Big Governments’ One-Two Punch: Scope Creep, Then Wartime Deprivation

Voluntary cooperation gets commandeered by the government gradually in peacetime, then suddenly through war.

Peace, then World War I

Starting in 1894, the USA no longer had a small-government major party. In both major parties, majorities of elected representatives were the USA’s crony-socialist Progressives.

Immediately, Progressives began working to consolidate their political control. They replaced voter-informing caucuses with voter-isolating primaries. They denigrated constitutionalist media and advocated “objectivity.” They cemented their influence through schools.

This being peacetime, it was more than a decade before Progressives before, in 1907, they first perceptibly started forcing down the relative amount of production that was voluntary, not government controlled (see figure A).

Soon enough, Progressives advanced major legislation. In 1913, Progressive initiatives yielded the USA’s first enduring versions of a national income tax and an inflationary central banking cartel.

From the start of World War I in 1914, Progressives involved the American people in the war. In 1917, Progressives declared war. They financed the war using the new Fed, the new income tax with dramatically raised rates (the highest rate rapidly rose from 7 percent to 77 percent), and a new “excess profits” tax.

In wartime, Progressives’ dramatically increased national government spending dramatically forced down the voluntary-to-government product ratio (see figure A). Even so, the still generally freer people of the Allies significantly ramped up their relative gross domestic product (GDP) (see figure B).

Peace and Great Depression, then World War II

After World War I, the American people only sprang back partially—halfway—to the voluntary-to-government product ratio they had enjoyed up until the war (see figure A).

The freer people of the future Allies in general and of the USA in particular started with much less of a GDP advantage over the more-coerced people under the future Axis governments. The future Allies’ now-bigger governments forced even this advantage further down (see figure B).

The new emboldened Fed kept inflating the quantity of money. Producers were increasing their productivity, so they normally would have decreased their prices and customers would have gotten more for their money. Instead, Fed money inflation largely kept prices constant, which generated takings for the Fed cartel banks and the national government.

Fed money inflation produced an unsustainable boom. Like during the peace before World War I, production seemed good, but this masked the troubles that were brewing.

The boom ended with the stock market crash of 1929 through 1932. Progressives forced down the voluntary-to-government product ratio about half as much as in World War I and across more years. This was the all-time-worst peacetime recession. Unlike previous crises, this crisis was stretched by progressives into a persistent trough (see figure A).

From the start of World War II in 1939, progressives again involved the American people in a war. Made ready by their own big-government spending, the Axis governments attacked the American people. Progressives again declared war.

In wartime, progressives radically increased national government spending again and forced down the voluntary-to-government product ratio (see figure A). Even so, the generally freer people of the Allies again significantly ramped up their relative GDP (see figure B).

The freer American people lived through World War II in a dramatic state of deprivation. Compared to the prewar value, American progressives forced the voluntary product per person down to a 1943 trough of only 24 percent as much, and for the duration of the war to only 50 percent as much (see figure C).

Peace and Great Creep

In the first postwar year, the American people made the voluntary product per person bounce back to exceed the prewar value by 28 percent. Through 2021, the American people made the voluntary product per person grow to exceed the prewar value by 266 percent (see figure C).

This increase sounds right. People live longer and are healthier; live in better, larger homes; drive vehicles that are better overall and safer; and utilize considerably more developed computing, communications, media, and entertainment.

Meanwhile, though, progressives relentlessly expanded their government scope creep. They’re projected by fiscal year 2024 to force the peacetime voluntary-to-government product ratio nearly back down to its wartime previous low (see figure A).

Allied people let the ratio of their combined GDP to the combined GDP of potential aggressors stagnate before World War I at 4.0, decline before World War II to 1.9, and decline subsequently to apparently 1.6. American people made the ratio of their GDP to the combined GDP of potential aggressors increase slightly before World War I to 2.1, decline before World War II to 1.2, and decline subsequently to 0.8 (see figure B).

Things aren’t necessarily all worse. Coercive governments lie and demand that their subjects lie, so we can be certain that portions of the more recent apparent relative declines of freer people aren’t real or sustainable. More-coerced people have always produced relatively less. More-coerced people at times significantly resist their own governments, so even coercive government people could decide that starting a world war would be unacceptably risky. Even though freer people live in greater opulence now, can pay for greater parasitism, and may see things as worse thanks to more-open media, progressives may actually be forcing people down less. Having a weaker progressive-led USA and stronger decentralized Allies may be safer. Freer people may always do the right thing after exhausting all alternatives.

Still, what is necessarily worse is that the proportion of voluntary cooperation in the USA is at a historic low for peacetime (see figure A).

Conflicts with governments are unavoidable. To limit how much they get deprived by other nations’ governments through war, people must limit their own governments always.

Figure A: Voluntary-to-government product ratios, USA

Source: Data from Christopher Chantrill, “Spending in 20th Century: US from FY 1900 to FY 2024,” usgovernmentspending.com, accessed August 7, 2023, data deposited at https://usgovernmentspending.com/spending_chart_1900_2024USp_24s2li011lcny_F0xF0fF0sF0l_Spending_In_20th_Century; and “All about Intergovernmental Transfers,” usgovernmentspending.com, updated October 19, 2016.

Figure B: Allies-to-opponents GDP ratios (upper lines) and USA-to-opponents GDP ratios (lower lines)

Source: Data from Jutta Bolt and Jan Luiten van Zanden, “Maddison style estimates of the evolution of the world economy: A new 2020 update” (Maddison-Project Working Paper WP-15, October 2020), data deposited at https://view.officeapps.live.com/op/view.aspx?src=https%3A%2F%2Fwww.rug.nl%2Fggdc%2Fhistoricaldevelopment%2Fmaddison%2Fdata%2Fmpd2020.xlsx&wdOrigin=BROWSELINK. Major-power coalitions per Encyclopaedia Britannica, s.v. “World War I: 1914–1918,” by Dennis E. Showalter and John Graham Royde-Smith; and Mark Harrison, “The Economics of World War II: An Overview,” in The Economics of World War II: Six Great Powers in International Comparison, ed. Mark Harrison (Cambridge: Cambridge University Press, 1998), 1–42, table 1-3. Note: Post–World War II opponents are China and Russia. 

Figure C: Voluntary product per capita, USA (2023 dollars)

Source: Adapted from FRED. Data from the Bureau of Economic Analysis (GDP, government consumption expenditures and gross investment, current-cost depreciation of fixed assets, and population); Council of Economic Advisors (gross federal debt); and Bureau of Labor Statistics (Consumer Price Index).