In Praise of Parallel Institutions

“Globalization” has been a buzzword for decades, but the word has competing definitions. It can refer to the reduction of barriers to trade and travel, which allows goods, ideas, and people to act as though the world is one free-flowing community. But it can also refer to the centralization of power into a nexus from which policy decisions are broadcast into all corners of the world.

Real world politics favor the latter definition, and so organizations such as the United Nations, the International Monetary Fund, and the World Bank have prospered. The arguments for centralizing power vary from the need for social harmony to the preservation of human rights to the provision of greater efficiency. Parallel institutions that compete with the global system are said to be disruptive, prone to injustice, or inefficient. Thus, globalization (as the centralization of power) presents social harmony as imposed control, human rights as defined by one agency, and efficiency as a one-size-fits-all process. Globalization is the ultimate in social engineering.

Implicit here is the notion that competition is wrong or wasteful. Absent here is the idea of freedom or personal choice.

Those who advocate “parallel institutions” offer a different view of harmony, rights, and efficiency. But first, what is the concept of parallel institutions? It generally means one of two things.

First, it refers to a multitude of institutions that compete with each other by providing the same basic service to customers, who can choose between them. A common example would be places of worship, which range from Baptist to Wiccan, from Catholic to Islamic.

In each case, as long as the association is voluntary, social harmony is preserved and rights are promoted. Moreover, in a desire to compete, institutions become more efficient at satisfying customers’ needs. In short, choice promotes both social harmony and a higher quality of life.

In its second meaning, “parallel institutions” refers to agencies that may not offer the same service but which compete in a significant manner. Church and state are an example. Although God and Caesar do not offer identical “goods,” they have competed with each other for allegiance, wealth, and power throughout much of history.

As a freedom strategy, “parallel institutions” refers to creating private agencies that perform the same functions as government agencies. A classic example is FedEx, which delivers packages in a manner similar to the post office.

A parallel institution like FedEx benefits freedom in at least two ways: It proves the free market can successfully compete with and often outdo a government service even though the latter has the extreme advantage of tax funding. It also hastens the demise of redundant, illegitimate government services. (Arguably, email is the parallel structure that will deliver the deathblow to the postal monopoly.)

Parallel institutions are not merely a strategy but also an irreplaceable building block of a free society. In his essay “Liberty and the New Left,” economist Murray Rothbard observed,

“The American Revolution occurred precisely by the people spontaneously and voluntarily creating local and then regional committees and assemblies totally apart from the State apparatus, and progressively taking on more and more of the State’s functions…”

But one of the key advantages of a parallel institution is that its creators and users need not even be aware of how the institution benefits freedom. The founders of FedEx wanted to make a profit; customers use the service because it is inexpensive, convenient, and efficient. The government agency is marginalized not because the hearts and souls of people have been converted toward privatization or freedom but simply because the market offers them a better alternative. Nevertheless, the political end result is the same.

Even when neither of the competing institutions are free market, freedom can benefit when people take advantage of parallel structures. There are many examples from history:

*** The “Flight of the Earls” in 1607 refers to the exodus of over a hundred Irish rebel leaders, many of whom were from the nobility. They fled from Ulster to continental Europe rather than live under English tyranny.

*** In the 17th century, the Netherlands offered more religious freedom than most of its neighbors. Thus, it became a magnet for religious refugees, including the Huguenots from France and the Puritans from England. Jewish immigrants settled largely in Antwerp and Amsterdam, where they formed their own parallel courts of law and other social structures.

*** Throughout the 18th and 19th centuries, as land and livelihood was taken away through such laws as the Enclosure Acts, Scottish and Irish immigrants flooded to American shores.

*** In the 1930s, when all other exit doors from Germany seemed closed, tens of thousands of Jews emigrated to Japanese-controlled Shanghai, because it imposed no quotas and required no passports or visas. Among those who found sanctuary were 400 members of the Mir Yeshiva (Talmudic school), the only yeshiva to survive the Holocaust.

It is no coincidence that totalitarian countries are surrounded by “iron curtains.” They close their doors on those who want to leave and access parallel institutions, or they charge punitive fees on emigrants for the privilege of not being governed by them.

Parallel institutions threaten those who wish society to speak with one voice — their voice — because the parallel structures offer choice. Any choice brings with it a greater possibility of freedom, if not in the absolute then in terms of degree. Every choice empowers individuals (even if it is a choice they cannot conceive of making, like fleeing with their family to Shanghai).

Globalization, in the sense of centralization of power, is an assault upon the right of nations, cultures, and individuals to choose for themselves. Parallel and competing institutions offer choice, which inevitably translates into greater freedom. They offer greater freedom regardless of whether the institutions are private or even conscious of the political benefit being extended. Like the marketplace itself, they operate to the benefit of all who would be free.


Wendy McElroy
for The Daily Reckoning

The Daily Reckoning