

     Exactly how a committee member uses her power depends on a variety of factors. Committee members want to please campaign contributors, pressure groups, and the constituencies in their voting districts. The relative importance of these factors differs from one legislator to the next. One common element, however, is that members of the committee seldom have much information about the day-to-day operation of the bureau as the bureau chief. Thus, they typically have an information disadvantage when they evaluate a bureau chief's testimony. In Chapter Fourteen, we shall refer to this as information asymmetry.

The Career Bureaucrats

     Our discussion here is mainly about control over the appointed bureau chiefs. Neither the president nor Congress has much control over the career bureaucrats. Their only real power is to change a bureau's mission or its budget. And to do this, the two branches of government must cooperate. This situation prompted President Truman in the late 1940s to say that trying to get the bureaucrats to carry out an executive order is like trying to push a string! President Nixon complained around 1970:

          We have no discipline in this bureaucracy. We never fire anybody. We never reprimand anybody. We never demote anybody. We always promote the sons-of-bitches that kick us in the ass.(Frederick Mosher, 1974, as quoted by Knott and Miller, 1987: 241.)

Oversight in a Parliamentary System

     In a parliamentary system, bureau chiefs are appointed from the legislature itself and are ordinarily members of the ruling party or coalition of parties. The leader of the party, typically the prime minister, directly supervises the bureau chiefs or uses his closest advisors to do so. The opposition party (parties) also participates in the monitoring, since their members expect that the knowledge they obtain may help them get reelected or to defeat the ruling party or coalition in the next election. There are no committees, although the opposition party(ies) may assign party members who they regard as specialists to keep track of the bureaus. The ministers (i.e., bureau chiefs) are responsible directly to the parliament (legislature) and must reply to questions put to them during parliamentary sessions. But the opposition party(ies) operates at a huge information disadvantage.

4. THE ANALYSIS OF BUREAUS: A COMPLEX PROBLEM

     The analysis of any particular bureau today is a difficult matter. The president's right to appoint the bureau chief implies a power over resources that can be used for political gain. The president has an incentive to use this power in accord with his estimate of the center of opinion, although he also aims to please campaign contributors. A legislator may support the bureau chief or not, depending on (1) whether she is from the same party as the president and (2) whether her constituents, campaign contributors, her party, and pressure groups can benefit or lose from the bureau chief's actions. The bureau chief is limited in her control over her bureau by the president, the legislature, and the civil service system. The bureaucrats under her are likely to support larger budgets. Because it is not easy for a bureau chief to discipline them, they can easily block a bureau chief's efforts to substantially change the bureau. The analysis of any particular bureau's actions is necessarily complex because of the multitude of actors whose actions influence the bureau.

     The difficulty of analyzing a particular bureau has led economists to begin their analysis of bureaus with a simple model. We present this model in the Chapter Fourteen.

Questions for Chapter 13

1.  Define bureaucracy, bureaucrat, bureau chief, sponsor.

2.  According to Max Weber, how can both impartiality and efficiency be achieved in the government supply of goods and services?

3.  The government supply of some goods and services require that bureaucrats at the lowest level of the bureaucracy use discretion. According to Weber, how can a bureau chief assure that this discretion is used in their interests.

4.  Explain why Max Weber believed that bureaucrats needed a moral code.

5.  Explain why the bureaus in a dictatorship are often more efficient than bureaus in a democracy.

6.  Max Weber believed that the bureaucratic form of government administration would help a nation achieve impartiality and efficiency in government administration. Was this a reasonable belief for a constitutional democracy? Explain.

7.  Tell why it is unrealistic to think that the citizens in a democracy would allow bureau chiefs to be independent, like the Justices of the Supreme Court.

8.  Max Weber argued that lower level bureaucrats should be specialized and of high moral character. Assuming that a country has a constitutional democracy, is it realistic to expect such bureaucrats to have these characteristics? Explain.

9.  Briefly describe the system of class and privilege in the history of government administration in the U.S.

10.   Explain how the rise of political parties in the U.S. led to the spoils system of government administration.

11.   Under the spoils system, how could you become qualified to be selected for a government administrative job?

12.   Explain how the spoils system gave incumbents an additional advantage over challengers in elections.

13.   If the ruling party has the right to appoint all government administrators, it has an additional advantage over challengers in elections. The reason is that, compared to the challenging party, voters believe that it is more likely to keep its promise of government jobs to people who help in the election. If this is true, how did the U.S. end the spoils system in 1883? (Hint: you must explain (a) why the initial law was passed and (b) why the law was not overturned by a subsequent legislature.

14.   Just prior to 1910, the political party was more powerful than afterwards because it could control all appointments to bureaus that were not covered by the civil service act. Describe the source of this power. In other words, describe the set of rules that resulted in the party leader’s control over appointments.

15.   Consider the government administrative positions that are not covered under the civil service act. In 1910, the method of appointing people to such positions changed radically in the U.S. Explain this change and how it affected the power of the political party.

16.   The modern civil service act in the U.S. seems to have been a direct consequence of a power struggle between the presidency and the legislature over the making of appointments to government administrative positions. Describe this struggle and how it led to the civil service act.

17.   On the surface it appears that the U.S. civil service act was the result of competition among self-serving politicians. However, starting in the mid-19th century, there were two underlying factors that contributed to the increased demand for efficiency in government administration. Describe these and tell how they brought about the increasing bureaucratization of the government.

18.   Government workers in mature democracies are in the civil service and face relatively uniform contracts. Tell why democracies have such uniform contracts for civil service workers.

19.   Describe the system of government oversight of bureaucracy in the modern U.S. In other words tell who in the government oversees.

20.   Tell the difference between oversight in a presidential system and oversight in a parliamentary system. Give special attention to the role of a minority opposition party.

Gunning’s Address
J. Patrick Gunning
Professor of Economics/ College of Business
Feng Chia University
100 Wenhwa Rd, Taichung
Taiwan, R.O.C.
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