How do bureaucracies get so big they can’t pay themselves? Assertions that it “can’t possible happen” are refuted by history in instances ranging from Henry VIII’s dissolution of the monasteries in 1536, which turned thousands of clergy starving into the streets to recent examples like the collapse of Soviet pensions or the debasement of the Greek pension system.
In each of these cases the impossible happened, just as it’s happening in Venezuela, where Joel Hirst describes the collapse of a whole system. “I never expected to witness the slow suicide of a country, a civilization. I suppose nobody does.”
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Unsustainable bureaucratic behemoths turn out to be what Churchill described: “a cut flower in a vase, fair to see yet bound to die.” They are not invincible, but quite the contrary have the distressing propensity to die. The irony is that the gigantism voters often associate with safety is in itself a risk factor. The bloat isn’t protection, but a heart attack waiting to happen. Economists have long known that being “too big to fail” is actually a source of moral hazard.