Economy

The most dangerous idea ever: why the tea party is right after all. Sort of.

The American econo-political system has always been a dangerous proposition, an egg balanced on a knife blade six feet above a concrete floor.

Sure, most countries have elements of the American solution. Many countries now have peaceful exchanges of power decided by voters. Most Western nations have pretty strong protections for individual rights, and in many cases, those are stronger than our Bill of Rights. Most have moved away from centrally planned economies.

But we were the ones who first put it all together. Just as Alfred Nobel figured out how to mix volatile nitroglycerine with diatomaceous earth to create the equally powerful but more stable explosive dynamite, the Founders managed to take an inherently dangerous set of ideas and make them stable. You need only look at the French Revolution to see what can happen when those same ideas are dropped on a concrete floor.

The diatomaceous earth in this case is a uniquely American hatred of government. In America, you can belong to three political camps. Those who hate big centralized government, those who hate small decentralized government, and those who hate all government, big or small, here or there, everywhere. Nobody else hates government the way we do. Citizens of other countries seem to accept that a large and invasive government is the natural state of affairs. Loek Van Mil, a pitcher in the LA Angels system, recently made headlines (and invited scorn) when he said, “I don’t mind paying taxes. It’s a Dutch way of thinking.” One baseball columnist called the Dutch Martians for thinking like this.

Those who hate small decentralized governments support a strong central government. Those who hate big central governments want the states to have more power. And those who hate both are libertarians. Throughout our history we have gone back and forth and back and forth. The stage play that started with Hamilton vs. Madison vs. Jefferson has, with different actors, continued its run uninterrupted for over two hundred years.

In theory each of those three systems make sense. In theory, a large central government should be the most efficient solution, avoiding duplication of effort and ensuring national competitiveness. In theory, strong states should provide local responsiveness and specialization, a la Ricardo, and allow the best ideas to win. And in theory, laissez faire economics and minimalist government should allow greater personal freedom and economic growth.

We have tested the theory on the first two, but the problem is we (meaning humankind) have never tried the libertarian solution.

Let’s use government spending as a percent of the total economy as a proxy for level of government involvement. Theoretically 0 would be a libertarian government and 100 would be a completely centrally planned state. (These numbers include federal, state and local expenditures.)

If we look at the data, what we see is most OECD nations have percentages within a pretty narrow band. And for the most part, those percentages are pretty large. Of the 34 OECD nations, only seven have a percentage below 35—Australia, Chile, S. Korea, Mexico, Slovakia, Switzerland and Turkey. (And only five have a percentage at or above 50—Belgium, Denmark, France, Iceland, and Sweden.) Twenty three are in a band between 35 and 50. As you would expect, Western European countries tend toward the high end of that range, and countries like the U.S. tend toward the lower end.

But the U.S. is far from the lowest and well above some countries that have a reputation for being more “socialist” or government-heavy, like Japan and Canada (and non-OECD member Russia, by the way.) Indeed, using the Heritage Organization’s Economic Freedom list as a measure of laissez-faire, we are only eleventh, behind not only Hong Kong and Singapore, but also Canada and Switzerland.

Some OECD countries have strong federal governments and some have strong state and local governments, but they all have pretty sizable governments. If you’re an optimistic libertarian (which probably doesn’t exist – all the ones I meet are pretty angry) then you could take solace that most countries are well below 50%, although I doubt many would look at it that way.

It must suck to be a libertarian. If you wanted to live in a country with lots and lots of government, at least in theory, you could emigrate to China or North Korea (or on a relative basis, Massachusetts or California). If you wanted to live in a place with government, but with a more isolated local flavor, you could move to Paraguay or Khazakistan, or again on a relative scale, Texas. But if you believe in laissez faire economics and the invisible hand, there’s nowhere for you to go. Some states may be more pro-business than others and some may be less, but there’s nowhere to escape a significant level of government.

Rand and Paul and Rand Paul may be full of shit, but we will never really know, because what they propose has never been tried.

We know the other two solutions don’t work, at least in their pure forms. The 100 percent model of a strong centralized government, e.g. Communism , doesn’t work. Even strong socialist governments like France don’t seem to work very well. Very strong central governments end up stifling innovation and producing moribund economies. We also know that smaller decentralized governments don’t work. Isolated state governments inevitably turn into nasty little Balkan oligarchies with persecution of one minority or another. Think what South Carolina, Arizona and Utah would be like if left completely to their own devices. But no one has tried no-government solution, at least in modern times.

Personally, I doubt most Tea Partiers really want a truly libertarian government. Go to a Tea Party, sit beside someone with white hair (it’s pretty easy to do) and say that we should downsize the government and start with ending Medicare. Or Social Security. Or national defense. Or farm supports. Or highway construction. It won’t take you long to find a government program they’re in favor of. And of course when you add them all up, you end up right where we are now, which is why the new Tea Party Republicans aren’t really going very hard after entitlements. Lots of thunder, but no lightning there.

However, to be fair, we can’t say they’re wrong because we just haven’t ever tried it.

16 replies »

  1. This isn’t entirely true. I mean, there are places with almost no government. They aren’t in the developed world, though, and they’re not nice places. A lib would no doubt argue that such examples don’t count before he/she would accept that they’re hellholes BECAUSE OF the lack of government.

    So yeah, I agree. We need a test case. This is why I have so very much appreciated Wufnik’s articles on giver states and taker states and secession (and why I have chipped in a post or two of my own on secession). I’d honest to Mergatroid love to see what would happen.

    My proposal is that we split off an appropriate number of states and make them a separate country and let the libertarians and Tea Partiers have them. Start in a place like SC, where such a move would require the least upheaval. There’s a band from there all the way across to Louisiana where everybody should fit.

