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States That Get it Right

While the nation-state is far from dead, more and more regions are feeling encumbered—if not suffocated—by centralized control. A large body of empirical research has examined the relationship between the size of government and economic outcomes; and based on that research, the U.S. has much room to scale back.

In a nonbinding referendum, Venice recently voted to secede from Italy. An 89 percent majority were in favor, a clear vote of “no confidence in Rome.” The separatist Parti Québécois (PQ) is expected shortly to take control of the provincial Québec legislature. The PQ’s mission, expressed sotto voce to be sure, is to establish Québec as a sovereign nation. In a 1995 referendum, they came within a hair of doing just that. This September, Scotland will vote on whether to disunite from the United Kingdom, leaving half of those in England and Wales in dismay and the other half muttering good riddance under their breath. Then, there is Catalonia, which proposes a November 9 vote to separate from Spain. Madrid considers this action illegal and has promised to quash the voting process. Yet, the proposal is an indicator of public disaffection with Madrid.

In the U.S., 11 Colorado counties recently, narrowly voted down seceding to form a new state (a process requiring more Constitutional steps than were in evidence). The Washington Times reported a comparable movement to break the governance of New York State into two autonomous regions—one western and another northern. It will surprise no one that secessionist movements in California pre-date the Civil War. Not only do folks from northern and southern parts of the state irritate one another, but the Central Valley has always claimed it wishes to be part of neither.

Most recently, in 2011, a Republican official in rural Riverside County called for 13 Southern California counties to band together to form “South California.” Notably absent from that group: Los Angeles. A Second Vermont Republic is the brainchild of former Duke University economics professor Thomas Naylor, author of several books on secession. Naylor advocates Vermont’s secession to escape the big government and multinational corporations that he says dominate the U.S. Second Vermont Republic even fielded a slate of candidates for statewide office in 2010, although they registered in the low single digits on Election Day. Notice I haven’t even mentioned Texas.

What is going on here? While the nation-state is far from dead, more and more regions are feeling encumbered—if not suffocated—by centralized control. A large body of empirical research has examined the relationship between the size of government and economic outcomes; and based on that research, the U.S. has much room to scale back. “We are losing and may have lost, in many respects, the rule of law,” said Allen Meltzer, professor of political economy at Carnegie Mellon. “We are getting the rule of regulators. The rule of regulators is a rule which encourages corruption, crony capitalism and circumvention.”

This negative effect is, in fact, what many individual states have been pushing against in order to boost their attractiveness as places to live and do business. Notice the strong five-year showings in our annual Best and Worst States Survey of states like Indiana, Wisconsin and Louisiana, not to mention Florida and Texas. In each case, they are expanding economic freedom as Washington seeks to go in the opposite direction. In addition, and close to home, Canada’s recent experience with government retrenchment is an example of a country shrinking government without a trade-off in economic and social consequences. The idea that smaller government can achieve better outcomes for the American people is being played out in America on a state-by-state stage every year.

 

About JP Donlon

JP Donlon is the Editor-in-Chief of Chief Executive magazine.