Thoughts on a Great Society

I recall my first Fleet Street Editor, the inestimable Peregrine Worsthorne, warning the re-elected Thatcher Conservatives in the mid-1980s against “bourgeois triumphalism.” For Perry there was a major risk that buoyed by their third victory over Labour, the Conservatives would be excessive and go far beyond common sense and what was acceptable to the country.

They didn’t heed his caution and the result was Tony Blair and a long period of New Labour rule.

Later in 2005, Perry argued that Thatcher’s “ideological excesses left such a bad taste in the mouth of the English people as to make Conservatism henceforth unpalatable, except as a last resort in the absence of a less dire alternative”.

There are parallels today on this side of the Atlantic.

Since last November’s congressional elections, American conservatives, and particularly those on the libertarian wing of the GOP, have adopted a swagger and a triumphalism that’s likely to swell support for Barack Obama.

Buoyed by the Tea Party presence in the GOP caucus on Capitol Hill, and by a belief that their time has come, they are offering policy solutions for the federal debt and deficit that are increasingly at odds with majority American opinion.

Paul Ryan’s budget is a case in point. To argue for tax reductions for the super-rich while at the same time advocating the end of Medicare is just a vote loser, plain and simple. The claque surrounding Ryan can’t hear the noise of disapproval coming from ordinary Americans because of the noise they’re generating.

But a Wall Street Journal poll this week illustrates what the GOP risks by following Ryan’s policy prescriptions. Eighty per cent of Americans want Medicare and Medicaid left untouched.

Listening to Rep. Ron Paul the other night on Fox’s Hannity Show one realizes how far American libertarians are moving away from the European classical liberalism they invoke as their parent. Paul maintained that he would “shrink government big enough so we don’t have to have an income tax.”

Asked by an approving Sean Hannity how infrastructure and defense would be paid for, Paul responded: “Let it be through user fees, you know, gasoline taxes for your highways.”

I am not sure how that would work for the Pentagon. Would the defense secretary be able to bill the White House? How would the Pentagon maintain military readiness in the weeks and months the White House didn’t call on the military? Or maybe the way forward for Paul – and I don’t want to put words in his mouth – is not to have a standing army at all but be able to call up state militias when the nation needs to be defended.

And I am not sure I am so wrong about how Paul would respond. Ultimately what is being argued for is a turning of the clock back to the buggy and pony days of the Founding Fathers.

That is just unrealistic and anti-progress.

What Paul and fellow American libertarians at, say, the Cato Institute, appear now to advocate is not limited government but virtually no government. And that is not what their intellectual heroes wanted at all. It is a distortion of classical liberalism.

Take Adam Smith, for example. It is not the case that he was arguing for no government. Nor is it even the case that he thought government should just limit itself to defending the realm, protecting private property, maintaining law and order and administering the courts.

He saw a much wider role for government.

As retired economics professor Gavin Kennedy has pointed out, Smith was not a laissez-faire ideologue.

“There were hundreds of miles of inter-city roads in need of construction and repair; scores of harbours that needed to be built and dredged; thousands of bridges in need of construction; hundreds of towns that need to be paved and have street lighting in place; thousands of ‘little school’ constructed and staffed with state-registered teachers; scores of palliative care hospitals established for those afflicted with ‘loathsome diseases’; scores of depots for stamping clothes with government quality marks; a network of post-offices established and organised; and likewise for all the other activities that Smith envisaged should be funded and managed by the state,” he writes.

Kennedy in his excellent blog of March 4th 2010, lists government intervention and actions Smith approves of in his main work, Wealth Of Nations:

“• the Navigation Acts, blessed by Smith under the assertion that ‘defence, however, is of much more importance than opulence’ (WN464);

• Sterling marks on plate and stamps on linen and woollen cloth (WN138–9);

• enforcement of contracts by a system of justice (WN720);

• wages to be paid in money, not goods;

• regulations of paper money in banking (WN437);

• obligations to build party walls to prevent the spread of fire (WN324);

• rights of farmers to send farm produce to the best market (except ‘only in the most urgent necessity’) (WN539);

• ‘Premiums and other encouragements to advance the linen and woollen industries’ (TMS185);

• ‘Police’, or preservation of the ‘cleanliness of roads, streets, and to prevent the bad effects of corruption and putrifying substances’;

• ensuring the ‘cheapness or plenty [of provisions]’ (LJ6; 331);

• patrols by town guards and fire fighters to watch for hazardous accidents (LJ331–2);

• erecting and maintaining certain public works and public institutions intended to facilitate commerce (roads, bridges, canals and harbours) (WN723);

• coinage and the mint (WN478; 1724);

• post office (WN724);

• regulation of institutions, such as company structures (joint- stock companies, co-partneries, regulated companies and so on) (WN731–58);

• temporary monopolies, including copyright and patents, of fixed duration (WN754);

• education of youth (‘village schools’, curriculum design and so on) (WN758–89);

• education of people of all ages (tythes or land tax) (WN788);

• encouragement of ‘the frequency and gaiety of publick diversions’(WN796);

• the prevention of ‘leprosy or any other loathsome and offensive disease’ from spreading among the population (WN787–88);

• encouragement of martial exercises (WN786);

• registration of mortgages for land, houses and boats over two tons (WN861, 863);

• government restrictions on interest for borrowing (usury laws) to overcome investor ‘stupidity’ (WN356–7);

• laws against banks issuing low-denomination promissory notes (WN324);

• natural liberty may be breached if individuals ‘endanger the security of the whole society’ (WN324);

• limiting ‘free exportation of corn’ only ‘in cases of the most urgent necessity’ (‘dearth’ turning into ‘famine’) (WN539); and

• moderate export taxes on wool exports for government revenue (WN879).

Yes, Smith quite clearly would have agreed with government regulation of the banks and hedge funds and mutual funds, etc to protect ordinary investors.

Medicare? Medicaid? How about “the prevention of ‘leprosy or any other loathsome and offensive disease’ from spreading among the population.”

Or how about the federal government being involved in education – something Cato and Paul have argued against. Well, yes, there it is — “education of people of all ages.”

It isn’t just Gavin Kennedy who dismissed the idea that Smith was a doctrinaire advocate of laissez-faire. Jacob Viner, one of the founding economists of the Chicago School, a mentor of Milton Friedman, makes the same points.

He notes among other things Smith’s support for “erecting and maintaining certain public works and certain public institutions, which it can never be for the interest of any individual, or small number of individuals, to erect and maintain; because the profit could never repay the expense to any individual or small number of individuals, though it may frequently do much more than repay it to a great society.”

A great society – that is what Americans want.