David Weber - The Universe of Honor Harrington

The Republic thus began to experiment, cautiously at first, with assistance and welfare programs to increase the opportunities of its less advantaged citizens. Unfortunately, what began as an experiment gradually became something else. Transfer payments became increasingly important for the maintenance of the industrial poor, requiring greater levies on the productive elements of society. Marginal industrial operations were shored up by protective tariffs, government loans, and outright grants to encourage full employment, which both undercut the overall efficiency and productivity of the industrial base and encouraged inflation. Inflation further worsened the condition of the poor, requiring still higher transfer payments — payments which were soon adjusted for inflation on a mandated basis — and, as the network of assistance proliferated, it came to be seen as a fundamental "right" of those receiving the aid. By 1680 pd, Haven had issued its famous "Economic Bill of Rights," declaring that all of its citizens had an "unalienable right" to a relative standard of living to be defined (and adjusted as inflation required) by statute by the legislature.

In the process, the government had initiated an unending spiral of inflation, higher transfer payments, and increasing deficit spending. Moreover, it had (quite unintentionally, at least at first) undermined the fundamental strength of its own democracy. The middle class, the traditional backbone of the Republic, was under increasing pressure both from above and below, caught in the squeeze between an increasingly less productive economy and ever larger levies against its earnings to support the welfare system. Whereas the middle class had once seen the upper class as (at worst) essentially friendly rivals or (at best) allies in their joint prosperity, they came to see the wealthy, like the poor, as enemies, fighting over a dwindling prosperity. Worse, the middle class's traditional aspiration to upward mobility had become an increasingly remote dream, and it was much easier to focus resentment on those who had more than the middle class than on those who had less — a tendency which became ever more pronounced as "enlightened" commentators and academics secured dominant positions in the media and educational system.

Perhaps worst of all, was the emergence of the "Dolist" blocs. The Dolists (so called because they were "on the dole," receiving government assistance in greater or lesser degree) were still franchised voters and, quite logically, supported the candidates who offered them the most. It was a case of self-interest, and the Dolists' self-interest interlocked with that of increasingly careerist politicians. A new class of machine politicians, the "Dolist managers," emerged, playing the role of king-makers by delivering huge blocks of votes to chosen candidates. Incumbent politicians soon realized that their continued incumbency was virtually assured with the managers' backing — and that the converse was also true. A politician targeted by the "People's Quorum" (the official term for the alliance of Dolist managers) was doomed, and as the leaders of the Quorum became aware of their power, they selected specific politicians to punish as an example to all politicos of the power the Quorum represented.

Finally, as if to complete the system-wide outbreak of mass insanity, most of those who recognized that something was wrong embraced a "conspiracy theory" which assumed that their problems must result from someone's hostile machinations — probably those of the domestic "monied classes" or foreign industries who "dumped" their cheap, shoddy products on the Haven economy. Almost worse, there was an entrenched element of "this wouldn't be happening to us if we weren't somehow at fault" in the vast majority of mid-18th century Havenite political and societal analysis and rhetoric, and this masochistic tendency only became more pronounced as the century wound to a close.

By 1750 pd, the Republic — no longer "The Republic of Haven," but now "The People's Republic of Haven" — had become the captive of a coalition of professional politicians (indeed, politicians who had never had and were not qualified for any other career) and the Quorum, aided and abetted by a morally and intellectually bankrupt academic community and a mass media philosophically at home with the Quorum's objectives and cowed (where necessary) by threats of blacklisting. That the Quorum could succeed in blacklisting journalists had been demonstrated in 1746 pd, in the case of Adele Wasserman, one of the last moderate journalists. Her moderation, which was actually a bit left of center by mid-17th century standards, was labeled "conservative" or, more frequently, "reactionary" by her 18th century contemporaries. She herself was called "an enemy of the common man," "a slave of the monied powers," and (most cutting slur then available on Haven) "a fiscal elitist," and her employer, one of the last independent news services, was pressured into terminating her contract (for "socially insensitive and inappropriate demagoguery") by means of an economic boycott, strikes, and governmental pressure. Her firing, followed by her subsequent relocation to the Kingdom of Manticore and a successful career as a leading theorist of the Centrist Party, was the writing on the wall for any who had eyes. Unless something quite extraordinary intervened, the current Havenite system was doomed.

The problem was one which had arisen as long ago as Old Earth's Roman Empire: when power depends on "bread and circuses," those in power are compelled to provide ever greater largess if they wish to remain in power. In effect, the politicos required a bottomless and ever-filled public trough to pay off the Dolists and provide the graft and corruption to support the lives to which they themselves had become accustomed, and after almost two centuries of increasingly serious self-inflicted wounds, not even the once-robust Havenite economy could support that burden. It became apparent to the political managers that the entire edifice was in trouble: tax revenues had not matched expenditures in over 143 T-years; R&D was faltering as an increasingly politicized (and hence ineffectual) educational system purveyed the pseudo-scientific mumbo-jumbo of collectivist economic theory rather than sound scientific training; and the decreasing numbers of truly capable industrial and technical managers produced by the system were increasingly lured to other star systems whose economies allowed them to use their talents and enjoy the benefits thereof. The "Technical Conservation Act" of 1778, which revoked emigration visas for all research and production engineers by nationalizing their expertise "as a resource of the Republic," was intended to put a stop to that, but it could not reverse the fatal trends.

Real economic growth had stopped — indeed, the economy was contracting — but ever higher Basic Living Stipend payments were politically inescapable, and the stagflation which had resulted was becoming a self-sustaining reaction. In 1771 pd, a highly classified economic report to the House of Legislators predicted that by the year 1870 the entire economy would collapse in a disaster which would make Old Earth's Great Depression and the Economic Winter of 252 pd look like mild recessions. The Chiefs of Staff, apprised of the degree of collapse to be anticipated, warned that it would precipitate pitched warfare in the streets as Haven's citizens fought for food for their families, for Haven had long since attained a population which could not feed itself without imports, and imports could not be paid for with a negative balance of trade.

The government saw only two ways out: to bite the bullet, end deficit spending, abolish the BLS, and hope to weather the resultant catastrophic reorganization, or to find some other source of income to shore up the budget. The possibility of admitting they could no longer pay the interest on Haven's mortgaged future was too much for them to stomach, which meant only the second solution was a real possibility, but there was no more money to be squeezed out of the economy. A panicked group of legislators suggested draconian "soak the rich" schemes, but the majority recognized that any such panacea would be purely cosmetic. Aside from their own hidden assets, the wealthy represented less than 0.5% of the total population, and the totally confiscatory taxes proposed would provide only a temporary reprieve… and eliminate both future private investment and the highest tax brackets (already taxed at 92% on personal income and 75% on investment income) as a long-term revenue source. A self-sustaining tax base could be produced only by a strong middle class, and the middle class had been systematically destroyed; what remained of it was far too small to sustain the government's current rate of expenditure and had been for almost a century.