    Let’s have the grand experiment. But no foreign aid from the US – that would be socialist.

  2. @Samuel–actually, even the hell holes tend to have a significant level of government, but your general point is exactly the correct–the more civilized the place, the greater the level of government–to a point, somewhere around 50 to 55%.

    I also strongly support your experiment idea. In my second novel, i pointed out that if the south had won, it would be a rancid hell hole today, which unfortunately trashed sales of that book. but such is life….

  3. @ Samuel–by the way, a seceeded South would not be the grand experiment. That would really be a test of the states rights/balkan model–highly localized governments, but still significant levels of government. The grand experiment would be to pick a state, and reconstitute the state government to have a completely balanced budget and tax reciepts constitutionally capped at some very low level, say 10%. By the way, my guess is the second they sign their outsource defense contract with the U.S. govt will blow their 10% right away, but that’s what the grand experiment would look like.

    • You’re talking with different libs than some I have known (this one economics prof who used to come talk to me when I was a J prof, for instance) because that wouldn’t be the model at all. The grand experiment would structurally look a lot like anarchy.

  4. Absolutely. The pure model of libertarianism is anarchy. That’s probably why no one has ever tried the model, because you need to be organized to get something done, and the idea of organized lack of organization is an oxymoron. That’s also why the libertarian arguments strke the rest of us as silly. Zero government just doesnt seem like it would work. Even isolated villages in New Guinea of 20 people have government. Thus my argument that the pragmatic version of the experiment would be a very, very small government at some percentage far below the current range.

    And by the way, the fact that 85% of the civilized nations in the world are above 35% probably suggests that there’s a practical limit to how small government can be.

    There’s a more nuanced argument, which I didnt make, around how that 35% is spent. We spend more than Canada, but much of what we spend is on the wrong things.

    If libertarians were smarter, they would abandon the absolutist arguments they make and argue for a perhaps arbitrary, but more realistic target, e.g. 25%.

    • If libertarians were smarter, they would abandon the absolutist arguments they make and argue for a perhaps arbitrary, but more realistic target, e.g. 25%.

      My complaint with libs hasn’t been about smart, per se. Most of the ones I know have plenty of basic intellectual horsepower. It’s just that many of them seem to have only a passing acquaintance with the real world. Which I guess goes to the second half of your sentence, huh?

  5. Great points– I’ve always held that it’s easy to be a libertarian, since, by definition, all of their “freedom principles ” must be absolutely embraced for the system to work. (Ayn Rand’s characters accepted no compromise.) So there is no way to test just one concept in isolation — e.g. libertarians say “trickle down” economics failed not because they were whacky to start with but because Reagan apostates abandoned the experiment (by increasing spending at a record pace!) before it had a chance to work. South Carolina has been trying to secede since back when Calhoun and Jackson faced off. Should have let them then and I’m all in favor of letting them now.

  6. Yep, John. It’s very easy to be for stuff that is unattainable, like libertarianism, world peace, vegetarianism, etc.

    The reason I wrote this post was to sort things out in my own mind. My big Aha! after writing the post and reading the comments is that all of us comingle libertarianism with the states rights guys like Barbour and Perry. They’re not the same, just two enemies of the current system finding common cause together. My enemy’s enemy is my friend, blah, blah.

  7. One other comment: While China has substituted a hybrid market economy for the central economic planning system of Communism, the Communist Party still defines the absolute extreme of a strong central government. Leaving aside ruthless control of expression and abolute power over the military, most of the major corporate entities are state owned (I’m guessing about 75% of the GNP) and all major personnel appointments at these entities are made by the Party through their “human resources” arm, an innocuosly named entity called The Central Organization Department. I read recently in a book called “The Party,” that to understand the power of this deparment, realize that a similar US dept. would appoint the entire US cabinet, all state governors and deputies, mayors of major cities, the heads of all regulatory agencies, the CEO’s of the 50 largest US companies, the Supreme Court, the editors of the NYT, WSJ and Washington Post, the heads of all the networks and the presidents of Yale and Harvard. Now that’s strong central government!

  8. Good point– libertarians cannot be lumped in with garden variety conservatives like the state’s rights folks and especially the religious right. Most would be appalled if they actually read a true libertarian platform.

  9. re:
    >> Even strong socialist governments like France don’t seem to work very well

    I’m not sure I agree here. I’ve spent time in France and I’ve found that the quality of
    life for ordinary (i.e. non-rich) people is higher than it is for ordinary Americans.
    France may be no utopia (no nation is). But I can’t think of a single area in which ordinary
    Americans have it better than the French do. (I dunno, maybe in the right to own guns, but
    that’s all I can think of). In any case, America’s insane gun policies may delight the wingnut
    crowd, but for the rest of us, it’s hardly a “quality of life” issue.
    I’d also challenge whether France is “socialist.” It’s very much a market economy. Yes,
    there are elements of socialism—but that’s the case with every Western “capitalist” nation.
    Yes, I know that the wingnuts love to beat up on the French. But then, they’re f*cking retards.

  10. @Marc. Socialism is a little tricky to define, but France has the highest government spending percentage of the serious members of the OECD. I would agree with you about quality of life, but that’s tricky to define as well. I met a Finn a few years ago who loved the quality of life in Houston because he was able to play golf 12 months a year. Houston? Really?

    • When we’re talking about nations like France and the other major Euros, it’s confusing trying to talk around the term “socialism.” They’re “social democracies,” which are based on a post-Fascism (I mean that in its literal sense – post-WW2 Fascism, and not as a vague pejorative) set of assumptions about the relationships between government, citizens and businesses. The US hasn’t gotten there yet and may not. 20th century socialism is certainly part of what the model draws on, but it’s inefficient, at best, to try and understand them through that old lens instead of the direct view of social democracy.

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