Government for Profit

Published: August 12, 2014

 

It’s an age-old problem: an underpaid government worker tries to get ahead by abusing his job privileges and access to get a little bit of green on the side. Each generation thinks they’ve figured out how to keep government workers honest. For most of American history, this meant making sure that workers were paid to get the job done right…essentially, by paying them on commission.  As our guest Nicholas Parrillo said,

Some government officers…were paid on a profit-seeking basis to do things that people didn’t want [to enforce].  You could think of these officers, as, in a sense, bounty hunters.

 

This system was even more complicated than you might think.  The fees and bonuses weren’t always simple to calculate, but gist of it was: the more unpopular the law, the more an official could make by enforcing it.  So the prosecutor who nabbed people under the Volstead Act (the law which established the structure for enforcing Prohibition) would get big bonuses, while the the workaday prosecutor going after jaywalkers and the like would get peanuts.

pouring-out-a-booze-bottle-edit

Prohibition enforcers get rid of liquor – for a fee. Image via Indiana Public Media.

Parrillo said this made a lot more sense than it initially seems.

The more unpopular the law they were being asked to enforce, the higher the fee. It was an incentive to get the officer to follow the law to the letter…by giving people a monetary incentive to enforce the law to the hilt, that was anti-corruption!

It does seem odd to the modern eye, but it seemed effective to many people at the time, and it follows a familiar kind of logic: the more unpleasant or dangerous the job, the better the pay. And this sort of fee-for-service system extended deep into the bureaucracy, says Parrillo.

Government officers were paid on a profit-seeking basis for providing services to people who wanted those services!

Imagine going to the DMV and paying not only for your license, but also handing $20 to the clerk behind the desk to pay their salary! Or, if you were so inclined, $30 to help speed the process along…

For that not to be corrupt, you have to have a quite different conception of government officer than we have today.  You can’t view officers as creatures of a legislature or centralized government the way we view them today – you have to view them as quasi-independent vendors…it’s not about giving uniform service to everybody.

But the revolution in democratic thought and government that ran through America in the 1700s and early 1800s changed this radically.  According to Parrillo, the evolution to modern models was slow, though.  The first step was constraining the fees these semi-private officers took from citizens to the ones defined by law.

There’s one hilarious example in which the federal government land officers wrote to their bosses and said “Look, the settlers applying for homesteads would like us to help them fill out their forms, and we’re really good at helping people fill out their forms….can we take a fee for helping these people fill out these forms?  And the bosses write back and they say “Congress has not authorized you to take a fee for helping people to fill out their forms!  You can only take the fees on the list!”

This hybrid model – still fee based, but closely controlled by the legislature – quickly became impossible for Congress to effectively legislate.  It was a logistical nightmare to determine a correct fee for every service every government officer might possibly provide.  And so, over the late 19th century, the United States began to move slowly but surely to a salary based model – the one we take for granted today. Certainly something to think about in line at the DMV.

For more tales of money, politics, and fears of bureaucrats on the take, listen to our latest episode.

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