282 – The limits of the “subsidiarity principle”

Posted on March 16, 2014 by

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“Subsidiarity is an organizing principle of decentralization, stating that a matter ought to be handled by the smallest, lowest, or least centralized authority capable of addressing that matter effectively.” Presently, subsidiarity is best known as a general principle of European Union law. According to this principle, the EU may only act (i.e. make laws) where action of individual countries is insufficient. The 1992 Treaty of Maastricht enshrined this principle.

Alexis de Tocqueville sang the praise of the subsidiarity principle in his Democracy in America. While he mustered many instances underscoring his point, he missed one manifest failure. For, the US divided over whether to apply the subsidiarity principle just thirty years after the book went into print. The instance was slavery, admittedly an issue defining the Republic by its absence from the Constitution.

Let us make a thought experiment. Slavery was a Southern problem. According to the subsidiarity principle, no political structure would have been better equipped to deal with the “peculiar” institution and find a way forward (or out) than the South itself. What if, instead of triggering the Civil War, peaceful secession had been agreed to and the South had been allowed to go its own “peculiar” way? Would the “subsidiarity principle” have worked its magic?

In simplifying the discussion, I’ll accept that slavery at the time was a profitable enterprise[1] – a unique mix of industrial and an agrarian economy. The economy was mono-culture in much of the South – the term King Cotton is apt.

What would have been the slave/master balance after Secession?

 

State

Population

Slaves

% Slaves

Alabama

964’201

435’080

0.45

Arkansas

435’450

111’115

0.26

Florida

140’424

61’745

0.44

Georgia

1’057’286

462’198

0.44

Louisiana

708’002

331’726

0.47

Mississippi

791’305

436’631

0.55

North Carolina

992’622

331’059

0.33

South Carolina

703’708

402’406

0.57

Tennessee

1’109’801

275’719

0.25

Texas

604’215

182’566

0.30

Virginia

1’219’630

490’865

0.40

In 1860, total US population was 31,443,321, (an increase of 35.4 percent over the preceding decade). The total population included 3,953,761 slaves, representing 12.7% of the total population. Essentially, slaves were located in the CSA (Confederate States of America), where they would have been 39% of the total population (plus 1% free African-Americans), with some variation around the mean on a state by state basis.

The Secession’s “cornerstone” was, in the words of Confederate Vice-President Alexander Stephens[2] racial supremacy, structured as slavery: “Our new Government is founded upon exactly the opposite ideas; its foundations are laid, its cornerstone rests, upon the great truth that the negro is not equal to the white man; that slavery, subordination to the superior race, is his natural and normal condition.” The slavery institution as well as slave codes, which made teaching a slave to read or write illegal (although it often took place as children taught each other) underpinned the system.

The CSA is now on its own. How could it have evolved? I can see three scenarios:

·        Slave revolution, like in Haiti (1791-1804). This upheaval destroyed the old regime in Hispaniola. No sustainable alternative was found. Haiti stagnated after that. Admittedly, in Haiti the slaves were 10:1 compared to the “free” population. At 40% slaves, the risk of revolt in the CSA would have remained high. The CSA would have been poorly equipped to deal with it, even if increasing repression might have stayed the inevitable for a while.

A more chronic (but no less terminal) form of resistance would have been the steady drip of slaves fleeing to the North – now that the Union was no longer obligated to return fugitive slaves.

·        Muddling through: In a slavery system, the labor force is a fixed cost[3] i.e. slaves were “capital” to the owners (most of the capital, given the abundance of land). Plantations were price-takers with respect to the international cotton market. If the price of cotton fell, planters could only adapt by selling off depreciated capital (i.e. slaves) in a distressed market. It is a straight way to ruin. In practice, even in fair weather, falling into debt was often the fate of many a plantation. Long-term economic viability of the King Cotton economy was far from settled.

What about diversification out of cotton? Given the enforced low level of education of the slave force, diversification toward industry would have been difficult (and slow), and in any case there is no indication that the plantation owners had the mettle for industry. Slavery was a self-sustaining homeostatic system, and thus adverse to evolutionary change. Whether this second option would have been viable, then, is more than doubtful.

Finally, with 40% of the population excluded from consumption, the economic base for endogenous, demand-led growth would have never materialized.

·        Voluntary emancipation. Except for Florida, all CSA states with large slave populations would have had shares of over 40%. Whether majorities for voluntary emancipation would have emerged in all states,[4] is doubtful.

The main economic issue in voluntary emancipation is the massive loss of capital resulting from freeing slaves. The UK solved its slavery problem in the Caribbean by buying out the planters – it could do so, for it had the means at hand in the UK. What would have been the cost of “buying out” the slavery system in the South? While the GDP of the Southern States in 1860 is difficult to gauge, one can afford the guess that voluntary emancipation would have implied the loss of 1-2 years of GDP for the country. It is doubtful that such a loss would have countenanced voluntarily.

Looking at the issue of secession through the – admittedly troubled – lens of counterfactual history one may venture that none of the available options looked economically or politically promising (I have abstracted from the moral issue). One can surmise that CSA was looking to a more than cloudy future. Left to its own devices, the CSA would neither have been able to make a living off the slave system, nor been able to disentangle itself from it. Economically and socially, the peculiar institution was a dead end (no value judgment on slavery here, simply political economy).

In fact, one may venture, the Civil War may have been a blessing in disguise for the South: violently, cruelly, destructively, the conflict took the South out of a hopeless path-dependent outcome to one with a viable future. Only under the might of the far larger Union could emancipation take place under more or less orderly conditions, putting the region back on a development track. The cost was massive, but the outcome proved viable.

We can go back now to the “subsidiarity principle”. In theory, the people on the spot are best equipped to deal with it: they have the information, and they have the motivation to solve the problem; unless – as in the instance of slavery in the CSA – the polity has become the prisoner of a path-dependent outcome where, for political, psychological, and economic reasons, switching path is unconceivable. Having dug themselves into a hole, bootstrapping is beyond the economic, emotional, and political means.

“A matter ought to be handled by the smallest, lowest, or least centralized authority capable of addressing that matter effectively.” This qualifier is admittedly big enough a loophole to let anything pass through, making the principle trivial. Let us take the principle seriously. Its underlying assumption is all-round rationality of the polity. Polities are not always fully “rational,” and this unpredictable behavior may lead to a discontinuity. At this point, the principle fails. I’d conclude that the “subsidiarity principle” is a fair-weather principle, operating only where, under the balmy breeze of rationality, a polity can steer the best course. In other words, it operated when it is not needed.

Of what value is a principle that only applies to “fair weather” instances, but fails “bad weather” ones? Of what value is a principle, which is unable to deal with discontinuities? Discontinuities – Black Swans – have a way of creeping up to us unexpectedly – Hitler, income disparities, or migration. The value of “large” states is that they have the institutional and economic means of tackling large discontinuities, albeit at the price of some bossy inefficiency on a day to day basis in lesser matters.

Far from being high principle, “subsidiarity” is simply good administrative practice, a default position in addressing an emerging problem. The use of the term “principle” is a distraction, for it focuses on theory and raises a fatuous issue, when discernment would be required.


[1]           The most-famous work on the profitability of slavery is attributed to Fogel and Engerman. In “Time on the Cross,” they argue that the rate of return of slavery at the market price was close to 10 percent, a number close to investment in other assets”.

[3]           Strict laws forbade owners to let slaves become vagrants. In any case, large numbers of vagrants would have destabilized the society.

[4]           The CSA Constitution did not explicitly foresee secession.

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