The Silent Transition from Capitalism to Equality in Government Offices

Social and cultural evolutions often occur without a single precipitating event and spread more quickly than we might anticipate. Through exhaustive research, Nicholas R. Parrillo has very effectively demonstrated that the shift from pay-for-service delivery of government services to salaried government officials was one of these spontaneous sociocultural transitions. The transition of American government offices as part of a cultural shift caused the natural progression toward salaried officials to proceed quickly.

Parrillo readily refutes some of the easier explanations for this movement. First, he looks at the types of government institutions that privatized. He eschews Max Weber's theory that salaried jobs are necessarily associated with secure positions, as Weber posits that salaried jobs offer “the opportunity of a career,” making organizations more effective (pp. 6–7). Moreover, Parrillo demonstrates that salaried officials need not belong to “bureaucracies” or other organizations that are subject to top-down management. He refutes this second traditional notion of salaried government by positing that an employee can be more loyal to an institution than to a single manager. To support this contention, he looks to the American “revolving door,” through which private sector employees enter government service, a tradition that enriches our understanding of what type of regulation in government makes sense and, on the flip side, sends former government workers to private entities, allowing them a greater understanding of the constraints that may be imposed on government agencies.

Most Americans are more comfortable with salaried government employees than agents who provide service for a fee. Today, the idea of basing government officials’ pay on transaction fees is anathema. Parrillo meticulously documents this transformation.

Nonetheless, those who favor smaller government may still see merit in fee-for-service system or privatization as being more efficient. In theory, this approach could foster competition leading to less expensive, more efficient performance of government services.

Americans’ inherent distrust of fee-for-service pay for officials apparently stems from early information asymmetry and fee setting by the official agents on the basis of “custom,” which was, to some degree, necessarily subjective. Lack of transparency and de facto cost obscurity make fee-for-service payments uncomfortable. While each situation has differences, how real those differences are—and how legitimate they are—may be much harder to quantify. To combat this fuzziness, legislatures began providing fee structures that were increasingly comprehensive. This created two competing fee constructs that the government officer had to weigh: first, did the services fit within the mandated fee structure and, if not, was an additional fee really warranted; and second (although perhaps more important in the end analysis), would the consumer recognize the price differential? If the consumer was able to learn of differential fees, this would create competition among the service providers.

The movement away from fees to salaries between 1810 and 1840 grew in part because of changing trends with respect to service providers. Historically, many services were provided by aristocrats, a concept with diminishing relevance in American society. This can be seen in the experience of both state and federal agencies. The federal government generally provided military services to the citizenry; one of the primary benefits of being a citizen was that protection. However, even within the military, not all duties were equal. Within the Naval Service, blood money and prize money might encourage sailors to go after higher-value targets rather than after more strategic targets.

It is important to understand that this move from private performance and payment for government services to salaried, career officials represented a sea change that has not been well explored until now. Through exhaustive research, Parrillo traces the evolution from a system where government had small revenues and services were often paid for by directly negotiated user fees to indirect payment of fixed salaries. Parrillo demonstrates how this shift occurred between the post-Revolutionary period of the late 1700s and the 1940s...