Suppose there is a community. Some members of the community are artists. The artists make paintings, sculptures, and music; write poetry and novels; etc. The other members of the community are janitors. The janitors clean up after the artists. The janitors mop the floors; take out the trash; scrub the toilets; wash the dishes; wash, repair, and make the clothes; grow and cook the food; plant, mow, weed, and prune the lawns and gardens; build and repair the buildings, streets, and utilities; etc.
The artists think the janitors are moochers. The artists work hard and create beautiful art. Meanwhile the janitors benefit from being surrounded by beautiful art, but do nothing to create that art.
The janitors think the artists are moochers. The janitors work hard cooking and cleaning and taking care of the artists. Meanwhile the artists goof off and play.
The competitive federalism solution to this problem is for either the artists or the janitors to secede. Then there will be two communities, one community of artists and one community of janitors.
The artists think the janitors contribute nothing to the community. Now the artists will learn from experience what a community without janitors is like.
The janitors think the artists contribute nothing to the community. Now the janitors will learn from experience what a community without artists is like.
My opinion is that the artists and the janitors both contribute to the community, and that both ought to respect the other. But that is only my opinion. The artists and janitors think otherwise, and what right do I have to tell them they are wrong?
I predict the artists will suffer from living in a community without janitors, and the janitors will suffer from living in a community without artists. I think this is an appropriate punishment for failing to respect each other. So competitive federalism is just, and justice was achieved without the government doing anything, without costing the taxpayers anything.
But suppose I am wrong. Suppose the artists or janitors do not suffer from living in a community without the other. Then they must have been right when they failed to respect the other. They haven't been punished and they were right. Once again, competitive federalism has achieved justice without government action.
When the government resolves a dispute, the government has to decide who is right and who is wrong. But deciding who is right takes time and costs money, which must be diverted from other things like roads and schools. And sometimes the government is incorrect, which multiplies the injustice.
For disputes like the dispute between the artists and the janitors, competitive federalism provides justice faster, at lower cost, and with fewer miscarriages of justice. It is not neccessary for the government or anyone to know who is right and who is wrong. Suppose the artists are right and the janitors contribute nothing to the community. Then the artists will benefit and the janitors will suffer from the secession, which is fair. Suppose the janitors are right and the artists contribute nothing to the community. Then the janitors will benefit and the artists will suffer from the secession, which is fair. Suppose both are wrong. Then both will suffer from the secession, which is fair.
Competitive federalism is especially good at solving problems where special interests manipulate the government and use the government to steal from everyone else, like the way in which the artists think the janitors are stealing from the artists, or like the way in which the janitors think the artists are stealing from the janitors.
Competitive federalism is especially good at solving problems where one group of people believe they are being exploited by a second group of people, but the second group of people believe they are not exploiting the first group of people. Both groups believe they are right. If the government attempts to resolve the dispute by deciding which group is right and which is wrong, whichever group loses will think it is the victim of injustice. If the government attempts to impose a compromise solution, both groups will think they are victims of injustice.
When people see the government as a source of injustice, they do not respect the government. People who do not respect the government do not think it is wrong to cheat on their taxes and do not think it is wrong to steal from government social programs. If the government is just a bunch of thieves which steals from ordinary people, then surely there is nothing wrong with ordinary people stealing some of the money back. When people do not respect the government, honest people will be less likely to take government jobs and dishonest people are more likely to take government jobs. Tax evasion, welfare fraud, and corruption will increase. Some people will try to reform government by aggressively prosecuting tax evasion, welfare fraud, and corruption. But this could result in increased harassment of ordinary people by the government, which will cause people to respect the government even less, which will make the problems worse.
Many people think that special interests lobby the government to transfer money from them to the special interests. But the amount taken from each person is small, so most people think it is easier to pay than to resist. Competitive federalism makes resistance easier, cheaper, and faster. If the government is stealing from you, you can secede and form a new government which does not steal from you. Since resistance is easier, more people will resist, and special interests will not be able to steal so much, and everyone except the special interests will be better off.
For example, suppose there is a business. The business owner is rich and getting richer. The workers are poor and staying poor. The workers have a union. The union is demanding higher wages for the workers. The business owner refuses to pay higher wages. The workers believe the business owner is exploiting them. The business owner believes the workers are exploiting him.
Some people say that the union is a special interest which is extorting and stealing money from the business owner and from the business's customers. But those people are biased because the business owner paid them to say that. Other people say the business owner is a special interest who is exploiting and stealing from the workers. But those people are biased because the union paid them to say that.
The role of a business manager is to organize production of the things we need and want. The workers must cooperate in order to produce anything. The manager's job is to somehow achieve worker cooperation.
There are many problems in the world which would disappear if people would only cooperate. Obviously there is a shortage of people who can persuade other people to cooperate. Thus there is a shortage of competent business managers. Workers are easy to replace. Competent business managers are difficult to replace. This is the reason why business managers ought to be paid more than workers. But should business managers be paid a little more than workers, or a lot more than workers?
If the government resolves wage disputes in favor of workers, business owners and managers will think they are the victims of government injustice. If the government resolves wage disputes in favor of business owners and managers, workers will think they are the victims of government injustice.
If the business owner believes that the workers and union are stealing from him, he should secede and set up a new government which outlaws such things. But he might find that business is not profitable or possible without workers.
If the workers believe that the business owner is stealing from them, they should secede and set up a new government which outlaws such things. But they might find themselves enduring perpetual shortages because of insufficient production because of a shortage of competent factory managers.
With competitive federalism, there will still be sore losers, but the sore losers will not blame the government.