In light of the massive interventionism that is being practiced by governments to handle the financial crisis, a warning needs to be repeated regarding two very different kinds of government action. The warning can be found in Chapter 17 of The Open Society and its Enemies, summarised here.
Popper warned that economic intervention, even the piecemeal methods that he advocated, will tend to increase the power of the state.
Interventionism is therefore extremely dangerous. This is not a decisive argument against it; state power must always remain a dangerous though necessary evil. But it should be a warning that if we relax our watchfulness, and if we do not strengthen our democratic institutions while giving more power to the state by interventionist planning, then we may lose our freedom.
He went on to say that ‘it is not enough to insist that our solution should be a minimum solution; that we should be watchful; and that we should not give more power to the state than is necessary for the protection of freedom’. His remarks raise problems, but they do not show a way to a solution. It will help to note the important distinction between persons and institutions: while the political question of the day may demand a personal solution, all long-term policy-and especially all democratic long-term policy-must be conceived in terms of impersonal institutions, that is to say, rules of procedure that are to the maximum extent independent of the whims and fancies of people in power at the time.
Similar considerations apply to the control of the economic power of the state where there is a need to guard against an increase in the power of the rulers, and against the arbitrariness of politicians, bureaucrats and petty officials.
We thus arrive at a distinction between two entirely different methods by which the economic intervention of the state may proceed. The first is that of designing a legal framework of protective institutions (laws restricting the powers of the owner of an animal, or of a landowner, are an example). The second is that of empowering organs of the state to act-within certain limits-as they consider necessary for achieving the ends laid down by the rulers for the time being. We may describe the first procedure as institutional or indirect intervention, and the second as personal or direct intervention.
From the point of view of democratic control, the first method is preferable and from the point of view of piecemeal social engineering (that is the method of trial and error, learning from our mistakes) the difference between the two methods is highly important.Only the first, the institutional method, makes it possible to make adjustments in the light of discussion and experience. It alone makes it possible to apply the method of trial and error to our political actions. It is long-term; yet the permanent legal framework can be slowly changed, in order to make allowances for unforeseen and undesired consequences, for changes in other parts of the framework, etc. It alone allows us to find out, by experience and analysis, what we actually were doing when we intervened with a certain aim in mind.
Discretionary decisions of the rulers or civil servants are outside these rational methods, being short-term decisions, transitory, changing from day to day. Generally they are not open to public inspection of discussion both because necessary information is lacking, and because the principles on which the decision is taken are often obscure. But it is not only in this sense that the first method can be described as rational and the second as irrational. It is also in an entirely different and highly important sense. The legal framework can be known and understood by the individual citizen; and it should be designed to be so understandable. Its functioning is predictable. It introduces a factor of certainty and security into social life. When it is altered, allowances can be made, during a transitional period, for those individuals who have laid their plans in the expectation of its constancy.
As opposed to this, the method of personal intervention must introduce an ever-growing element of unpredictability into social life, and with it will develop the feeling that social life is irrational and insecure. The use of discretionary powers is liable to grow quickly, once it has become an accepted method, since adjustments will be necessary, and adjustments to discretionary short-term decisions can hardly be carried out by institutional means. This tendency must greatly increase the irrationality of the system, creating in many the impression that there are hidden powers behind the scenes, and making them susceptible to the conspiracy theory of society with all its consequences – heresy hunts, national, social, and class hostility. In spite of all this, the obvious policy of preferring where possible the institutional method is far from being generally accepted. The failure to accept it is, I suppose, due to different reasons. One is that it needs a certain detachment to embark on the long-term task of re-designing the legal framework. But governments live from hand to mouth, and discretionary powers belong to this style of living-quite apart from the fact that rulers are inclined to love those powers for their own sake.